Besides being a grade A schmuck there's a reason people
in Ballmer's position tend to fail. The
basic issue facing Microsoft over the past ten years has been this—innovating
is really hard.
The company reached a point where Office and Windows were so
popular that wasn't much you could do to increase their popularity by improving
the product. They continued to work on improving the product, and kept these
divisions very healthy and profitable, but there simply wasn't an explosive
growth opportunity left to be had because the previous successes had been so
enormous. So you create a situation where the company as a whole is basically a
venture capital firm. It has this huge stream of Office/Windows profits and
needs to figure out how to invest those profits in exciting new products. But
successful venture capitalists are really rare, and for all we know most of
them are just getting lucky. The average financial returns from the venture
capital sector as a whole are terrible. But Microsoft qua venture capitalist
faces the additional burden that the top management of the company has to be
good at running the giant existing Office/Windows businesses. It's as if you
were trying to hire a tax attorney who could also perform open heart surgery.
One alternative strategy could have been to just give up.
Pay huge dividends, keep focusing on incremental improvements to the core
products, and basically don't worry if other firms dominate mobile and online
services. But not only is that psychologically unappealing to managers, it'd be
weirdly demoralizing to the staff. Windows and Office need to be able to hire
talented engineers—the kind of people who are going to want to work for a
company that aspires to be forever on the cutting edge, not a company that's
resigned itself to operating as a boring dividend machine.
So what are you supposed to do?....
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