SteveB’s Retirement Announcement

I’ve been trying to decide how to approach this topic, because in truth I want to write about the future of Microsoft and not focus so much on Steve.  But I might as well put the past to bed first and then write a blog entry on the future.

I hope when historians look back on Steve Ballmer’s tenure at Microsoft they focus on all his positive contributions to the company rather than just his mistakes.  Steve was a key contributor to the success of the company, certainly prior to being CEO and one can make the case that he did a lot of good during his CEO tenure as well.  Ultimately he didn’t return Microsoft to its pre-DoJ glory, and that will always dominate the discussion.

For employees and ex-employees, our biggest beef with Steve will probably turn out to be that he made a great, if sometimes brutal, place to work a lot less great.  And that, particularly in the second half of his CEO tenure, it became a lot more brutal yet cruelly random in how it measured and rewarded employee contributions.  It wasn’t always this way.  In his first few years as CEO Steve went overboard in trying to keep employees happy.  At some point he sensed they’d become complacent, many of us noticed how the parking lots were surprisingly empty at times employees would previously have been working, and sought ways to re-motivate people.  His efforts here seemed to be like grasping at straws, eventually degrading into fear as the primary  way of motivating people.  I don’t think Steve really intended this, but that’s how it worked out.  I’m not sure who this bothered more, those who lived through Microsoft’s glory days or new hires who only experienced Microsoft at its fearful worst.

By the time I left in 2010 I couldn’t find any employee, executive staff included, who wasn’t down on Steve.  One thing that is surprising about his retirement announcement is that employees (particularly senior leadership) seemed to be getting more positive.  The recent reorganization, and the new leadership made up of a new generation and how they were working together, was a positive.  There are also some indications that the era of fear as motivator was coming to an end.  Now we’ll never know if Steve would have regained favor with the employee base.

Steve made plenty of mistakes on the product front, many of them clearly of his own design but not necessarily the worst of them.  Longhorn.  Steve didn’t craft the Longhorn plan, Bill did.  Steve has to take responsibility for it since he was CEO, and he obviously bears responsibility for not making sure the company executed.  Longhorn was a bold plan and Steve took a huge risk in agreeing to it.  Had it succeeded he probably would have gotten the kind of credit regularly attributed to that other company head named Steve.  Instead it doomed his tenure as CEO.  The management distraction in recovering from that debacle, along with the efforts to make up for lost time, led Microsoft to miss the critical transitions of the last decade such as the emergence of consumer smartphones and tablets.

The other big overhang in Steve’s tenure as CEO were the U.S. and European antitrust actions.  Steve’s move from running sales and service to President and then CEO was largely the result of these actions.  Steve was one of the few senior executives who was not a central figure in the legal proceedings and thus had the cycles and energy to run the company.  And after the DoJ settlement, he had to spend a good chunk of his tenure finding a way to settle with the E.U.  And then run the company under the terrible burden of complying with both settlements.  Between the actual restrictions from these settlements and the general caution about antitrust that then pervaded the Microsoft culture, Steve was essentially running Microsoft with one hand tied behind his back.

The truth is, I don’t think Steve gets enough credit for saving the company.  Without him Microsoft probably would now be a footnote in tech history.  Like Digital Equipment Corporation in the 90s, an industry titan that became irrelevant and then quickly faded away.  It would have been easy for Microsoft to turn itself into a cash cow.  Or break up the company.  Or become a niche player.  Or be absorbed into another tech industry giant.  Can you imagine the irony of IBM having purchased Microsoft?

Steve took over Microsoft at its low point and kept it going and growing.  He made a lot of mistakes and then fought the company back from both his own and the mistakes of others.  And from the horrors of living under government imposed restrictions that none of Microsoft’s competitors faced.  When you look at it this way Steve is a hero.  Period.

Steve’s biggest crime is that he’s never gotten Microsoft out of purgatory.  He kept it from sliding in to the depths of hell, but failed to return it to the heaven of industry leadership.  He’s never gotten vision, strategy, tactics, execution, employee engagement, collaboration, communication, etc. to all line up at the same time.  This dwarfs any individual mistakes he’s made, big or small, in terms of how to look at his tenure.  No matter how brilliant the vision or strategy, if you can’t communicate and execute against it then you’ll fail.  And no matter how good the execution, if it isn’t taking you to the right place then you’ll fail as well.  Microsoft under Steve was guilty of a lot of both of these.

I was somewhat surprised by the announcement of Steve’s retirement, largely because I hadn’t heard any recent rumblings about his future.  Two or three years ago I heard something from a very well-connected source that lead me to expect something like this, but as time went by I assumed it was a false positive.  Was Steve forced out?  Probably not.  Was he encouraged to consider leaving earlier than his original timeline?  Perhaps so.

Let me offer a somewhat different perspective on this.  Steve just rebuilt Microsoft’s senior executive team with the next generation.  All functions are now led by individuals that were either middle management or outside the company when he became CEO.  The dinosaurs have all died out, with one exception.  Perhaps Steve looked at this and realized he was the only one left and it was time for him to join the other First Ones beyond the rim.  The future belongs to the next generation, now let’s see what they do with it.

 

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25 Responses to SteveB’s Retirement Announcement

  1. Joe Wood says:

    Hal, would love to see a post from you about potential candidates for the job.

  2. orcmid says:

    I’ve been ignoring most of the nonsense about Ballmer’s departure. Your summation is rather touching and, from an outsider’s perspective, suggests some grounding in reality.

    I’ll always admire Bill Gates and Steve Ballmer for the realization of the PC vision, especially in the face of IBM’s effort to corral it. The regulatory-compliance situation comes with achieving monopoly power and using it. It seems that Microsoft has become mature about that. That’s not necessarily the best outcome, in terms of product control, but it is part of the game in the US and it is necessary if Microsoft is to be just not another Apple/IBM in some oligopoly. I respect the maturity. It is not uniformly evident.

    It’s still striking how one does not get to deal with one Microsoft and in too many cases are not dealing with Microsoft at all. That doesn’t work. It’s a gigantic challenge and I have no idea how anyone can accomplish having ownership of all things Microsoft work across the corporation. That’s for the future to reveal.

    Most of all, I will always respect Gates and Ballmer for the achievement and what a gift the results have been. I wish them, and the corporation, enduring success.

  3. Anon says:

    Hi Hal, this was a thoughtful and well-written post, thanks for sharing. I have a comment on this sentence:

    “The management distraction in recovering from that debacle, along with the efforts to make up for lost time, led Microsoft to miss the critical transitions of the last decade such as the emergence of consumer smartphones and tablets.”

    It makes it seem like management was just too busy to get into smartphones and tablets, not that they had a poorly-thought out vision of cramming Windows onto smartphones (WinCE) and tablets (TabletPC). The bullheaded belief in “Windows Everywhere, Whether You Like It Or Not” is one of the largest strategic mistakes. XBox, one of the few modern successes, had to fight SteveB to *not* use the Windows Kernel as its basis for a video game system. Other groups weren’t as lucky, and squandered a 10-year head start in the smartphone and tablet industry.

  4. Joseph Williams says:

    Thanks, Hal. Nice article.

  5. Dave H says:

    Really nice piece, Hal. As a recent but avid reader, I’d been looking forward to seeing your take on Ballmer’s retirement. To be honest, I expected to disagree with it more than I do.

    In particular, you’ve given the Longhorn disaster the central role it (IMO) deserves. In hindsight I probably shouldn’t be surprised. Of course you’ve discussed the importance of Longhorn at length in the past; even Gates and Ballmer have both recently identified it as the costliest mistake in Microsoft’s history. (In contrast, it’s been embarrassing to see how poorly the mainstream consumer tech press understands this–I saw several tweets misreading Ballmer’s comment as being about Vista, the product, rather than Longhorn, the abandoned strategy.)

    Even so, I’d like to suggest that the shadow of Longhorn’s failure extends even further than you acknowledge here. Your posts on the long term incubation and strategic importance of MoSH/WinRT as Microsoft’s intended future for Windows apps have convinced me that the failure and eventual abandonment of the long series of .Net-based app stacks has blown a decade-long hole in Microsoft’s Windows strategy.

    To be honest, I don’t fully understand whether the new religion that WinRT rather than .Net is the eventual Win32 replacement is down to technical reasons or politics, but it seems to be outgrowth of Longhorn in either case. (If the reasons are fully technical that just proves Longhorn was poorly conceived to begin with.) Either way, Microsoft is now pushing a badly unfinished and incomplete API and ecosystem as the only alternative to the future-incompatible, registry- and mouse-bound world of Win32.

    As an outside observer, I’ve been fascinated to watch the fortunes of WinRT and Windows 8 as a collision between the irresistible force of the size of the Windows PC ecosystem, and the immovable object that is MoSH/WinRT not solving the major unaddressed needs of any significant group of users or developers. So far, the immovable object is holding up just fine. Given the immense number of changes crammed into the new app model (seemingly in a desperate attempt to “make up for lost time” as you put it), it’s no surprise it hasn’t achieved much success. It seems ominous for WinRT, though, that Windows 8.1 is already removing some of the forced interaction with MoSH. I’m tempted to guess that this situation is what you had in mind when you referred to good execution in the service of bad strategy, but given the immaturity of the WinRT API at launch I’d have to say there were significant failures of execution, too.

    Second, I’d be interested to see you respond to Ben Thompson’s arguments that the new reorg is destined for failure. (If you’re not familiar with him–ex-Apple, ex-MSFTie writing some very compelling analysis at stratechery.com.) Of course it’s easy to sympathize with the motivations for the reorg in light of the Longhorn fiasco (and, more recently, the failure to have a touch-based Office ready in time to save Windows RT from being the awkward duck it is today). Presumably a Microsoft that was successfully organized around functional boundaries with a single company-wide P&L would have avoided those failures of cross-divisional planning.

    But I think Ben makes a compelling case that the assumption Microsoft *can* be successfully organized along these lines is wishful thinking. Everyone should read his posts[1][2] for themselves, but to briefly sum up, he argues that:

    1) any successful functionally-organized company requires a strong, product-oriented, universally-respected leader–and a small and tightly-focused collection of products–in order to guide the various functional teams to execute a coherent strategy in the absence of division-level incentives;

    2) at the individual level, the incentives and career trajectories available to employees working in a divisionally-organized company are very different from those in a functionally-organized company, making a transition from one style to the other fraught with danger.

    With the timing of Ballmer’s retirement, and with no successor lined up (despite apparently having been actively searching for several years now!), concern #1 looms especially large. I’d be very curious to see your thoughts about this.

    [1] http://stratechery.com/2013/why-microsofts-reorganization-is-a-bad-idea/
    [2] http://stratechery.com/2013/the-uncanny-valley-of-a-functional-organization/

    • Eagle Jackson says:

      I would say the damage caused by Longhorn and then Vista goes even deeper. First, by not having a compelling product for so many years, it deeply damaged Microsoft’s OEM ecosystem, which has never recovered. What trust there was between the OEM’s and Microsoft was destroyed. Second, it consumed Microsoft with its internal execution issues at a critical time and disconnected Microsoft from the watershed changes happening in the industry. The world didn’t stop and wait till Microsoft got its act together; it moved on full speed ahead. By the time, Microsoft shipped Windows 7, which is essentially an improved version of XP (and a bug fix version of Vista), it was a very different world that had moved on, and Microsoft was no longer part of the discussion. No did Windows 7 move Windows forward in any dramatic way or open up new scenarios that didn’t previously exist.

  6. alfredtwo says:

    Fear was indeed the big motivator or at least the tool attempting to motivate people in my last year or so at Microsoft. It drove some good people away and motivated almost no one. I think many people came to Microsoft expecting to be inspired not terrorized. Microsoft would run MGX as a bit rah rah event and I know many came home excited. But the people at MGX were mostly field people not product developers. Field people were excited (sometimes) by the products but as soon as you got home the message was “we’ve giving you great products don’t screw up promoting them.” In several cases the products were not all they were cracked up to be. WIndows 8 is one example. Everyone I know who worked in the field understood that Windows 8 had issues. It may be great in some ways but in many others it was and is a tough sell. Yet the message was clear “the product is the best thing since sliced bread so if it doesn’t do well the field will be the ones to pay not the Windows team.” If the products were inspired the fear wouldn’t be needed.

  7. Mark says:

    Nicely balanced, unlike so much else of what I’ve read this week. And I think you really got to the heart of it with this:

    “He’s never gotten vision, strategy, tactics, execution, employee engagement, collaboration, communication, etc. to all line up at the same time.”

  8. Very good. Couple points I’d add:

    * Give DavidV “credit” for Longhorn along with Bill.
    * Re: “saving the company” – I don’t think people appreciate how close Microsoft was to completely imploding in 2000 with DoJ, dot com bubble collapse, etc.
    * The interesting question to me is whether Steve’s departure decision happened in recent weeks vs. months. When did Steve decide it was better for the company to go than stay and what was the catalyst? I think the “activist” investors played bigger role than is acknowledged.

    • halberenson says:

      David was certainly a huge driver of the Longhorn vision. And JimAll was right there as well. But I’m not going to say more because I was in the room when the decision was made, so it would go beyond analysis and into an uncomfortable zone.

      I suspect you are right about the role activist investors played, even if it was nothing more than making Steve realize that over the next remainder of his planned time as CEO he’d spend more energy on fighting with them than on actually running the company.

  9. When you look at it this way Steve is a hero. Period.
    I have been waiting on your post since the announcement was made and this is exactly what I expected. People are underestimating what Steve has accomplished during his tenure as CEO. If may not be the most eloquent speaker but the guy was very involved, proud and love what he was doing. I am not sure about you, but I kind like the direction the company was going. I know recently-write off is not going to help, but there are many things, in fact, lot of things that we can point to that Steve did well under is tenure.

    It took a company that was in the middle of anti-trust yet he helped the company growth. Sure, there were lot of falls, but no one can really deny all the good that happened during his tenure. Microsoft is a very complex company to run and he understood the in and out of the company. He will surely be missed even he was often perceived as comical and too energetic.

    I am not sure who will be next. It will be an interesting time for Microsoft and technology in general.

  10. mossyblog says:

    I think people have a distorted view on Steve. To infer “without steve..” theories is a bit weak at best as that’s as if to say “throughout the land no other can rule the kingdom like he?” … ie Stephen Elop could easily have done better than Ballmer on his worst day and countless other executives. To assume that Steve was the savoir despite his past hiccups is a bit of a tall order to position and the fact he did agree to Longhorn shows one of many of his mistakes & lack of leadership skills.

    The day I had to brief Steve on a topic was the day various other handlers around him or oppose him gave me tips on how to navigate his mind. Basically it made you think of a child and no matter what you do, don’t feed him sugar…was basically the subtext you were given.

    For me though the day he told a group of us in a room that Microsoft isn’t going to be the innovator and “we sell good enough” was his response to a question on why “Microsoft isn’t cool like Apple” question.

    He then went soon after to trash the iPhone calling it a toy and not a serious device a phone that basically has given Apple a market cap that is insanely high where as the day he took over the Microsoft market cap was high and it’s now -$400b worse off today.

    Personally I’ve meet him 3 times he seemed a nice guy and I guess if you knew him outside the CEO space you could grow to like him.. as a (very minor) shareholder… NEXT!…. :)

  11. dave says:

    What a beautiful remembrance.

  12. surilamin says:

    Great last paragraph haha…

  13. Jeff says:

    Great post, Hal. I loved the Babylon 5 reference. :-)

    As a current MS employee (formerly out of the Denver-4700 office, in fact), I’ve been reflecting a lot on this topic over the last few days. I’ve long felt that a new CEO would be good for Microsoft, but only in the last couple of days has it occurred to me how huge those shoes are. I think Steve leaving is a little bittersweet. I think Microsoft as a company missed in some areas under his tenure (we had tablets and Windows Mobile very early on, but didn’t do nearly enough to keep pushing them forward), but clearly Steve did a lot of good and kept the company growing. No matter who we end up with as the new CEO, I don’t think we’ll find anyone with as much passion and devotion to Microsoft as Steve, and for that, I’ll miss him.

    I liked some of the points this “open letter” made, particularly about mobile computing (Apple) and search (Google). Other than the author’s complete miss on what Steve said about Vista, I thought it was a good read.

    http://www.foxbusiness.com/business-leaders/2013/08/26/open-letter-to-microsoft-ceo-steve-ballmer/

    • halberenson says:

      I had an office in Denver-4700 :-)

      You may be the only one you got the B5 reference :-)

      • Jeff says:

        I know. :-) I worked out of that office from 1999 until the very end. I don’t think we ever met, but I knew of you. I was on 6. I still miss that office.

        I thought it was a pretty geeky reference, so I had to check your link to make sure it really was a B5 reference and not something entirely. Definitely got a grin out of that, though.

  14. I’m curious. Each of the divisions are billion dollar companies in their own right and lead by capable people.

    What does someone like Ballmer actually do? How much of Microsoft’s growth can be attributed to the PC wave and how much did Ballmer contribute towards it? As CEO he gets the last say on portfolio allocation, defining the vision, and fostering cooperation, acquisitions ? What were the best calls he made?

    • Steve should get credit for company’s presence in cloud. Unlike lots of big tech for whom cloud may be fatal (notably Oracle, HP, IBM), Microsoft is a serious contender. Steve is responsible for the Azure reboot and pushing Office to become a service with Office 365. Before that, Steve gets an awful lot of the credit for turning Microsoft into a credible enterprise software company. Keeping the company alive through the DoJ mess would be a third.

      • Brian says:

        It wasn’t always obvious that Steve and the senior leadership team knew the way out of the DoJ mess. Anyone who sat through Steve’s meandering MGB keynote message at a sweltering Superdome in New Orleans back in the early 2000s sometime had to come away thinking “WTF?”.

        That the company came out of it without getting into the funk that IBM did after their run-in with antitrust folks in the 60s and 70s shows a lot. That Microsoft was able to figure out how to do business post-DoJ and thrive is impressive. I’m curious to see what happens to Apple and Google once they get through their anti-trust baptisms (though they seem to be getting off pretty easy).

      • Truth be told, I can’t think of any major tech company that don’t have a cloud offering. In fact, One can hardly attribute this success to Ballmer, Microsoft had a head start – Hotmail is arguably Microsoft’s first web service. It just took them 12 years to transition to a paid service. The DoJ settlement fundamentally restricted Microsoft’s business model. If it ran Exchange as a service, it would either be unpalatable to the DoJ, or killed margins anyway.

        Sales wise, the software assurance program was a good call. However, the anachronistic licensing schemes delayed Microsoft’s march to the cloud. If MS had courted hosted providers iterated on making software easier to deploy, it would have been a big win for all. MS failed to remove the friction due to sheer hubris.

        XBox is interesting. They basically productized their DirectX gaming stack that had been running on the PC. It’s a winning formula. Lowers technical risk, and partners are already familiar with the stack. Incidentally, this has been the gameplay with Azure too.

  15. @teyc

    Yes every tech company pretends to have a cloud offering, but guys like HP, IBM and Oracle are in real trouble on this front. Cloud is more than a press release. You need serious capex amongst other other things and years to refine the stack and processes. The battle over the CIA as a customer between Amazon and IBM is telling. The CIA said Amazon is lower risk and despite IBM’s attempts to buy the business, they opted to pay more for AWS. IBM of course is fighting this on legal front, but they have a fundamental problem in that they have no product/service portfolio for the cloud era. Hosted WebSphere demand is not measurable.

    I have no idea what you mean by saying Exchange as a service is contra DoJ. Microsoft and lots of hosting providers offer Exchange as a service today and have been for years. Exchange’s issues in the cloud are economic and architectural (it isn’t scale out).

    Azure originally was completely different than the mainline Microsoft enterprise platform. They have been fixing that and are executing quite well on that front. I think they are the clear challenger to AWS.

  16. andisimo says:

    Ahhh, great closing line. Let’s see.

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