We are all competitive by nature and often compare ourselves to our friends as a benchmark for how successful we are. Now, some of us are more competitive than others and Steve Ballmer, who graduated magna cum laude from Harvard, is at the extreme edge of this.
Think how nuts it likely makes him when he thinks about how much more successful Bill Gates and Steve Jobs have been — neither of which finished school. While I’m sure he can tolerate Steve Jobs' success, albeit grudgingly, he is faced with Bill’s success every day of his life and likely knows a large percentage of Microsoft employees are pestering Bill to come back and run Microsoft. So not only was Bill more successful, but Steve’s own efforts continue to both be discounted and compared unfavorably to him.
Steve desperately wants to be seen as equal to, or better than, Gates. But it is unlikely he will be successful unless he gets on a different path and his efforts are going to drive Microsoft into some really risky directions.
If you look at the comments (particularly the first one) quoted in Computerworld, with regard to Microsoft’s moves into hardware, he is clearly arguing that moving Microsoft into hardware is in line with what Gates did in founding Microsoft. The dangerous thing is that it really isn’t and if he thinks he will eclipse Bill in Microsoft, he is in for a Carly Fiorina-like surprise.
This isn’t to say Steve isn’t very capable in his own right, but only that you can never eclipse a founder for a company while that founder lives (and at IBM and HP, not even until years after they die). The only way to beat Bill Gates would be to start a company like Google or Facebook, which eclipsed Microsoft in some way, yet I doubt he will attempt this at his current age.
Therefore, Steve will be attracted to big, risky moves like Windows 8’s move to touch and potentially repeat Oracle’s mistake of going into hardware aggressively. Both put Microsoft at high risk, are significant gambles and could result in having to step down from Microsoft not as a success, but as a failure. But he is likely so tightly focused on the possibility of overshadowing Gates that he can’t see the risks in their true light and, I’ll bet that in hindsight, even he is likely to regret taking so many big risks over so short a period of time.
The two big risks we are talking about are Windows 8 and going aggressively into hardware. Windows 8 is a new interface, one we once called Metro, and while I personally feel it is more advanced and better than either iOS or Android, the market rejected it on phones. I believe it is because it was under marketed, but Microsoft should have likely assured its success on phones before pushing out to PCs to limit the damage and better assure success. If it fails on PCs, it might, in hindsight, look intentional because it would appear that Microsoft took a failed UI and put it onto a successful platform and caused the failure.
The issue with going into hardware is twofold. First, it puts Microsoft into competition with its OEMs and while I don’t think it will cause the drama that Oracle caused when it broke up with HP, it could be far broader in this case and encompass Microsoft’s entire existing ecosystem. Strangely, it is exactly the same step that Steve Ballmer rejected years ago with regard to services because of these same concerns.
The other problem is margins. Hardware companies live off of very thin margins but comparatively high revenues. By going into hardware, Microsoft’s revenues will increase sharply, but its margins will fall just as sharply and that could be a big problem for investors in the long term.
In the end, the market is moving to vertical integration and it does look like the Microsoft model is failing, but Microsoft isn’t putting up much of a fight and this reminds me a lot of IBM’s decision to sell its hardware and shift away from mainframes in the 1980s — a move it later regretted.
Over the next 24 months, Microsoft is likely to go through some extreme changes. Hardware company purchases (RIM or Nokia) and a very difficult product launch will likely result in additional internal changes, and it will likely emerge a very different company. In the end, I expect we’ll learn a series of lessons that will include thinking through why we are making unusual decisions to make sure they will result in the outcomes we really want. In Steve’s case, the fastest path to the goal he appears to want is through forming his own company. Microsoft would likely be more successful running as Bill Gates designed it.
Tim Cook has a similar problem with Jobs and I expect that will result in similar problems for Apple in the long term. It is tough to come after a successful founder particularly if you are competitive. At least both men have that in common.