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How to Turn Microsoft Around: A Primer, Part 1

Rob Enderle

One of the first things I read this morning as I opened my eyes to face the first week of 2010 was a piece in InformationWeek on the seven things Microsoft Must Do in 2010. Each was a good idea, but each -- and this isn't unusual -- addressed symptoms of an undisclosed core problem and didn't try to determine if there was a central cause for the mistakes, assuming they are mistakes, in the first place.

 

I'm calling this post a primer because while this should likely be a book, I'm going to cover the issues in blog form, so it will be light and relatively quick. This piece dovetails somewhat with my final post for 2009, dealing with Apple, Google and Microsoft CEOs.

 

Avoiding the Whack-a-Mole Approach

 

Going after the symptoms isn't unusual. Often, a new chief executive comes in and plays a few years of whack-a-mole, pounding on highly visible problems, then either sells the company, stabilizes it or gets replaced. Rarely does he or she ever restore the company to the greatness it once enjoyed. To do that, you have to put your mole-whacking stick down and take time to study the company for a while. Few are given this kind of time and those that are generally focus, like our fictional whack-a-mole CEO, on the more topical moles. Whacking moles also tends to be less effort and much more fun.

 


Since I'd like this decade to be a bit different, I'm going to approach this topic in another way. Instead of whacking moles, let's instead see what's getting them to pop up out of their holes in the first place.

 

Microsoft, the Good Years: Defined Customers

 

If we were trying to analyze a problem in a car or a person, it would be good to look back at when it was working well, compare that to what is going on now, and see what changes are degrading performance.

 

Microsoft seemed to peak in 1995. Its big break was when IBM licensed DOS for a pittance and Microsoft helped create the PC OEMs that today make up the majority of PC sales. The customers were well defined (they were these original equipment manufacturers that had effectively outsourced software to Microsoft). A side lesson was learned by IBM, in that by buying DOS so cheaply, IBM devolved from Microsoft's most important to least important partner, setting the groundwork for their eventual breakup. (I wonder if IBM retains this lesson.)

 

This OEM relationship made Microsoft the vendor and the OEMs the customer, with clearly defined roles and little conflict. Microsoft Office was, particularly with the peak 1995 launch, subordinated to Windows, and even though Office often was sold directly to companies and consumers, it was seen as a PC enhancement, strengthening the OEM/Microsoft bonds. PC turnover went from eight to 10 years to two to three years over the '90s, and this was a lucrative market for everyone.


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