Steve Ballmer’s Early Retirement from Microsoft

    As you likely know, Steve Ballmer is stepping down under a cloud at Microsoft, and I too think he is getting a raw deal. What you don’t know is that I feel I’m partially responsible. It goes back to a meeting in the late 1990s. In 1999, I actually thought of Steve Ballmer as a friend (I still do actually; but I may be delusional). I’d had a private meeting with him and a few other analysts to talk about how he was going to fit into his president’s role. He was looking for advice and providing insight on what he planned to do as he phased into becoming CEO. Then a couple of years later, I met with a very different Steve Ballmer. He was angry and combative. I wondered where both my friend and what would have been a far more successful plan had gone.

    Steve’s 1999 Vision

    Two things came out of the meeting with Steve in 1999: One that he executed on and falls into the success column for his time at Microsoft, and one that he didn’t execute on and goes to the core of why he appears to be leaving the CEO job as a failure. Let me set the stage.

    This was right around the time of the dotcom craziness and right after Netscape—which up till then had been seen as Microsoft’s most dangerous competitor—had collapsed. I’d known Steve for some six years at this point, having met him in person at an analyst retreat I accidentally caused to be cancelled. (They’d asked me about improving it and I suggested they not spend 95 percent of the time lecturing analysts and an hour listening to them over several days and they responded by pulling the plug.)

    I’d had a number of one-on-ones with Steve, as well, and he’d almost gotten me fired once (although he stepped in and saved my butt), something I would regularly recall in jest. By 1999, we were corresponding somewhat regularly and he seemed to have a strong relationship with a number of my peers as well, which is what likely got us all on the meeting list. The meeting was held near the Oracle campus. It was one of the few times anyone had tried to find a location equally convenient for both those in San Francisco and San Jose.

    The purpose was to pick our brains on what he needed to do. During the process we got a sense of what he planned to do and it was an impressive plan. When we suggested he move to what would later be called the cloud, he responded that he clearly saw this trend as well and planned to aggressively move Microsoft there. Azure, Office 365, the Live products, and Microsoft’s impressive move to embrace the cloud and monetize it were the result.

    I don’t recall talking about devices much, but in 1999, Windows was preeminent. We were pre-iPod and Microsoft was already exploring things like MP3 players, so it didn’t look like they would screw up their client business.

    The other aspect of the talk that stuck with me was how Steve was going to meet with the top employees in the company to collaboratively make Microsoft better. This clearly didn’t happen and I think the pointed feedback he got may have driven a wedge between him and the employees. Over the next few years, rather than getting closer to the employees, he had been isolated from them and failures like Zune and Vista, which could have easily been anticipated and avoided, resulted.

    2002 Ballmer

    My last in person meeting with Steve Ballmer was in 2002. I remember it more distinctly because I had just thrown my back out and was in extreme pain. However, I was also the Senior Fellow for Forrester, which had just acquired Giga, and not only was I the most senior analyst in the room, I was also known to know Steve personally and was expected to guide the meeting. I’d opened with some banter, which Steve shut down immediately and, unlike in our prior conversations, he was combative, angry and polarizing. I was personally embarrassed. His behavior reflected on my own performance adversely, and it was clear he wasn’t there to listen to but to tell us the way things were. In a meeting with Bill Gates the same day, Bill invited me to his home (an invitation I will always regret not taking, but at the time I was just in too much pain and needed to get off my feet).

    Over the years, we still corresponded from time to time. That somewhat backfired when my emails warning of the impending Windows Vista failure, instead of preventing it, showed up in a lawsuit where the other side used to them to argue that Microsoft knowingly shipped a faulty product.

    Over the decade, Steve became more and more isolated and the product failures started to mount. The relationship with Intel, which had been rocky, worsened. All of this eventually led to Steve’s early retirement. I believe, had he remained connected to the folks that worked for and with him, we would have seen a different, better outcome.

    Wrapping up: The Cause of Steve’s Failure

    We are often more apt to blame than to look at a problem and figure out how to fix it. The number of CEOs I’ve known who were fired right after they finally figured out how to run the company they were hired to run is pretty impressive. Sadly, I think this may have been what happened at Microsoft, given the recent reorganization, with one exception. Steve Ballmer remained isolated and you can’t run a company without the support of your employees and key partners.

    So I think the cause of the problem with Steve is his relationship with Bill Gates. Steve was at the top of his class at Harvard, Bill dropped out. Yet Bill has always been held up as better than Steve. Bill never addressed this chip on Steve’s shoulder by either driving him harder as chairman or giving Steve adequate support to properly grow into the CEO role. As a result, Steve became excessively combative because he felt he stood alone at the top, unreasonably compared to his closest friend and inadequately supported by him. This caused him to retreat inwardly and the rest is history. This is really a shame because I still see the unrealized potential in Steve that I saw in 1999, and even though I saw the problem progress, I was completely ineffective in addressing it. You see, I did eventually see that Steve was failing but couldn’t come up with an effective way to prevent the failure. Every time I tried, I just made Steve angrier.

    This is why, in the end, I view Steve’s early retirement as one of my own greatest failures.

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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