Monday, March 15, 2010

How Not to Manage Microsoft…Like a Car Company


As far back as April, 2006 we here at NotMakingThisUp reported on Microsoft CEO Steve Ballmer’s refusal to spring for iPods for his children, and his insistence that they not use Google.

In “Over-Share from Dr. Evil’s Hideaway,” we quoted Ballmer from a Fortune Magazine story thusly, when asked if he had an iPod:

“No, I do not. Nor do my children…. I’ve got my kids brainwashed: You don’t use Google, and you don’t use an iPod.”

The danger of this line of thinking, we noted, was that a heretofore successful company thus cuts itself off from knowing what its customers want.

One year later, in “Random People Creating Value,” we reported further on the dangers inherent in Ballmer’s insular, hard-headed management style, after he dismissed the Google management style as “a random collection of people” attempting to
“create value.”

We likened Ballmer’s approach to that of the old car companies, thusly:

Such a blinders-on, head-in-the-sand, not-invented-here mindset has heretofore been more closely associated with Detroit, where auto executives drive only their own company’s best cars. Small wonder the bigs at GM, Ford and Chrysler failed to grasp, before it was too late, the quality and innovation that allowed Toyota and other imports to eat their collective lunch.


—NotMakingThisUp, March, 2007

Little did we know that Steve Ballmer’s father once worked for Ford.

That’s right. In “Forbidden Fruit: Microsoft Workers Hide Their iPhones” the weekend Wall Street Journal describes—and we are not making this up—“the perils of being an iPhone user at Microsoft”:

Kevin Turner, chief operating officer…said he discouraged Microsoft's sales force from using the iPhone... "What's good for the field is good for Redmond," Mr. Turner said, recalls one of the people who heard his comments.

Mr. Ballmer took a similar stance at the meeting.

He told executives that he grew up in Detroit, where his father worked for Ford Motor Co., and that his family always drove Fords, according to several people at the meeting.

—The Wall Street Journal, March 12, 2010

Ballmer’s father, of course, was not alone. All the car companies used to feed spanking-new, smokin’-hot, top-of-the-line models to ‘the suits.’ That’s why the suits never saw the Japanese coming.

And Ballmer—like father, like son, it would seem—is doing the same for Microsoft.

It’s been four years since we here at NotMakingThisUp flagged that intransigence as a potentially fatal flaw—and that was back when the iPod was the hot new product.

Of course, the iPod long ago made Microsoft’s “Zune” music player as extinct as monks transcribing bibles. More recently, it is the iPhone that has been pushing Microsoft’s own smart-phone software off the shelves and into computer museums, where it belongs.

Now, just this weekend, we ordered an iPad, and it’s only a matter of time before the Dell notebook on which we write these virtual columns will go wherever dead Zunes are buried.

Seems to us that if Bill Gates is as smart as Warren Buffett thinks, and if Bill Gates really wants to see his legacy survive, he should buy Steve Ballmer an iPad and an iPhone and an iPod.

And Steve Ballmer should use them all, to understand—really understand—what Microsoft is up against.

Otherwise, Microsoft just might need to call Alan Mulally in a few years, to clean up the mess in Redmond.

Mulally, for readers not familiar with the name, is the genius behind the recent Ford renaisscance.

Mulally’s very first act upon being named CEO by the Ford family? He drove every Ford in the lineup.

Not just the good ones.



Jeff Matthews
I Am Not Making This Up


© 2010 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews, who also acts as an advisor: clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.

21 comments:

babar ganesh said...

word is that microsoft employees are and have been discouraged from using or evaluating competing products (and open source software even on their own scarce time). the (bs) reason management gives is that this reduces the possibility of intellectual property infringement. i've heard this at least for the compiler / dev tools group, which is way behind the competition but which survives on the back of microsoft's OS monopoly. has anyone else heard this?

Craig said...

Awesome, love this stuff Jeff. Feel like an old friend is back from the dead.

Anonymous said...

What about the other side of the argument: one should eat one's own dog food?

Perhaps the correct answer is neither arguments alone. The correct answer is a balance of both approach?

bustem said...

I guess the assumption is that Microsoft should do whatever Apple does. Last I checked Microsoft doesn't do hardware. The iPad is nothing compared to PCs, printers, etc., but no one criticizes MS for staying out of those markets. And why no criticism of those who are actually in the hardware game, like Dell, HP, Sony, etc.? Why not criticize Apple for losing miserably every single year to Windows and Office, both of which are perennial multi-billion dollar cash cows, products that maintain market share even when everyone hates Vista.

Personally, I think it's an especially wise decision not to go head to head with Apple, one of the greatest companies ever, and currently the largest company in the world. Some very good companies, like Amazon, Dell, HP, Sony, and so on are all likely to lose big to the iPad Apple at their own game--no telling how much they may lose on the kindle and netbooks.

Comparing Microsoft to GM is like comparing apples to cigarettes.

Anonymous said...

Love the fact that last year on the first day of Daylight Savings Time, every 8 gb Zune crashed and the only fix was to wait until the next day...
These guys are clueless - unfortunately they also dominate the market. Too bad that by the time they get nailed al la the "Big Three" a lot of folks will have had to deal with a lot more of their crap products.
Great post and I loved the WSJ article.

Alex K. said...

I think Bill Gates could be as smart as Warren Buffett for he sold most of his MS stock and bought some Berkshire. Currently, Mr. Gates's fortunes are very marginally tied to Microsoft.

Anonymous said...

Jeff:

Good post - hope you'll provide some thoughts on the iPad vs Kindle next month. I sense they're not direct competitors.

I love Anonymous' phrase "eat one's own dog food". Of course, it might be good for MS to know they're making dog food while down in Cupertino they're preparing for the Bocuse D'Or.

- American Bandersnatch

Jeff Matthews said...

Babar Ganesh leaves the most interesting comment, by far.

Craig says this blog post is like 'an old friend is back from the dead,' and I admit it feels the same. Writing about Buffett is a chore; writing this was fun.

Anonymous 1 raises a worthwhile point: why isn't it a good thing that Microsoft 'eats their own cooking'? The problem is when a business ignores the other food being prepared. Competition drives great products. "Sgt. Pepper" was a groundbreaking album because the Beatles wanted to outdo the Beach Boys' "Pet Sounds." Anonymous 3 is right: Steve Ballmer will never know how good Microsoft needs to be to win back the customers it is losing, inexorably, to Apple and Google.

Bustem takes an odd approach, denying the fundamental notion that Microsoft is being managed like a car company--which is straight out of Steve Ballmer's mouth. We are not "comparing Microsoft to GM"...we are comparing the management styles of those entities, and in that sense, the comparision is pretty exact.

Anonymous 2 reports that the 8 gig Zunes all crashed when Daylight Savings Time hit. Probably iPod sales in Redmond went through the roof that day.

Cheers,

JM

Anonymous said...

The situation in Detroit was worse than you picture it. It was not just that executives drove only their best models; cars destined for executives were "red tagged" on the production line, so that everything was really to spec., and given special post-production testing.
They didn't even see what was wrong with their best models.

Chris Maresca said...

Good post. I've recently been giving a presentation to CEOs and other business leaders about the difference between Microsoft and GM vs Apple and WalMart.

Basically, it comes down to knowing what business you are in. Both MSFT and GM believe they are in the product business, one produces software, the other produces cars and trucks. In contrast, Apple understands that it's in the business of making technology usable, while WalMart understands that it's in the logistics business.

In the end, companies that understand they are not just producing 'product' are the ones that win in the modern marketplace.

UK Shopping said...

I think it's pretty common for most corporations to want its employees to 'eat there own dog food'. However I think its pretty clear that if you do stick your head in the sand and don't keep a close eye on your competitors, they can pass you right by.

MSBassSinger said...

A bit off the mark.

First, the "Big Three" car companies failed because the unions drove up costs, and management decided to cut back on quality and innovation rather than fight the union leeches.

Second, Microsoft should have a division that does nothing but competitor research. The rest of the company should eat their own dog food, while that division "QAs" the competition and gives feedback to the architects and development on features and capabilities (which is not a copyright or patent violation).

Third, the quality of Microsoft products has declined (e.g. I am still waiting for Visual Studio to be as reliable, productive, and capable as the VB6 IDE was) over the past several years. From where I sit, as one who has used their products since the 80s, the problem is that Microsoft sought diversity at the cost of quality and innovative abilities in the people they hire. They should be welcoming diversity without sacrificing the quality and capabilities of "the best".

Contrary to babar ganesh, the "compiler / dev tools" is not way behind the competition. Although Visual Studio and the other development and servers could be better, nothing in the competition comes close.

It is time for Microsoft to look outside their normal channels and procedures to find the kind of intellect, drive, and innovative employees they used to have.

Steve said...

"Now, just this weekend, we ordered an iPad, and it’s only a matter of time before the Dell notebook on which we write these virtual columns will go wherever dead Zunes are buried."

Be sure to post a video of you writing on an iPad. Or do you just mean that you'll carry a keyboard and mouse around and be more productive on a smaller screen?

iPads and similar media players are really nice adjuncts to real computers. They're not replacements.

Jeff Matthews said...

Steve: Do you use an iPhone? It has replaced perhaps 1/4 of the functionality of the notebook computer I otherwise (much email, much periodical/news reading, and much note-taking despite your comment about the limits of a virtual keypad).

The iPad will continue that trend. It won't kill notebooks off in its current form, but what Apple and others are doing will continue to eat away at the Microsoft/Intel franchise.

Eventually, (and before Microsoft knows what's happening--so long as they continue to pretend nothing's happening) that franchise will be irrelevant.

It will take time, just as with all product transitions. But, hey, people still ride horses, don't they?

JM

raversnet said...

@bustem

Actually Google is the biggest company in the world. And arguably the biggest threat.

Anonymous said...

"Eating your own dogfood" - This is the concept of "use your company's products while under development and when released". How can Microsoft make a better Smartphone experience for their customers if their own employees aren't using those products and reporting on their poor experiences to drive home just how bad that particular product is?

As for statements like "word is microsoft employees are and have been discouraged from using or evaluating competing products", that's complete trash. I'm a full time Microsoft employee and we're *constantly* evaluating our products against other products and see which stacks up better.

This doesn't mean that we will always make the right choice, or be legally able to make the right choice, but don't think for a second that we don't evalueate other software. That would be pure foolishness.

k said...

"Now, just this weekend, we ordered an iPad, and it’s only a matter of time before the Dell notebook on which we write these virtual columns will go wherever dead Zunes are buried.", seems to me you don't really need a notebook in the first place. Try a netbook, with touch screen if you must.

Anonymous said...

I remember reading a Car and Driver article back in the 70s where a VP at Ford was quoted as saying "the great thing about the car industry is that you don't need to know anything about cars!".

It is easy to blame the unions, but how many managers were willing to give up their bonuses? My guess - zero.

I also think MS is doing the exact same thing, they don't truly understand what the industry they are in at this time. How many Bob's, ME, Vistas, Zunes, etc. can they tolerate before it's too late?

Anonymous said...

Apple is the biggest company in the world? Google is the biggest company in the world? What world is that.

Jeff Matthews said...

TO ALL READERS: We just had our first "Yahoo Message-Board Alert" here on the comment pages of NotMakingThisUp.

That means a comment submitted that used Yahoo Message-Board type language--the lazy kind, with finger-pointing-in-the-chest type remarks aimed at individuals who previously commented.

It will not appear, nor will any like it, whatever side you're on. Take it to the message boards with the other ham-and-eggers.

JM

truck rental said...

I think it is very important to know, and believe in your product! If he doesn't want he's children to use it then why should he produce this product? I find it very problematic from many different points of view.