Resolve and Fortitude : Microsoft's ''SECRET POWER BROKER'' breaks his silence (43 page)
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Authors: Joachim Kempin
“Fortitude is the marshal of thought, the armor of the will, and the fort of reason.” —Sir Francis Bacon
Shortly after I left the company, I ran into Richard Fade and was surprised to hear that Steve Ballmer, in several OEM business reviews he had attended, continued to pose a simple question: “What would Joachim have done?” Being remembered that way felt rewarding, and maybe my old boss truly missed me, but I saw no reason to reverse course and go back to work. MS had changed dramatically compared to when I had joined up. She now employed a workforce of over fifty thousand people. I had been about the four hundredth when I joined. When I left, only ten others if I excluded Steve and Bill had served longer. My old comrades had voted with their feet following the exodus of others who had joined the company much later. At the end of my career, I felt like a relic from a bygone era, a dinosaur missed by the meteorite and its afterglow. Back when I arrived, the whole company was enthusiastically marching to what the French revolutionary Danton often quoted and what Frederick the Great, Napoleon, and General Patton appeared to have thematically adopted in abbreviated versions and acted upon in spirit:
“Pour les vaincre, messieurs,
il nous faut de l’audace, encore de l’audace, toujours de l’audace
et la Patrie sera sauvée!” (In italics is the shorter form; Patton used the condensed form of “l’audace, l’audace, toujours l’audace.”) All of these versions express the same philosophy in a military sense, for which they were originally meant and applied for. Danton’s original remark roughly translates into the following:
“In order to overcome them, gentlemen, you need audacity, extra audacity, and audacity forever, and the Fatherland will be saved.” Danton used this powerful slogan to fire up the French population and its military during the revolutionary wars, as did French emperor Napoleon, hardcore Prussian king Frederick the Great, and my other hero General Patton.
When I joined MS, the above slogan characterized our shared understanding of how to be victorious—unspoken, but in spirit. “To win against competitors, employees, we need audacity, extra audacity, and audacity forever, and we will defeat them.” The top two guys had instilled and drilled it into us. (After reading the above you might think that Steve Jobs was spot-on when he once said for MS it was all about winning and not about great products. Sorry, but without them there, what was there to win?) A modern interpretation of the meaning of Danton’s words and the way I always thought they should be understood can be found on the Wasabi Venture website:
“A bold commander never gives up the aggressive initiative to his enemy. As a start-up, even when you have great success, you have to keep going. Great sales success is not an excuse not to do more marketing. Great new features in a product are not an excuse not to build the next great thing. This probably means extended time of 15 hour days, doing sales calls on weekends, answering support tickets at crazy hours, and never losing the audacity that got you success in the first place. It is in this effort that you will win. Your competitors are not your friends. They are the enemy, and you must step on their throats and cut off the very air they breathe.
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Every customer/user they add is one you never are getting. Start-up life is a Blitzkrieg land grab, and you need to push every day to steal the next inch of ground. Winning is what this game is about, and that is what determines who gets to cash the big checks at the end of the day.”
Organizing a relentless pursuit is the best way to decisively finish a battle and win the war as the Prussian general Carl von Clausewitz once wrote. This was what the company I knew practiced. The company I was leaving had her wings clipped. An important part of her business was now regulated. Blitzkrieg was no longer in management’s vocabulary. In this context the result of the Feds action against MS can best be described with the famous words of Joseph Fouché, Napoleon’s police minister when characterizing the unjustifiable murder of a political enemy ordered by Napoleon: “C’est plus qu’un crime, c’est une faute!” (It was worse than a crime, it was a blunder—unfairly diminishing America’s number one IT Company!)
In the aftermath of the Feds strike, openly venal attorneys representing opposing parties encircled MS like scavengers ready to maul her bandaged carcass. They engaged the company in a host of class action lawsuits. Companies like Gateway and IBM posing as injured parties went for another part of the kill. The lion I had faced only partially accomplished what his extended pride eventually finished. The finding of facts by the discredited judge served as a scent trail for the blood-thirsty predator bunch. After the dust settled and the mop-up crews had shut the lights and left the building, the legal foragers had extracted approximately six billon US dollars, including the fines paid to the notoriously off-the-wall EU bureaucrats.
The company, wanting to get rid of these distractions and the resonating hell and damnation of the press, caved and settled most matters out of court. The total settlement sum, in perspective, was roughly the profit my group had generated during my last year at the helm of OEM. The conspiratorial pack of wolves and leeches certainly did have their pay-day nicely lining their pockets. MS dug into her cash hoard and paid up. Having lost her edge, she did so without mounting too vigorous of a defense. Neither the remaining management team nor our own lawyers were willing to slug it out at length. The historically combative mode was drifting toward political appeasement.
Having lost the legal battle partially and having paid up without depleting all cash allowed the company to take stock and regroup. Best of all her market position was unharmed. Windows and Office, the leading bread winners, were unharmed—by 2002—and so far unchallenged. The current versions Windows XP and Office 10 were solid products and had a strong following with enterprises and consumers alike. The profitable OEM business was still growing and piracy was slowly being reduced further. The enterprise server market—competitive as ever—was at least a break even business. Xbox and all online services, while not profitable, were steadily gaining momentum. MS researchers were creating more patents than ever, rivaling IBM in quality and quantity. In a nutshell, when it came to revenue, profits and product’s health, breadth and depth, the US regulatory measures had been by no means lethal.
Was there any damage at all? Foremost the company lost a lot of talent, and second of all the public relations (PR) beating had given her a bad image. People leaving the company in droves had reasons. Not wanting to work for a PR damaged company was one, having made enough money to retire another. Salaries were now up to industry standards. But Steve had dropped stock option rewards. Correct or not it sent the wrong message. Employees interpreted his action as management having lost faith in the future of the company. In particular, developers felt that breakthrough contributions would no longer be rewarded like before. To improve pay one definitely needed to climb up in rank. With jobs on the top scarce, people believed their upside was slipping away.
Last but not least, plenty of other attractive opportunities were available to explore. The Google start-up was making a name for itself, revolutionizing Internet search and Web-advertising methods. Something MS had been talking about for some time but had dropped the ball on. Apple was gaining strength with new innovative notebook products and ever improving OS technology making working on leading edge technology tempting even for MS developers. The open software movement was stronger than ever, and all Linux distributors were vying for smart programmers. Social network services, still in their infancy, were rumored to be developed. All of these formative enterprises were still dishing out stock options, why not try and make a second run, add to one’s fortune and once and for all secure a plentiful future beyond MS?
As a still growing company, MS responded and created more managerial opportunities for employees. More layers, more committees and more review cycles were the result. The speed of thought once eminent slowly disappeared. To increase visibility, political standings and future advancements, career minded employees now had to make sure that their peer reviews went well. Contributions became secondary for advancements. Political correctness counted as much and sometimes more.
I received several e-mails and phone calls from some of my old cohorts not understanding the company any longer. They complained in particular about the stack ranking method the company deployed during the review cycle. It had started when I was still around and I had ignored it, believing it was unjust and cruel for my in general well performing employees. Now it was followed to the letter and if you landed on the bottom of the stack, you had to fear for your employment. Like other employees, my ex-coworkers expressed their dissatisfaction in regularly conducted annual employee surveys. Nobody seemed to read them, get the message or appear to care. It surprised me knowing Steve’s sensitivity. I concluded the bureaucracy which had bugged me years ago had by now cemented itself so deeply that it must have become a management blessed modus operandi. MS’s wheels began to churn slower and slower. Products got delayed and influenced by designing them in committees. The company was losing her way, as Jim Alchin the head of the Windows group in ’04 remarked.
Steve Ballmer was now fully in charge of the company. He tried to stem the tide introducing an enlarged leadership circle, promoting more people than ever to VP and making sure people got incentives in form of stock, not options—somehow restoring a little bit of faith. Before I left, I attended several of his rallies, listening to pep-talks he gave. They sounded repetitive and fell mostly on deaf ears. Even at his best the eternal fiercely gesticulating optimist was no longer the convincing demagogue he had once been. People just needed to follow the news cycle to understand reality. Attacked in the aftermath of the trial, MS seemed to be giving up the noble fight, caving in everywhere by settling the left over matters. Management rained money on winning plaintiffs while at the same time tightening long established and generous freebees employees took for granted, causing more consternation. Clear signs of weakness, and as much as Steve tried to keep his posture in internal meetings, the air smelled of mollification. The subsequent compliance scrutiny fostered a cautionary conservatism inside. The stench manifested itself. An unheard-of hesitancy took hold, slowly converting the company into a less assertive competitor. Why stay put and become a political animal, when there were way more exciting opportunities waiting outside? So the exodus continued and enfeebled MS further when tackling emerging challenges.
The investment community for sure judged it that way. MS was throttling back her fighting spirit, dampening her ability to compete. The mass-departures of key contributors slowly but surely hampered her ability to respond fast enough and with sufficient innovations. Bill obviously crumbling was the last sign that the community needed to make MS’s stock price head south. Fortunes vanished. Millionaire dreams evaporated. More brain trust left the company strongly doubting Bill’s and Steve’s renewed leadership efforts and MS’s future business prospects.
Vista, the next version of Windows after XP, took five years to see the light of day. Not only was it two years late, it missed a plenty of new features like a long touted innovative file system. To Jim Alchin’s dismay, competitors introduced that feature he had long envisioned first. Internet Explorer was staid and contained more bugs and security holes than usual. A tablet version was dropped from Vista’s development schedule. A disgruntled Alchin who had supervised its development considered this release his last act in a company he no longer believed in. Three years earlier he had told Bill that he now preferred an Apple MAC over any IBM PC clone. Superior design and an advanced OS were the reasons for his frustrating opinion—sadly true and it showed up in Apple’s ever increasing share of the total PC market.
Encouraged by Vista’s deficiencies and bloat, Google released her own Linux-based OS called Android in ’07. Having a small footprint it immediately gained a solid foothold in the rapidly evolving smart phone, tablet and netbook market, and is now poised to gain notebook and potentially desktop market share as well.
There were other indications for MS’s falling behind. When Apple introduced the iPod in ’01, an innovative music player, and complemented it two years later with an online music store (iTunes) for MAC and later Windows PCs, MS was caught flat footed. ITunes allowed for music sales and downloads. Its launch clearly demonstrated who was ahead in exploring this new and highly profitable online service frontier. It took MS until 2006 to come up a competitive product called Zune, only to discontinue it a couple of years later. It simply crashed.
The year ’04 brought us MySpace and Facebook. The popularity signs for social service networks had been on the wall since AOL introduced an instant messenger service in ’01. While matching it somehow two years later, MS’s management never got or accepted the real message of how much the younger generation truly enjoyed an always on chatting opportunity. The company for sure had the technical ability to show some leadership here but was seemingly out of touch because management was not convinced by the by then obvious. Over 900 million people using this service today shows how much one bad judgment can hurt a company.
During ’04, stiff competition for Hotmail, MS’s e-mail service,
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arrived when Google entered this service segment with G-mail. One of the attributes and why people liked it was its ability to store unlimited user information in the cloud, something MS’s chairman belittled when it was announced, but had to follow several month later as users left Hotmail in droves. It took Google some time to get her service right but she eventually cleverly cross linked it to her search engine pioneering the meanwhile infamous context advertising and accelerating her ad revenues dramatically. Today the e-mail market is pretty much split among three companies: MS, Google, and Yahoo! all retaining around 300 million customers. MS’s recent announcement to revamp her service and make it look and feel more Outlook
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like shows that the fight for member share is by no means over. While all these services are free, they produce revenues through advertising placements, which Google is the master of.