Ballmer’s Microsoft

Steve Ballmer is the hand picked successor of a company that just posted record breaking profits. Not just profits reaped from onetime moves such as layoffs or gimmicks, but generated from cultivating existing revenue streams while growing new product lines. He would be infallible at any other company. As the CEO of Microsoft however, Ballmer is plagued with perpetual doubt driven by an expectation to continue the status quo of unchallenged domination. While this perception has some merit, much of it stems from an unfair apples-to-apples comparison being made between the past decade and the golden days of yonder past. One critical difference between the two eras: competent and fierce competition.

Throughout the late 80s and 90s, Microsoft would identify a lucrative market, produce a marginally better clone, and then tie in their new offering with an already established product. Often this strategy worked simply because the competition wouldn’t respond, capitulate, or fall on it’s face. Only after Ballmer became CEO in 2000 did fierce competition emerge as a regular challenge. Windows Mobile is a good example of this dynamic as a marginally better clone that was greatly stymied by strong competition.

In 2006, market share of Windows Mobile had grown to about 14%, a little under twice Blackberry’s and much less than Symbian’s 67%. While 14% seems pitiful, Microsoft had 4 factors working in it’s favor. First, the smartphone market was largely untapped in 2006 and just starting to boom. Second, Microsoft’s hardware vendors such as HTC, Samsung, and Motorola had started to release a slew of attractive handsets. Third, Windows Mobile had the enterprise appeal that Symbian lacked. Finally, Nokia was the exact type of overconfident and stagnant competitor ripe for the overtaking. Despite low market share, the future was surprisingly bright for Windows Mobile.

This outlook changed in 2007 when two strong competitors emerged. First came Apple with the iPhone. The handset blew everything else out of the water in terms of user experience and polish, but it alone wasn’t a big enough threat to Microsoft’s mobile strategy. The iPhone lacked enterprise support and more importantly, was an integrated solution that did not impact Windows Mobile licensing deals. The real threat emerged when Google followed Apple’s steps with a remodeled Android that attractively aped iPhone’s user experience and offered a free licensing that lured away Windows Mobile handset manufacturers. The advent of iPhone and Android spurred fast paced and compelling competition that ultimately left an only marginally improved Windows Mobile in the dust and forced Microsoft to start over.

The failure of Windows Mobile wasn’t because Microsoft was doing anything worse or different. The strategy was the same. The difference was fierce competition that 90s Microsoft hardly dealt with. Sure, mistakes were made. Ballmer could reacted more aggressively to the growing Android threat and lord knows what the hell he was thinking with the Kin. But Ballmer deserves credit for overseeing the reinvention of Windows 7 Mobile into something compelling and unique, as well as providing the new platform with the best chance to succeed by creating a hugely beneficial partnership with Nokia.

Ballmer started at the end of an era where Microsoft’s success hinged on total dominance. While imperfect, Ballmer has done what many CEOs would avoid. He has accepted Microsoft’s need to thrive among fierce competition. For that he deserves praise.