What I Would Do As the New CEO of Microsoft

No, I have not received the call yet. Alan Mulally, the CEO of Ford, apparently has. So have a bunch of insiders including Stephen Elop of Burning Platform fame and Tony Bates, the former CEO of Skype - the only Microsoft product I still like to use today. Bill Gates apparently got the call but he said “no”. But as Steve Ballmer's era nears its announced end, the search for the new CEO is heating up. And when they call me, here is what I would do to fix Microsoft:

Steve Ballmer, Microsoft CEO

First, let’s figure out why Microsoft got itself into trouble. Their problems are clearly not related to financial performance. Microsoft is still making money hand-over-fist. The problem is the company’s perception. Microsoft is seen to be lacking innovation and relevance. Not that Microsoft has ever been considered a big innovator - in fact, entire books have been written documenting how pretty much every Microsoft product has been a reverse engineering of someone else’s innovation: Word was a remake of WordPerfect, Excel a copy of Lotus 1-2-3, Windows was inspired by Mac OS, Active Directory was 'stolen' from Novell NDS, XBox from Sony Playstation, Bing from Google...should I keep going?

So perhaps the lack of innovation is not the root cause of the Microsoft problem. Or at least not a new cause. But if not, what is? Well, I am convinced that it is Microsoft’s maniacal obsession with their single vendor stack. Back in the heydays when all the hardware vendors decided to try to copy IBM’s success in the PC business and they all started making PCs, this strategy was perfect. Everybody had the same PC architecture that came preloaded with a Microsoft Windows operating system and so every computer was able to run Microsoft software. To their credit, Microsoft made all that software pretty well integrated and the IT departments had to support homogeneous environments where every employee had the same system. Everybody was happy. What computer we used at home didn’t really matter because it was usually a generation or two behind and we couldn’t bring it to work anyway.

Today, all of that changed. Thanks to the success of Apple and Google, the computer landscape is much more heterogenous. Operating systems such as iOS and Android have a significant market share and Windows is no longer the only game in town. The devices we use at home are better than the ones we have at work and it is easy to bring them to work and to use them for work. The ultimate Microsoft nightmare is that they don’t run Windows. As a result, all that Microsoft software doesn’t run on many of the computers we use. There are a few exceptions such as Microsoft Office for Mac and my trusted Skype which ran pretty much on everything already before Microsoft acquired the company.

Yet Microsoft continues insisting on the no longer existent Microsoft-only world. For example: SharePoint only has a Windows client, Office doesn’t run on iOS or Android, and every Microsoft online service requires a Microsoft Hotmail email address...seriously?

If I were to become the new Microsoft CEO, I would change one main thing. I would stop the Microsoft myopia madness. I would make the different company divisions accountable for their revenue independent of the concerns for any other division. If the Office group wants to port their applications to iOS or Android, let’s have a go at it! If the Windows group decides to make their OS available on a Mac or iPad, let’s do it! If the Nokia team can make a case for offering an Android based device, don’t stop them! Let the XBox group make their games available on other consoles such as Sony Playstation or Nintendo Wii. Embrace tablets that people actually use - not just the ones from Microsoft. Stop playing defense! Stop always worrying about how does your move impact the “cash cow”, the installed base. Open up your strategy, open your software, open your imagination!

If Microsoft needs to defend anything, it is not their profits, not the revenue, and not the installed base. It needs to defend their market share. That’s not an easy play for a company that has been used to 95% market share for a couple of decades. Talk about being out of the comfort zone… The market share I’m talking about is the market share of all eyeballs at all times. Not just the PCs. It includes business users just as consumers. It includes desktops, smart phones, tablets, game consoles, TVs, and now also home security systems, thermostats, and wearable computers. That’s the game that Apple and Google are playing and Microsoft has to engage them on their turf. Even books, newspapers, and movie theaters are the competition!

That’s the market share that matters. Expecting that someone would ever buy all these products from a single vendor, even one as big and strong as Microsoft, is simply foolish. The world of the Internet of Things cannot be based on a single vendor’s stack. There are simply too many “things” out there. Microsoft has no choice but to open itself up on every layer of the stack.

That is the key thing that I would change if I were the new CEO of Microsoft.

Microsoft at an Inflection point

The year 2012 will go down in history as a major milestone for Microsoft. The once dominant company started the year under tremendous pressure after continuously losing users, market share, and hipness to a new breed of vendors driving the perfect storm of change. This change is based on the shift to mobility, social software and cloud computing and companies such as Apple, Google, LinkedIn, Dropbox, and Amazon are Microsoft's new arch-enemies.

Microsoft wasn't sitting idly by watching the market forces unfold, though. In fact, it is hard to find any blemish on Microsoft's execution in 2012 and the company delivered on all key battlegrounds. With Office 365, Microsoft demonstrated that they are all-in at betting the farm on the cloud. With the purchase of Yammer (and Skype before), they are making great strides to become a force in social software. Microsoft Windows 8 operating system is attractive, innovative, and differentiated. With the help of Nokia, Microsoft delivered some impressive smartphones and the Microsoft Surface tablet is receiving good reviews (well, until they announced the pricing earlier this week).

Measured by their product execution, Microsoft turned things around in 2012 and the company is cool again. The problem is, however, that Microsoft continues losing users and market share. According to comScore, Microsoft mobile OS market share has continued declining and remains in the irrelevant territory with 3.2% (IDC gives them 3.6% which is about the same - really bad). Gartner predicts, that 90% of enterprises will skip Windows 8 and consumers are wishing for Apple devices under the Christmas tree. Finally, early indicators suggest that the Surface is not selling well either.

Why is that, you wonder? Microsoft designed a perfect combination of operating system, devices, social tools, cloud, and even enterprise applications. All of it is beautifully integrated and does (almost) everything you need. The problem is, that it only works with Microsoft.

That's right. Just like in the old days when the Wintel architecture used to dominate the market with well over 90% market share, Microsoft continues building products that assume we live in a Microsoft-only world. Do you want to access any of the Microsoft consumer services? Well, you need a Microsoft email account like Hotmail. Do you want to work with a Microsoft application from an iPad or an Android device? Tough luck, you will always be a second class user at best. Wanna search? Get used to Bing!

Microsoft's continued insistence on this puritanical approach to architecture is creating an interesting dilemma. A Microsoft-only environment may work great but you will only find such an environment on the Microsoft campus. If you use any non-Microsoft platforms, the appeal of Microsoft’s closely-integrated architecture diminishes fairly quickly. That includes pretty much everyone as over 96% of users today have a mobile device running something other than Windows.

Microsoft is finding itself in completely unfamiliar territory. The world is not all about Microsoft anymore. Do you want to share documents with friends? Chances are much higher that they have a Dropbox account rather than a Microsoft SkyDrive account. Do you want to create a professional community of interest? Everybody has a LinkedIn account while Microsoft Live has...does it still exist? Do you want to use SharePoint from a Mac or an iPad? Tough luck! You may be better served by another ECM vendor.

Microsoft’s finding itself on an inflection point. While they are delivering some very competitive products, those products have been built for a Microsoft-only world that no longer exists. To address this problem, Microsoft will have to open up and mandate all its groups to go multi-platform. That might be their only chance to start gaining market share again. That's a tough pill to swallow for a company that has single-vendor architecture in its DNA. It is a particularly difficult move, given that Microsoft's top competitor, Apple, has persevered through decades of single-digit market share to become the world’s largest company - based on a puritanical single-vendor architecture!

App Store Comparison - iPhone vs Android vs BlackBerry vs Windows Phone

Recently, I wrote about my take on the smartphone market. My conclusion was that the key factor to success is the availability of apps, noting that iPhone is way ahead of the game with Android following closely behind while Microsoft and BlackBerry are nowhere. But as soon as I published my blog post, Microsoft announced that they now have 100,000 apps in their app store. And I started doubting myself...

100,000 apps sounds like a pretty good number. I only use about 100 apps on my iPhone and so 100,000 is a lot to choose from. But there was this nagging feeling that the number of apps available is actually a pretty meaningless number. What I really care about is my apps. The apps that satisfy my needs. But which apps are those?

Well, I recently published a post about my favorite apps on the iPhone. I have distinguished between the coolest and the most useful apps. That’s a good list to start. In the article, I have mentioned a few solid alternatives and so let’s add them to the list too. I should also add a couple of service apps for services I use a lot like Marriott and Air Canada. They didn’t make the list but let’s see. And for a good measure, let’s add some of the event specific apps to the list. What could be more important right now than Wimbledon, Tour de France and the Olympics?

That results is a pretty good basket of meaningful, useful apps. There are 30 of them in total and I have all of them on my iPhone. No basket is perfect or entirely rational but a sample basket is useful. Just ask the Dow-Jones. So let’s take a look at how the other smartphones scored. I have checked the app stores for Android, BlackBerry and Windows Phone. Here are the results:

The results? As expected, Android scored relatively high and by far the best. With 23 out of 30 apps available on Android, Google is not on the same level as Apple but certainly in contention. Microsoft Windows scored 16 out of 30 apps which was disappointing. That said, most of the big providers such as Netflix, Audible, Shazam or Evernote have made it as far as supporting Windows by now which is encouraging. But if you are looking for any more specialized apps for your Windows Phone, forget it.

BlackBerry, as expected, is far behind and considering that they are in the process of switching operating systems to QNX, the apps shortage is not going to improve anytime soon.

So there you have it. The next time any of these vendors start throwing around numbers like hundreds of thousands of available apps in their apps store, remember that such numbers matter little. What matters is - do they have the apps I need?

Does Windows Phone Stand A Chance?

I must say, I am pretty impressed by the Windows Phone operating system. Unlike the Google Android which is, let’s face it, a poor copy of the the Apple iOS, Microsoft created a truly original user experience. The notion of having the same OS that spans the desktop, laptop, tablet, and the smartphone is a very compelling idea. Even Apple didn’t quite make that happen as their Mac OS is still distinct from  iOS.

I have also been impressed by some of the strategic moves Microsoft has been making with their Windows Phone. The partnership with Nokia is a strong endorsement - no matter how long and painful Nokia’s recovery might be. Microsoft also recruited many other vendors including Samsung, LG, HTC, Dell, and others.

Since Google acquired Motorola, there is more and more doubt about Google’s innocence when it gets down to the openness of the Android operating system. That fact alone makes the Windows Phone operating system a rather compelling alternative for the hardware vendors. While none of them have publicly switched their allegiances yet, I’m sure they all are talking to Microsoft.

Also, the recently announced deal with Barnes & Noble and their Nook ebook reader could be a major coup for Microsoft. Sure, Nook runs on Android today but I would bet many chips that the next release will run the Windows Phone OS. Not a bad move for Microsoft if you ask me!

With all of these strategic moves going in Microsoft’s favor, it is surprising that the Windows Phone market share continues sliding down. According to the latest ComScore market share report, Windows Phone has merely 3.9% of the US market - compared with 4.7% three months ago. The trend has been heading south over the last 18 months and frankly, any player in the single digits is questionable...

So what should Microsoft do to reverse this trend? Well, releasing a truly differentiated and innovative operating system is a good start. Windows 8 with all its bells and whistles and particularly with the Metro-style user interface is very promising. The Metro-style apps that Microsoft is going to release next look awesome. But one thing is still missing...

A mobile operating system is supposed to be a platform. And a platform requires applications. This is where Microsoft is not doing so well. When I try to find my favorite iPhone apps on the Windows Phone, I am striking out more often than not. Yet Microsoft understands how to cater to developers. Their tools and developer programs are second to none in the software industry. But there is more to that.

Microsoft should be actively recruiting developers to port their apps to Windows Phone. That is not a slam dunk for most developers as Windows Phone is currently their number 4 platform of choice after Apple, Google and RIM. Yeah sure, RIM has some problems but the BlackBerry OS still has more than double the market share than Windows Phone. Today, building an app for Windows OS is a major gamble with uncertain payoff.

This is where Microsoft could and should use its market power. Instead of billboards, Microsoft could be paying a few thousand dollars to the developers of the key apps to port their apps to Windows Phone. Microsoft should just go aggressively after all these developers and entice them to make it happen.

Particularly in the enterprise market , Microsoft should aggresively solicit the vendors’ support. Right now, Windows Phone OS is the number 4 priority on the list for any enterprise software vendor - after Apple, Google, and RIM. Number 4 rarely makes it into a released product. Everybody’s budget is tight and the money is barely enough for priorities 1 and 2...

Developing apps for a platform that has 3.9% market share with a declining trend is a tough business case to make. This is the top problem Microsoft has to focus on to make Windows Phone a success and without addressing this issue, the platform will likely fail.