Microsoft CEO Steve Ballmer's Legacy: A Salesman Without Product Vision

Last summer, as Microsoft was gearing up for arguably the most important product launch in the company's history, CEO Steve Ballmer was nowhere to be found. Microsoft had scheduled a mysterious, last-minute event in Los Angeles, flying in roughly a hundred members of the media from around the globe, who were eager to set their eyes on the rumored Surface tablet, Microsoft's first PC device in its 30-year history, which was developed to show off the power of Windows 8, the operating system's most radical redesign in more than a decade. Yet in the days leading up to the presser, as then-Windows chief Steven Sinofsky tirelessly rehearsed his presentation at Milk Studios, Ballmer was a no-show. According to a source present, his role was played by a stand-in until the day of the event.

That's not to say Ballmer was an absentee chief executive, but it's a telling example of the type of leadership he brought to Redmond. Ballmer, undeniably, was a booster of the company; he bled (and definitely sweat) Microsoft. But unlike Steve Jobs, who was involved in every aspect of product launches, Ballmer was never the hands-on leader that Microsoft so desperately needed. Nor was he a product visionary like Jobs was at Apple or his own predecessor Bill Gates was at Microsoft. Instead, Ballmer, who announced last week that he would retire from the company within the next 12 months, is likely to exit with a messy, unsatisfying legacy. He was a salesman who steadily grew the company's bottom line, but one who has left Microsoft in a weaker market position than it has ever been in before.

There are two ways to view Ballmer's tenure. On the one hand, Ballmer's defenders might argue he brought much success. The press release on the day of his retirement is likely to tout how he tripled annual revenue since taking over in 2000, from $23 billion to nearly $78 billion, and goosed net income to $21.8 billion. It would also outline how Ballmer oversaw the launch of the Xbox and Kinect; ushered in the acquisitions of Skype and Yammer; expanded the company's enterprise business significantly; and introduced new versions of best-selling products like Windows 7, which still dominates the PC market. After all, Microsoft is the fourth most valuable company in the world, roughly tied with Google in market cap.

However, Ballmer's mistakes are impossible to ignore. The list of product flops during his tenure are numerous: Zune, Vista, Kin, to name just a few. He invested billions of dollars in Bing, which has failed to make a dent in Google's search market share. And most significantly, Ballmer completely missed the sea change in mobile, losing out to Amazon, Apple, and Google in the music player, e-reader, smartphone, and tablet markets. The PC industry is now in decline; Microsoft's enterprise business is being attacked from all sides; and Ballmer's bets on Windows 8 and Windows Phone have failed to resonate with the public. Only recently, Microsoft was forced to take a $900 million write-down on unsold Surface tablet inventory.

Following the announcement that Ballmer was stepping down, Microsoft's long stagnant share price shot up around 7%. But it wasn't just shareholders who seemed to welcome the news; the tech press lauded the move too. And reports indicate that Microsoft's board, including Gates, who recently criticized the company for a lackluster period of innovation, also agreed it would be best for Ballmer to depart sooner than the company had originally planned.

The problem is that Ballmer was never much of an innovator. A former high-level Microsoft manager describes Ballmer's approach to product: "It really all boils down to the innovator's dilemma," the source explains. "Are you going to have 50 people work on something that's interesting and that could maybe make $100 million in three to four years? Or are you going to use those 50 workers to increase the SQL server sales team, which could generate $1 billion in additional revenue in nine months?"

Ballmer simply wasn't a product guy. As top insiders told me not long ago, Ballmer offered no direction on the features and user interface of Windows 8, for example; he never even got together with the team to green-light the redesign. When asked if Ballmer was ever involved in any product decisions, one longtime designer said "no" flat-out. Another added, "Not at all." As one source said, "I don’t think Steve could even spell the word design."

Ballmer was always, at heart, a salesman. I once saw him actually running to find Yang Yuanqing, the head of Lenovo, at a Microsoft event, yelling at his handler, "Just tell me where he is!" Lenovo is the world's No. 1 PC maker, and therefore a huge Microsoft customer. It was clear that Ballmer, who looked relieved to catch Yuanqing before he left, was in his element talking him up and keeping him happy.

Steve Jobs believed having a salesman at the helm was a big reason for Microsoft's decline. "The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of product becomes less important," he's quoted as saying in Walter Isaacson's biography. "The company starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. When the sales guys run the company, the product guys don’t matter so much...it happened when Ballmer took over Microsoft."

It's the reason why so many sources I've spoken with hoped Microsoft would one day add a chief designer to its ranks, a position that was sorely lacking from Ballmer's recent company restructuring.

Ian Sands, the former senior director of Microsoft’s product long-term vision and strategy, once told me that he believed Microsoft would be a better company if it had someone in that role, as Apple did with Steve Jobs. "I think a lot of people feel like, 'Why don’t we just have a senior VP of design?'" he said.

Still, one former top executive, who worked closely with Ballmer, argues that it's unfair to criticize Ballmer with the benefit of hindsight. No company, the source argues, saw the disruptions coming to the mobile space from Apple, though he acknowledges that the iPhone, which now generates more revenue than all of Microsoft's divisions, caught Ballmer off guard. "All of us were surprised that the iPhone was as successful as it was."

"People give Steve a hard time," the source adds. "But he’s got the hardest job in the world."

Well, for not much longer.

[Image: Flickr user Microsoft Sweden]

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10 Comments

  • jbelkin

    Microsoft would've been fine as an ENTERPRISE company with Ballmer as head - with examples that you cite but the problem is his not just a limited product vision but a limited corporate vision. Microsoft's brilliance was restricting competive distribution through both delivering EVERY "feature" (checklistware) that a customer might want (you want 50 starburst designs in Powerpoint, YOU got it!) and in buying up or blocking competitive distribution through any means BUT that strategy does NOT work once the internet era started - slowly but eventually knocking down the city walls ... look at how MS attacked Netscape (prevented OEM loading by threatening to pull WIN license, writing code in WIN & Explorer to slow downloads and offering maintence deals to corporations to switch to IE) BUT MS could not figure out how to attack Mozilla. It was free AND thousands of programmers would work to program and fix bugs 24/7 Worldwide - most with no pay and freely available on the internet for anyone to download - MS was at a loss because their only corporate strategy was to lock up distribution either at retail, at manufacturng or wherever. MS thought they won the audio format war with WMA. They locked up all the record labels, and all the portable players manufacturers ... BUT consumers decided that Mp3's were better (openness for one) and MS was at a loss to compete - after all, they thought they had locked up the gates but it was a new internet world where gates MEANS nothing (the pun also works here :-)  ... Apple went around MS locking up retail distribution by opening their own stores ... basically Ballmer's failure is a total lack of vision in EVERYTHING - they were failures in his era because a) he didn't understand the internet and EVERYTHING that went along with that B) he REPEATED his "old general's fight the last war" by we'll just copy whatever is out there and because we're MS - they'll buy ours soon enough which worked fine in the DOS/WIN 95 era but since 1998 not so much but Ballmer never learned that still TO THIS DAY with "WIN PHONES" are not toys like the smartphones. So, while the OS, Office and Servers had a better business than the US Mint in printing cash, they wasted HUNDREDS OF BILLIONS of dollars chasing markets they had ZERO understanding of. Look at the Xbox. They will never climb out of $15 BILLION dollar hole they spent in creating the Xbox - it's breakeven now after you deduct $15 BILLION AND by taking a $5k PC and stuffing it into a $299 PC gaming machine with no driver and malware issues, they KILLED the PC market to anything above $399 - if you want to play PC games, you just buy an Xbox not a $5k PC or add-ons EVERY YEAR. How many BILLION did that cost MS? Or spening $6 BILLION on Bing search? Or $1 BILLION on ZUNE? KIN, another billion - $10 BILLION on the ad agency which they wrote down to ZERO. $6 BILLION on creating WIN 7 - really? Apple spent something like $400 million over a 2 year period on OSes and released 3 versions in that time period. But it took MS 3 years to fix Vista? MS shareholders should tally up what MS generated in cash flow and then see what's left in the bank to figure out why keeping the founder's college room-mate is not a good idea.

  • ryan_dorrell

    You wrote: "He invested billions of dollars in Bing, which has failed to make a dent in Google's search market share."  Bing holds an 18% market share.  Not on par with Google, but definitely a dent.

  • ryan_dorrell

    good point - they went from zero to 18% share, but at the expense of others, not necessarily Google. 

  • Suleman Ali

    Microsoft is not ready for the cloud. That will be a big challenge for the next CEO

  • TG

    Really? That's a bit of an uneducated comment. Pretty much all of Microsoft's enterprise technologies are Cloud-based (see O365, for a recent example).