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The Toppling Towers of Redmond

Gates' 'road head' comes to an end.

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Things have never looked quite so dismal for Microsoft. They continue to rake in the cash with their Windows and Office franchises but they're otherwise an epic fail. The latest Kin fiasco only serves to highlight what employees and pundits have been noticing for some time.

Henry Blodget's Business Insider reports on an ongoing power struggle. Steven Sinofsky is set to take over after the departed Robbie Bach and James Allard. Whether this actually changes anything is another matter completely.

So why was Kin such a fiasco? Business Insider reports.

'In conversations with former employees, we've heard stories that the mobile division can't build its own phone operating system from scratch. It has to check with the Office group and the Windows group at every step along the way to make sure the Microsoft look and feel is preserved.

'The phone originally had its own OS. Then Microsoft's mobile boss Andy Lees told the Kin team to rewrite the OS based on Windows Compact Edition. It took 18 months to rewrite the software to fit these new specs.

'The Kin was originally the spawn of Microsoft's Danger acquisition but most of the Danger team left the company. Verizon was going to provide cheaper data plans for Kin phones initially but after all the delays it decided it had had enough, and didn't offer lower rates, which ultimately screwed the phone.'

So Danger abandoned Microsoft and Verizon abandoned Microsoft. Not a good sign.

Steve Ballmer sent out a letter to all employees in the aftermath. Transitions are always hard, says Steve.

From: Steve Ballmer
Sent: Tuesday, May 25, 2010 11:01 AM
To: Microsoft - All Employees (QBDG)
Subject: Executive Leadership Transitions

After almost 22 years with the company, Robbie Bach has decided to retire from Microsoft. I have worked with Robbie during his entire tenure at Microsoft, and count him as both a friend and a great business partner and leader. Robbie has always had great timing, and is going out on a high note - this has been a phenomenal year for E&D overall, and with the coming launches of both Windows Phone 7 and 'Project Natal', the rest of the year looks stupendous as well. While we are announcing Robbie's retirement today, he will remain here through the fall, ensuring we have a smooth transition.

Concurrent with Robbie's retirement, I am making several organization changes to ensure we have the right leaders in the right positions as we set ourselves up for the next big wave of products and services. Effective July 1, Don Mattrick, who leads our interactive entertainment business, and Andy Lees, who leads our mobile communications business, will report directly to me. Don and Andy have built out strong leadership teams and product pipelines, and are well-positioned for the years ahead. Independent of Robbie's decision, J Allard (currently serving as senior vice president of Design and Development for E&D), will also be leaving Microsoft. Given his ongoing passion and commitment to Microsoft, he will remain as an advisor to me, helping incubation efforts, looking at design and UI, and providing a cross-company perspective on these and similar topics. With J's change in role, corporate vice president David Treadwell will join IEB to lead the core technology organization, reporting to Don. David has a great set of accomplishments at Microsoft, most recently working on the Windows Live Platform Services team. Over the next several months, Robbie and I will work together to finalize reporting and structure for the rest of his org.

Now that Office 2010 has been launched to business customers, Antoine Leblond, senior vice president in the Office Productivity Applications Group, will take a new role as senior vice president for the Windows Web Services team. This team brings together the integral Windows services that today deliver updates, solutions, community and depth information for the Windows consumer. Kurt DelBene, senior vice president in the Office Business Productivity Group, will take on all of the engineering responsibilities for the Office business.

Transitions are always hard. Robbie has been an instrumental part of so many key moments in Microsoft history - from the evolution of Office to the decision to create the first Xbox to pushing the company hard in entertainment overall. J as well has had a great impact in the market and on our culture, providing leadership in design, and in creating a passionate and involved Xbox community, and earlier being at the center of our work seizing the importance of the Web for the company. But most important, both have been great team builders with a strong record of attracting, coaching and growing talent. As a result, their teams are primed to continue to step up and deliver great products, great services and great results for the company. Don has led the Interactive Entertainment Business since July 2007, where he's significantly grown our entertainment footprint as well as our profitability. He can count as successes the evolution of Xbox Live, the launch of blockbusters like 'Halo 3' and the much-anticipated 'Project Natal'. Previously, Don was president of Electronic Arts Worldwide Studios. Andy has led the Mobile Communications Business since February, 2008, and has been instrumental in reinvigorating our mobility efforts, bringing in new business and development talent and overseeing the creation of both KIN and Windows Phone 7.

As we finalize and ship so many of our key products ('Project Natal', Windows Phone 7, Office 2010, Windows Live Wave 4 and others) it is a natural time for us to look ahead and make sure we have the right talent in the right roles to fuel our next set of offerings. I am confident that the changes above will set us up well for the months and years ahead.

I want to close by thanking Robbie for the incalculable contributions he has made to Microsoft over the years. He will be greatly missed when he retires this fall, and I am glad that I'll have the opportunity to continue working closely with him between now and then. And as J makes a similar transition, I look forward to working with him in a new way.


The people commenting at Mini-Microsoft aren't buying any of it.

'My morale has never been lower. I have no faith in our senior leadership (Ballmer, Turner, Ozzie, Brummel) but I don't see any apparently leader that could step in and make the hard choices and forge a new urgently needed direction unless Bill Gates returns. Even then I don't know if the company can be steered off of the painful path it is now headed on.'

Microsoft's Kin failure sank morale at the company's Redmond campus, reports Business Insider again. A former Danger employee called Microsoft a 'dysfunctional organization where decisions were made by politics rather than logic'. An insider account also published at Business Insider provides even more insight.

Ballmer likes loyalty. He rewards it handsomely and in recent years to the detriment of MS. I know of multiple mediocre managers who became his 'yes' men in order to get promoted; often on the backs of their much more talented and innovative peers.

Robbie Bach is a great example of this. He oversaw a division that lost +/- $1B dollars on XBOX due to lack of quality oversight. Instead of losing his job he was promoted. Many of my former MS peers talk about the fact that the company has become a place of 'waring camps', each trying to outdo each other and killing innovation in the process. MS has gotten so big that employees have found a way to 'hide', working very little but making no waves so they can keep their jobs and their health insurance.

The biggest difference between the old days with Bill and the current situation is most easily described by this scenario: Bill: Two smart people are tasked with solving a hard problem in an innovative and interesting way. After a set amount of time both are given the opportunity to present to Bill. Bill takes both through their paces and decided which solution was the most elegant, which solution would best meet customer needs - which translated into sales. The person not chosen to build the solution and a team would be given another interesting opportunity. (Unless their idea was really stupid (one of Bill's favorite words). The penalty for not being chosen wasn't banishment to an irrelevant job.

Today with Steve: Two smart people are tasked with solving a hard problem in a way that will generate the most revenue for MS. Knowing that if you don't come up with the most profitable solution means your career is over. You scheme, backbite, sabotage and otherwise undermine the other person until you have so ruined their reputation that even if they have a better idea Steve will consider them damaged goods and choose you to implement their idea. Needless to say, you spend so much time on the politics and brown nosing aspect of the process that the product solution you come up with isn't very innovative, takes very little risk and uses the 'old' tried and true MS licensing model.

Innovation takes risk, but Steve has managed to make the risk so unacceptably high that very few people are willing to take it. MS needs a new CEO who isn't so insecure that he needs to hear his ideas are the best ones and instead someone who is willing and able to let other people in the room be super smart.

It's too bad that Bill can't look past his friendship to realize that Steve is making a once great company irrelevant. As a former MS employee who spent countless hours with Bill and Steve, I am sad to see where the company is headed.

Everybody's picking on Microsoft these days. Fast Company have an interesting report.

One hapless serf made a tragic mistake at a Microsoft company meeting last fall. He pulled out an iPhone in front of CEO Steve Ballmer. According to observers, Ballmer freaked out. The chief grabbed the iPhone, placed it on the ground, and pretended to stomp on it. This was typical Ballmer, whose notions of company loyalty were honed in his hometown of Detroit, where everyone drove Fords. Ballmer doesn't let his children jam to iPods or use Google to search the Web. Microsoft recently decided to reimburse workers only when they use Windows-based phones. According to The Wall Street Journal, about 10% of Microsoft employees carry iPhones anyway, but they hide them in ugly cases, like concealing a comic book in a newspaper.

Ballmer's insecurity about his employees' iPhones suggests a larger myopia. His Microsoft seems rudderless, without any real goals other than to react fretfully to whatever Google and Apple do in categories they already dominate. Remember when Microsoft was the fearless Death Star, the gravitational force that determined the direction of everything else in tech? Those days are long gone. Ballmer took over as CEO in 2000, as Bill Gates began his long departure from the firm. It hasn't been a happy decade. While Google and Apple reached stratospheric heights, Microsoft careened from one disappointment to the next. Think of Ballmer's on-again, off-again effort to woo Yahoo, the worst romantic comedy ever (How to Lose Your Credibility in 10 Months). Or his continued investment in the Zune, the Washington Generals of handheld entertainment. While Ballmer kept his eyes on rivals, the company's cash cow endured the ignominy of an embarrassing Vista launch. Can you think of any other tech firm where the CEO could bungle the company's main product and still keep his job?

See Also
Fortune: Steve Ballmer doesn't get it
NY Times/Ashlee Vance: Microsoft Calling - Anyone There?
Business Insider: Power Struggle At Microsoft After Kin Flop
Fast Company/Farhad Manjoo: Microsoft Needs Bill Gates Back
Everything Wrong With The Steve Ballmer Era On Display At D8
Business Insider: Huge Shakeup at Microsoft: Robbie Bach, J Allard Out
Business Insider: Microsoft's Employees, Shareholders Pine For Bill Gates Return
Mini-Microsoft: The KIN-fusing KIN-clusion to KIN, and FY11 Microsoft Layoff Rumors
Business Insider: Microsoft Rank And File Felt 'Embarrassment All Over Campus' From Kin Failure

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