Why Windows 7's success may ruin Microsoft

They shouldn't be popping the champagne corks at Microsoft over the news that Windows 7 sales are skyrocketing. A well-known management consultant says that Windows 7's success could be the worst thing to happen to Microsoft, and turn the company in the General Motors of software.

The market research company NPD Group reports that sales of Windows 7 in the U.S. "were 234 percent higher than Vista’s first few days of sales."

Stephen Baker, vice president of industry analysis at NPD said this about the Windows 7 launch:

"Microsoft's program of early low-cost pre-sales, high visibility marketing, and aggressive deals helped make the Windows 7 software launch successful. In a slow environment for packaged software Windows 7 brought a large number of customers into the software aisles."

Sounds like good news, doesn't it? In fact, it's just about the worst news that Microsoft could hear, says Jay R. Galbraith, president and founder, Galbraith Management Consultants. In an article for CNNMoney, Galbraith argues that Microsoft could potentially become the the General Motors of software --- old, outdated, irrelevant, and eventually headed towards ruin. And the success of Windows 7, he says, will only accelerate that.

Galbraith says that in order for Microsoft to thrive, it needs to shift its attention away from the desktop, and towards other devices and cloud computing. He has this to say about why a Windows 7 success will hurt Microsoft:

"The worst thing that could happen is a success with Windows 7, which would reinforce management's focus on the desktop. Then, as customers move away from the desktop to smartphones and other devices, market share will decline. But if share declines slowly, maybe a point or two a year, the drop will not be enough to overcome the pride that comes with high margins and high profits. Over time, the desktop mafia will experience a shift from pride to hubris. Welcome to the General Motors scenario.

Galbraith says that Microsoft needs to clean house and rid itself of managers tied to past ways of thinking and doing business. And the quickest way for that to happen, he believes, is for Microsoft's competitors to succeed:

"The best thing that could happen to Microsoft would be successes by Apple (AAPL) or Google (GOOG) that cause a significant loss of sales and market share. The shock would create a sense of urgency and cause the leaders to clean house."

He says that Microsoft does not have to turn into the next General Motors, as long as Steve Ballmer takes drastic action:

"The General Motors scenario does not have to happen. Ballmer can focus inward on transforming the desktop mafia to the new computing paradigm. Or, better yet, appoint a hands-on, change-experienced chief operating officer who can do it with him."

I don't see that happening, though. Ballmer is too wedded to the past --- a fresh set of eyes are needed if Microsoft is going to transform itself.

 Microsoft clearly isn't in trouble today --- it's got nearly a global monopoly on operating systems, and other profit-making product lines. But GM at one point was in a similar situation. It took decades for GM to decline. Unless Microsoft heeds Galbraith's advice, the same eventually may happen to Microsoft.

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