Ballmer's chance of changing Microsoft? Don't bet on it

Failed attempts to change corporate culture litter the business landscape, says expert, citing research into fiascos

Microsoft's attempt to transform its dog-eat-dog corporate culture into a kinder, gentler cooperative climate is likely doomed, an expert in failed business strategies said today.

"If you look at the research into failures, culture is very resilient to change," said Paul Carroll, co-founder of the Devil's Advocate Group and co-author of Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years. "Culture eats strategy for breakfast."

Carroll's book, which he wrote with fellow Devil's Advocate co-founder Chunka Mui, conducted postmortems on some of the most famous business failures, and is based on research into 2,500 enterprise flops. Devil's Advocate, meanwhile, is an alliance of experts who help corporations evaluate strategy shifts.

That research, and Carroll's 17 years as a reporter with the Wall Street Journal, where he profiled CEO Steve Ballmer and interviewed him several times, gave him interesting insights into the changes that Ballmer has spelled out for Microsoft.

He isn't optimistic.

"In all our research, we did not find an example of a company able to address the problems that Steve [Ballmer] is trying to address," said Carroll. "I just don't think it bodes well for Microsoft if they do the conventional kind of stuff."

Last week, Ballmer unveiled a corporate overhaul that will take Microsoft, which for decades used a "divisional" organization -- one where each product line was run as a miniature company with significant autonomy -- to a "functional" structure, where, for instance, an engineering group handles all product development, and where other responsibilities, like marketing and finance, are centralized.

Functionally-structured companies with multiple products are rare; Apple is one of the few that rely on that organization.

Because a functional org chart requires much more cooperation -- theoretically, internal competition between groups has been downplayed or eliminated outright with the death of product-specific divisions -- Ballmer also said that Microsoft must and would change its corporate culture, which for decades notoriously pitted groups against each other as leaders battled to meet financial goals.

"You role model it from the top, you talk about it a lot, you pinch yourself and remind yourself when you're not doing better, you measure it in the employee poll," Ballmer said in a Saturday interview with the Seattle Times when asked how cooperation would be instilled in the company.

Carroll wasn't impressed with the top-down idea, saying that he couldn't come up with an example where it worked.

But he had plenty of examples of CEOs who thought they could force-feed workers a new philosophy. One who was notable, he said, was Robert Nardelli, who in 2000 took the reigns of Home Depot after he was passed over for the replacement of General Electric's top spot when Jack Welch stepped down.

Nardelli, voted by CNBC as one of the "Worst American CEOs of All Time," tried to transform Home Depot's culture from the top down -- hoping to remake it into a more centralized company, Ballmer's goal as well -- but failed miserably.

"He just didn't understand Home Depot's culture," said Carroll. "At GE, it was a very much command-and-control culture, you saluted Welch and did it. But the Home Depot culture rejected that."

One of the few successes, said Carroll, was Sanjay Jha, the CEO of Motorola Mobility until it was acquired by Google in 2012. Jha, unlike Nardelli, worked within the existing culture by first turning around the company's business fortunes -- he was the one who decided to kill the firm's Symbian product line and committed Motorola to Android rather than rely on Windows Phone -- and then used the financial turn-around to prove to employees that a single corporate strategy, as opposed to combative divisions, could pay off.

Ballmer's only chance at succeeding in his effort to radically remake Microsoft is to replicate Jha's tactics, Carroll contended, and conduct a "show me" campaign.

"Ballmer should focus personally on just a handful of products, maybe 10 originally that get winnowed to two or three, products that he believes are killer apps, and have those teams report directly to him," said Carroll. "That would let him make sure, personally, that if there were executives and managers who don't fit with this new culture he can smack 'em around a little bit."

If Ballmer can demonstrate that a cooperative culture works and results in great products, he has a chance of convincing employees that the shift can work as well as, ideally better than, the old way.

The problem with any culture change, but particularly those mandated from above, is that employees' natural inclinations are to keep doing things the way they've been done for years, and when pressed, actively if surreptitiously resist, like guerrilla forces battling from jungles, mountains and deserts against an occupier.

"That gets worse the further down-layer it gets in the company," Carroll said of the resistance and sabotage. "There will be lots of people in Microsoft who think, 'This too shall pass.'"

Others agreed with Carroll that Ballmer has an extremely difficult job ahead of him.

Ben Thompson, who left Microsoft earlier this month, has dissected the revamped organization and concluded that it simply won't work. "I believe collaboration is fundamentally broken at Microsoft," Thompson wrote on his Stratechery blog last week. "It is all about politics, not great outcomes, and that is absolute death in a functional organization, which has nothing but collaboration to hold together cross-functional product teams."

Thompson, who started at Microsoft in mid-2011, was a partner marketing manager in the Windows app team when he exited July 1.

Industry analysts, too, have been skeptical about some of the implications of the restructuring, the focus on devices and services -- as opposed to packaged software, Microsoft's meat-and-potatoes its entire history -- and the necessary cultural shift.

But unlike Carroll, those analysts have placed bets that Ballmer can prod people to change by using compensation, figuring that workers will cooperate if they're paid for working well with others.

"They will reward cooperative planning and work," said Patrick Moorhead of Moor Insights & Strategy. "And if they won't change, they won't be long for Microsoft."

According to the research Devil's Advocate has accumulated on business-change failures, compensation is one of the usual components, along with increased attention to internal communications and an aggressive educational campaign to explain the new regime to employees, that companies regularly trot out at the beginning of a transformation.

And while they are all, as Carroll said, "useful stuff to do," he didn't think they were, by any measure, enough for Microsoft.

"People will accept a reorganization, but the case here is cultural," said Carroll. "Microsoft's culture is that everybody is supposed to be tough and to fight for themselves. And they want to smash them together [into new groups] and expect everyone to now play nice? They fight like cats and dogs at Microsoft, and you can't just turn that off."

This article, Ballmer's chance of changing Microsoft? Don't bet on it, was originally published at

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at  @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His email address is

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