Decline of Digital Equipment offers lessons for Microsoft

Former DEC exec wonders how Microsoft can weather the storms it's created

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But DeLisi focused on a different problem Microsoft faces: Its search for a new CEO. In part that was because he had identified the same event -- iconic founder and CEO Ken Olsen's departure in 1992 and the hiring of Robert Palmer as its new CEO -- as, if not a tipping point, then certainly one cause of its precipitous decline. "Bob Palmer was the wrong CEO for the times," said DeLisi.

Microsoft's board could repeat the error. If nothing else, it has a very difficult job in finding the right person to lead Microsoft through these times. "How do you hire a CEO to deal with all these kinds of changes?" DeLisi asked, only partly rhetorically. "What's the right thing to hire the CEO to do? It's not obvious."

Identifying what the CEO should have as a top priority will be tough because it's impossible to predict the future. What Microsoft's board pegs as the No. 1 job for the CEO may not, in short order, be what he or she spends considerable time doing.

DeLisi pointed to the negative comments threaded through the Mini-Microsoft blog post as an example. "It sounds like there's a lot of discontent [at Microsoft]," said DeLisi after reading the several hundred comments. "It's questionable whether or not a new CEO would recognize internal problems that would undermine strategies. Some people come in [as CEO] and just have no clue."

He also worried that Microsoft has already wrapped a strait jacket around its unnamed CEO by shifting to a "devices-and-services" strategy, kicking off one of biggest-ever reorganizations and then swallowing Nokia.

"One of two things can happen," DeLisi said. "If the CEO is brought in to implement this strategy, you lose the benefit of any insights and innovation this person brings to the table. [The new CEO] is compromised before he starts. Or you hire this person and tell them, 'You're free to go ahead and change things.' Now what they've created is unbelievable confusion. Everyone is confused about the direction, what they should be doing and the strategy.

"It was a bad decision to do what they've done," DeLisi said. Considering corners Microsoft has painted its new CEO into, the Microsoft board must have had someone in mind all along, DeLisi contended.

"I see the problems rooted in Microsoft's culture," DeLisi said, citing unintended cultural changes at DEC as the precipitating factor in its ultimate decline. "Can they take these changes? Can they hire the right leader? Those are the questions for me."

While many analysts have speculated that even if Microsoft fails in its volte-face or stumbles with its CEO choice, it could see years of impressive revenue while it also declines in importance, DeLisi drew on his experience at DEC to wonder if it would be otherwise.

In his 1998 paper, DeLisi called DEC's fall "precipitous." In the interview today, he pointed out other technology companies that went south quickly, including Sun Microsystems and Silicon Graphics.

"I think we're seeing some of that happen to Microsoft," DeLisi said.

DeLisi's paper on DEC can be downloaded from his company's website as a PDF.

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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Copyright © 2013 IDG Communications, Inc.

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