How Microsoft's Delayed Reorganization Is Fixing the Loyalty Gap

When the rumors of the coming Microsoft reorganization broke this week, my response wasn't like most. I wasn't surprised at the direction-that Microsoft planned to become a "device and services company." I wasn't surprised that it would likely change Microsoft massively. I wasn't even surprised that there was a leak in the first place.

I was surprised this hadn't happened a decade ago.

More than a decade ago, right before Steve Ballmer took over as Microsoft CEO, he told me this was the way he knew the company had to go. Had he acted sharply on his own vision, Microsoft would now be leading to the cloud rather than chasing Amazon and Google to it.

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This had me thinking back to Microsoft's other big failures over the last decade: Zune, Windows Phone, Windows Tablet and even Portable Media Center. These weren't failures in direction; they were failures in execution. They reflect a very unique problem Ballmer had when taking over Microsoft one-and it's one I don't think we've ever really explored.

Microsoft Wasn't Ready to Replace Gates

While Ballmer was clearly favored for the CEO roll, he wasn't the ideal candidate. Nor was he mentored. He and Gates are nearly as different as Tim Cook and Steve Jobs and possess very different skill sets.

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Microsoft had been designed around a leader who was a coder. Now, Gates wasn't a great coder, but he was good enough to know when people were giving him a load of BS, and his vision was largely technical.

I met Gates shortly after he passed the torch to Ballmer and asked him his vision for the future. Rather than describe some imaginary Microsoft-centric utopia, he spelled out what sounded like a topology for the data center of the future. Gates had no real connection to what you or I might want; rather, he was describing a geek heaven of fast bits and bytes.

Microsoft after Gates was tuned to favor someone who knew technology intimately and, by and large, distributed power to like-mined geeks. In other words, it was not at all a company that someone with Ballmer's background and capabilities could run.

From Zune to Windows 8, Warnings Aplenty

Zune should have been the big warning. This was Ballmer's idea. He wanted was a better iPod-and, on paper, Zune was exactly that. The first Zune hit the iPod in all its weak spots. The iPod was fragile; the Zune was hardened. The iPod couldn't do video; the Zune had a huge video screen. The iPod forced you to buy all your music; the Zune had a subscription plan-something Apple can't even do well today-and even let users legally share music.

But the Zune was under marketed, it lacked video content and, compared to the sleek iPod, was truly ugly. Apple rolled over the offering like a bulldozer. That was all execution, and Zune showcased a horrible execution problem.

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This problem was repeated with the Portable Media Center, Windows Tablets,Windows Vista and even Windows 8. In these cases, it wasn't that the idea or direction was bad. The execution was horrid.

Part of this is because virtually every products' marking effort was underfunded. Even if marketing execution has been good, as it initially was with Windows Phone, the funding just wasn't at the appropriate level.

Much of the failure, though, also reflects that whatever Ballmer asked for wasn't translating to successful execution. Executives used to working with Gates rebelled, likely thinking someone such as Ballmer shouldn't have the job, then tried unsuccessfully to showcase they were smarter than him.

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Leadership requires two components: Someone who can lead and many who are willing to follow. Given Ballmer's success as an executive before taking Gates' job as CEO, Microsoft's failures may come down to an absence of followers, not a leader.

Ballmer Finally Learning His Lessons

We're finally seeing a ton of progress at Microsoft thanks to Azure, Azure Pack, Office 365, SkyDrive and Windows 8.1. Why? Ballmer finally has a team that's loyal, not secretly working to get Gates back or become the next Gates.

You can't run a disloyal company, and there were simply too many senior executives who seemed to think they should be steering the boat while doing a bad job executing what, in hindsight, might have actually been strategically solid orders. While Ballmer still shows an unwillingness to fully fund marketing, so did Gates-and recent anti-Apple spots and Windows 8 campaigns suggest that this, too, may be changing.

We're finally seeing the Microsoft that Ballmer envisioned more than a decade ago. With it, he's confirming that any successful CEO needs a team of executives loyal to him, not to his predecessor or to its own vision of being the next CEO. Ballmer appears to have learned this lesson, but I can think of several CEOs who have yet to learn it.

Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.

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This story, "How Microsoft's Delayed Reorganization Is Fixing the Loyalty Gap" was originally published by CIO.

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