There are times in any business that you need to re-invent yourself.  Even if you are selling nuts and bolts, a bigger fish like Lowes or Home Depot can wreck your sales and pricing.  Nothing changes faster these days than the IT industry.

Microsoft is facing the situation that IBM has faced at least 3 times now.  The last one was a do or die decision to not break up the company and I credit one Lou Gerstner for such a great move.  Nevertheless, he reformed and reshaped the company from a hardware (mainframe) company to more of a services and software organization. Microsoft unfortunately didn’t invent everything it sells and is faced with a fork in the road on success or pack mediocrity.  I for one would not want to have to face the upcoming issues as a communications professional that Microsoft will face.

ORIGINS OF THE CASH COW’S

Microsoft got it’s start by buying an operating system and taking the Software PC business away from IBM.  Next, they “stole” the Windows idea from Apple, here is a bit of history from MG Siegler….

For nearly 25 years now, the story has lingered that Microsoft stole the idea of Windows from Apple (AAPL) while working to develop software for the Lisa and Macintosh operating systems. The stories you hear generally seem to be a mixture of truth, urban legend, and fanboy fabrications at this point — but the fact is that Apple did sue Microsoft in 1988 for copyright infringement on the matter. After four years worth of arguments, Apple lost. They also lost the subsequent appeal (and they even tried to take it to the U.S. Supreme Court, but that was denied). But they didn’t lose because Windows wasn’t thought to be similar to Apple’s operating systems. They lost because the judge ruled that you couldn’t protect the concept of a graphical user interface or the desktop metaphor idea. And more specifically, Apple ran into problems because of a decision that then-CEO John Sculley made in 1985 to sign an agreement licensing certain parts of Apple’s GUI to Bill Gates for use in what would become Windows 1.0 (presumably without realizing exactly what he was doing).

Siegler proves my point of re-inventing themselves here:

But now that idea is waning. Or rather, everyone is starting to recognize that the idea will be waning in the years to come. Make no mistake, Microsoft still makes a lot of money from Windows — and I do mean a lot. But Windows is not the future. By that I mean that the desktop metaphor GUI is slowly but surely being replaced by a rise of mobile and touchable devices. In other words, Microsoft needs a new idea.

The problem is that Microsoft hasn’t proven themselves to be capable of coming up with or executing such an idea on their own. Dozens of failed projects ranging from the original tablet PCs to SPOT watches to the Kin have been left in their wake. The fact that tablet computers are now exploding in popularity thanks to Apple’s iPad suggests that Microsoft, for whatever reason, has a hard time launching new, successful ideas on their own. Windows Mobile is another example of this. They were there early, much earlier than their main rivals. And now they’re getting trounced.

Instead, it may be time to piggyback off an idea again. To create a new inception, as it were. Lure someone in, take their idea — and take it to the next level. Microsoft has nothing if not a huge amount of resources. If they pick the right idea to take, they can once again transform the world — but they need that right idea.

BALLMER IS NO GERSTNER

I’ll go on record to say that Ballmer is no Lou Gerstner.  A company needs a visionary like a Gerstner or maybe in this case, a Steve Jobs.  Sam Diaz speculates his demise and that he might not even make it to CES to make the keynote.

Here is Diaz’s Ballmer scorecard:

• Mobile: Clearly, the KIN was a flop. And, isn’t it kind of funny that references to the mobile landscape are always centered around iPhone, Android and BlackBerry. When was the last time you heard someone get excited about the forthcoming arrival of Windows Phone 7 and talk about how it will rock the mobile landscape? OK, putting Microsoft shareholders and employees aside, when was the last time you heard anyone else talk highly of Windows Phone 7?
• Tablet: Well, Ballmer killed the Courier. Or someone at Microsoft did – but surely not without Ballmer’s permission. OK, so they killed a tablet PC project. Big deal. Isn’t that better than launching a loser (like they did with KIN)? But it wasn’t so much that they killed it as much as it was the extra line in the company’s official statement that declared “no plans to build such a device right now.” It seems that tablets are all the buzz right now, sparked largely by Apple’s iPad. And Microsoft has no plans for one?
• Software/OS: Regardless of what you think about Google, the cloud and even the Mac, you cannot ignore the fact that Geese that lay Golden Eggs at Microsoft – Windows OS and Office – are getting old. There’s fresh competition from all over – and this isn’t just the Mac vs. PC sort of competition. There’s excitement around the launch of tablets running Google’s Chrome or Android OS. Clearly, Apple is gaining some ground from its switch campaign. And companies are being given real options for productivity software from online providers.

The point of all of this is that Ballmer, as the CEO of Microsoft, seems to have spent quite a bit of time riding on the successful coat tails of Bill Gates – but really hasn’t done much to elevate the company further, XBox being the exception.

My .02, he needs to go and they need new leadership to fend off Google, Oracle, Amazon and most of all Apple.  He is not the savior and they need a Gerstner.

Rob Enderle, one of the analysts I used to work with when I covered Analyst Relations for ThinkPad adds this nugget of perception:

Perception works both inside and outside the company. Recall that in the Apple turnaround, Steve Jobs started out with a company in deep trouble with products he had publicly called crap.  He started changing the perceptions surrounding the company because he knew this would give him the time he needed to rebuild it. At IBM, Louis Gerstner changed out the entire marketing department as one of his first accomplishments. He knew that if he couldn’t deal with the perception that IBM was failing, that perception would drive an unavoidable result.  In  both cases, by aggressively dealing with perceptions of unavoidable failure, both internally and externally, they bought time they needed to get  the real work done.

MINI-MICROSOFT WEIGH’S IN

One of the blogs I follow is Mini Microsoft as do many.  He’s got the biggest set of attachments that I know to write things like this:

And now Kin is killed *after* it has shipped in June 2010. You can bet Andy was involved in the development of Kin, the partnership agreements with the OEM, Verizon and most importantly the “ship it” approvals all along the way. And Microsoft discovers its a bad idea after it blows up in the broad market. Absolutely no thanks to any pro-active decision making on Andy’s part.

Now there is spin that Andy killed kin to put all the wood behind Windows Phone 7. Er, the guy was in charge for two years of Kin development. He could have made this decision far earlier.

Similarly Windows Phone 7 has two years of development under his watch. Based on his past performance, 99% chance this is also going to be a total catastrophe. It further doesn’t help that much of the Windows Phone 7 leadership team was kicked out of Windows when they screwed up Vista.

And finally, one Danger-employee’s point of view of why they became demotivated:

To the person who talked about the unprofessional behavior of the Palo Alto Kin (former Danger team), I need to respond because I was one of them.

You are correct, the remaining Danger team was not professional nor did we show off the amazing stuff we had that made Danger such a great place. But the reason for that was our collective disbelief that we were working in such a screwed up place. Yes, we took long lunches and we sat in conference rooms and went on coffee breaks and the conversations always went something like this…”Can you believe that want us to do this?” Or “Did you hear that IM was cut, YouTube was cut? The App store was cut?” “Can you believe how mismanaged this place is?” “Why is this place to dysfunctional??”

Please understand that we went from being a high functioning, extremely passionate and driven organization to a dysfunctional organization where decisions were made by politics rather than logic.

Consider this, in less than 10 years with 1/10 of the budget Microsoft had for PMX, we created a fully multitasking operating system, a powerful service to support it, 12 different device models, and obsessed and supportive fans of our product. While I will grant that we did not shake up the entire wireless world (ala iPhone) we made a really good product and were rewarded by the incredible support of our userbase and our own feelings of accomplishment. If we had had more time and resources, we would of come out with newer versions, supporting touch screens and revamping our UI. But we ran out of time and were acquired and look at the results. A phone that was a complete and total failure. We all knew (Microsoft employees included) that is was a lackluster device, lacked the features the market wanted and was buggy with performance problems on top of it all.

When we were first acquired, we were not taking long lunches and coffee breaks. We were committed to help this Pink project out and show our stuff. But when our best ideas were knocked down over and over and it began to dawn on us that we were not going to have any real affect on the product, we gave up. We began counting down to the 2 year point so we could get our retention bonuses and get out.

I am sorry you had to witness that amazing group behave so poorly. Trust me, they were (and still are) the best group of people ever assembled to fight the cellular battle. But when the leaders are all incompetent, we just wanted out.

So it is even internal that they know they need a change…..BUT HOW

Most of their products that were successful were others, what they invented except the xbox were largely irrelevant or unsuccessful.  They should have been a dominant phone player and got owned by Apple and Android.

And their big solution is this right now -

Microsoft: ‘If we don’t cannibalize our existing business, others will’

That’s not what companies do to reinvent themselves.  Take Apple, or IBM…that is what Microsoft needs to do.

I’ll give them this, they have a lot of money in the bank, but they are not positioning themselves as a dominant player for the future.

COMMUNICATIONS

In talking to the analysts and even the press from time to time, arrogant seems to be a trend.  They need to be humble and explain the situation.  Most of all, they need a product and a strategy to deal with.  I don’t envy them.

So far, they have emulated IBM in a lot of ways.  Re-Inventing themselves would be a good start.

Fixing moral would be good too….I’ll end with what Rob Enderle says:

The best way the take on these problems is for the management team to engage with employees by both listening to them and providing insight into the company’s strategic plans. Candor is critical; the goal is to get people working as a team again.  Employee surveys are generally ineffective because they aren’t trusted and the results don’t create the needed dialog.

Update: Their tablet strategy is labeled misguided and confusing.  Who would have guessed that?

Let the communications team explain this.