When CEOs Matter

Sometime in 2012, during the runup to Windows 8, I was on a call with a Microsoft Developer & Platform Evangelist (DPE) strategizing how we would approach a particular partner.1 I asked his opinion of a specific feature in this partner’s iPad app, and was shocked at his response:

“I don’t own an iPad, and never will. I’m a Microsoft man.”

When Steve Ballmer resigned, Horace Dediu had one of the sharpest albeit unintuitive takes on his tenure:

The most common, almost universally accepted reason for company failure is “the stupid manager theory”. It’s the corollary to “the smart manager theory” which is used to describe almost all company successes. The only problem with this theory is that it is usually the same managers who run the company while it’s successful as when it’s not. Therefore for the theory to be valid then the smart manager must have turned stupid at a specific moment in time, and as most companies in an industry fail in unison, then the stupidity bit must have been flipped in more than one individual at the same time in some massive conspiracy to fail simultaneously.

So the failures of Microsoft to move beyond the rapidly evaporating Windows business model are attributed to the personal failings of its CEO. The calls for his head have been getting loud and rancorous for years. Taking this theory further, now that he’s leaving, the prosperity of the company depends entirely on the choice of a new (smarter) CEO.

It’s all nonsense of course.

In general, I agree. What has befallen Microsoft over the last half-decade is a fundamental shift from desktop to mobile, and contrary to most commentary, there is no particular reason to think that Microsoft “missed” mobile. As I wrote in Microsoft’s Mobile Muddle:

Saying “Microsoft missed mobile” is a bit unfair; Windows Mobile came out way back in 2000, and the whole reason Google bought Android was the fear that Microsoft would dominate mobile the way they dominated the PC era. It turned out, though, that mobile devices, with their focus on touch, simplified interfaces, and ARM foundation, were nothing like PCs. Everyone had to start from scratch, and if starting from scratch, by definition Microsoft didn’t have any sort of built-in advantage. They were simply out-executed.

You can, of course, pin the lack of execution on Ballmer, but any fair ascription of blame falls not only on him, but on thousands of other employees, not to mention just about every other tech company in the world, including companies like Google and Samsung.

What made Google and Samsung different from Microsoft (and Nokia and Blackberry and many others) was the speed with which they recognized that the world had changed with the launch of the iPhone. Setting aside whatever distaste you may have about features that Android and Galaxy phones borrowed from iOS and the iPhone, the fact remains that Google and Samsung are the only two companies who were relevant in 2007 who are still relevant today. It turns out seeing and accepting reality are powerful differentiators.

Steve Ballmer, on the other hand, “liked his chances”:

I know this clip has been played to death; I was hesitant to even include it for that reason alone. And I also get that a CEO has a certain responsibility to talk up his company’s prospects. But the consequence of statements like this, and the general arrogance endemic of a company that has forgotten why it succeeded in the first place, results in rank-and-file like the evangelist I spoke to – who, to be clear, was very smart and a very hard worker – who wouldn’t even touch an iPad.

This is the power CEOs have. They cannot do all the work, and they cannot impact industry trends beyond their control. But they can choose whether or not to accept reality, and in so doing, impact the worldview of all those they lead.

This is why it matters that the first public event Satya Nadella appeared at was Office for iPad. This is why it matters that Microsoft released it even though the Windows Touch version wasn’t finished. This is why it matters that Microsoft gave up the pretense of Windows Phone license payments that were already effectively zero2 and simply made it free.

Microsoft is by no means in the clear. There is still that whole matter of execution, and an industry that is moving away from the PC. But accepting reality is the necessary first step in fighting back, and it seems Nadella has passed that test with flying colors.

  1. I was a category manager for the Windows Store, dealing with top partners directly, and giving direction to our DPE colleagues who were “boots on the ground” all over the world 

  2. Microsoft was paying OEM partners marketing development funds that basically made up for licensing costs