The details of Paul Allen’s testy personal relationship with Bill Gates have been the most eye-catching part of his forthcoming memoir. But it is the Microsoft co-founder’s damning critique of the company’s current problems that could well prove more telling.
In a draft of the forthcoming book, seen by the FT, Mr Allen writes: “How did a company once at the forefront of technology and change fall so far behind? It’s a thorny question, with roots that go back decades, but I believe it boils down to three broad factors: scale, culture and leadership.”
In terms of size, Mr Allen says that Microsoft “got huge and failed to deal with the consequences”.
A dozen lunches he had with recently-departed executives revealed a common complaint: “Too many semicompetent managers, too much in-house politics among the fiefdoms and silos of principal product lines. Windows Vista was the dead canary in the coal mine… How could Microsoft allow this to happen to its signature commodity?”
The subsequent Windows 7 was the product of more disciplined management – “But the company’s broader cultural issues may be harder to fix.”
One of these is its bias towards enterprise software, which accounts for the bulk of its profits. Microsoft might want to innovate in consumer markets, writes Mr Allen, “but it can be like trying to fight gravity.” Worse, the attempt to appeal to end-users might distract from the “unwavering focus” the company needs to succeed with its core customers.
A second cultural problem has been Microsoft’s addiction to its “fast-follower” strategy – an approach that Mr Allen associates closely with Steve Ballmer. Racing to copy more imaginative rivals may have worked in the past, but: “Today, for the most part, the best opportunities now lie where your competitors have yet to establish themselves, not where they’re already entrenched. Microsoft is struggling to adapt to that new reality. Over time, its enterprise-leaning culture has calcified; the fast follower became a slower one.”
Mr Allen says he “repeatedly asked” Mr Gates how Microsoft was going to catch Google in search, only to be told that it could be done in six months. “Complacency has taken its toll,” he adds, “most tellingly in the newest competitive arenas of smartphones and tablets, like the iPad.”
Ultimately, he concludes, Microsoft forgot what put it on top in the first place: how to build software platforms that take best advantage of the latest generation of silicon. Google and Apple “have beaten Microsoft to the punch because they’ve been more alert in developing new and innovative platforms. They’ve done a better job of following the chips.”
He still professes some hope: that Microsoft has woken up to the danger, that it can deploy its deep cash reserves, and that smartphone users will be willing to switch to something new that “catches their eye” in a fragmented market. With a quicker development cycle and a “return to its cutting-edge roots” (no small feat) Microsoft might just make it.
But one way or another, according to the man who claims much of the early technology vision behind Microsoft’s success, the PC era on which Microsoft’s fortune was founded is over: “Here’s what the death knell for the personal computer will sound like: Mainly I use my phone/pad, but I still use my PC to write long e-mails and documents. Most people aren’t there yet, but that’s where we’re headed.”
Update: We’ve tried to get Microsoft to respond to Mr Allen’s comments, to no avail. But in the interests of balance, here’s a recent blog post from the company that seeks to counter the perception that its most innovative years lie in the past.
