Microsoft’s Downfall: Inside the Executive E-mails
and Cannibalistic Culture That Felled a Tech Giant
by Vanity Fair
12:00
AM, JULY 3 2012
Microsoft C.E.O. Steve Ballmer
delivers the keynote address at the 2012 International Consumer Electronics
Show, in Las Vegas, on January 9.
Analyzing one of American corporate
history’s greatest mysteries—the lost decade of Microsoft—two-time George Polk
Award winner (and V.F.’s newest contributing editor)
Kurt Eichenwald traces the “astonishingly foolish
management decisions” at the company that “could serve as a business-school
case study on the pitfalls of success.” Relying on dozens of interviews and
internal corporate records—including e-mails between executives at the
company’s highest ranks—Eichenwald offers an unprecedented view of life inside
Microsoft during the reign of its current chief executive, Steve Ballmer, in the August issue. Today, a single Apple product—the
iPhone—generates more revenue than all of Microsoft’s wares combined.
Eichenwald’s conversations reveal that
a management system known as “stack ranking”—a program that forces every unit
to declare a certain percentage of employees as top performers, good
performers, average, and poor—effectively crippled Microsoft’s ability to
innovate. “Every current and former Microsoft employee I interviewed—every
one—cited stack ranking as the most destructive process inside of
Microsoft, something that drove out untold numbers of employees,” Eichenwald
writes. “If you were on a team of 10 people, you walked in the first day
knowing that, no matter how good everyone was, 2 people were going to get a
great review, 7 were going to get mediocre reviews, and 1 was going to get a
terrible review,” says a former software developer. “It leads to employees
focusing on competing with each other rather than competing with other
companies.”
When Eichenwald asks Brian Cody, a
former Microsoft engineer, whether a review of him was ever based on the
quality of his work, Cody says, “It was always much less about how I could
become a better engineer and much more about my need to improve my visibility
among other managers.” Ed McCahill, who worked at Microsoft as a marketing
manager for 16 years, says, “You look at the Windows Phone and you can’t help
but wonder, How did Microsoft squander the lead they had with the Windows CE
devices? They had a great lead, they were years ahead. And they completely blew
it. And they completely blew it because of the bureaucracy.”
According to Eichenwald, Microsoft had
a prototype e-reader ready to go in 1998, but when the technology group
presented it to Bill Gates he promptly gave it a thumbs-down, saying it wasn’t
right for Microsoft. “He didn’t like the user interface, because it didn’t look
like Windows,” a programmer involved in the project recalls.
“The group working on the initiative
was removed from a reporting line to Gates and folded into the major-product
group dedicated to software for Office,” Eichenwald reports. “Immediately, the
technology unit was reclassified from one charged with dreaming up and
producing new ideas to one required to report profits and losses right away.”
“Our entire plan had to be moved forward three to four years from 2003–04, and
we had to ship a product in 1999,” says Steve Stone, a founder of the
technology group. “We couldn’t be focused anymore on developing technology that
was effective for consumers. Instead, all of a sudden we had to look at this
and say, ‘How are we going to use this to make money?’”
A former official in Microsoft’s Office
division tells Eichenwald that the death of the e-reader effort was not simply
the consequence of a desire for immediate profits. The real problem for his
colleagues was the touch screen: “Office is designed to inputting with a
keyboard, not a stylus or a finger,” the official says. “There were all kinds
of personal prejudices at work.” According to Microsoft executives, the
company’s loyalty to Windows and Office repeatedly kept them from jumping on
emerging technologies. “Windows was the god—everything had to work with
Windows,” Stone tells Eichenwald. “Ideas about mobile computing with a user
experience that was cleaner than with a P.C. were deemed unimportant by a few
powerful people in that division, and they managed to kill the effort.”
When one of the young developers of MSN
Messenger noticed college kids giving status updates on AOL’s AIM, he saw what
Microsoft’s product lacked. “That was the beginning of the trend toward
Facebook, people having somewhere to put their thoughts, a continuous stream of
consciousness,” he tells Eichenwald. “The main purpose of AIM wasn’t to chat,
but to give you the chance to log in at any time and check out what your
friends were doing.” When he pointed out to his boss that Messenger lacked a
short-message feature, the older man dismissed his concerns; he couldn’t see
why young people would care about putting up a few words. “He didn’t get it,”
the developer says. “And because he didn’t know or didn’t believe how young
people were using messenger programs, we didn’t do anything.”
“I see Microsoft as technology’s answer
to Sears,” said Kurt Massey, a former senior marketing manager. “In the 40s,
50s, and 60s, Sears had it nailed. It was top-notch, but now it’s just a barren
wasteland. And that’s Microsoft. The company just isn’t cool anymore.”
“They used to point their finger at IBM
and laugh,” said Bill Hill, a former Microsoft manager. “Now they’ve become the
thing they despised.”
Source : Vanity Fair
