There was hardly a murmur of surprise on Friday when Microsoft chief executive Steve Ballmer announced he would be stepping down within the next 12 months, after a successor is found. Reviews of his tenure, which began in 2000, ranged from negative to mixed at best.
Many pundits pointed out that Microsoft, under Ballmer, has missed just about every major technology trend of the past decade, to the point where it is now largely irrelevant. The most charitable reviews brought up his solid financial performance, since Microsoft has indeed been good to shareholders with steady profits from the same old Windows and Office products.
The company’s future is an open question, given its lack of presence or traction in key markets that matter, such as smartphones and tablets. The challenge for the next CEO, whoever he or she is, will be to turn the company around and get it leading and innovating again, rather than just desperately playing catch-up to competitors.
Who could this individual be? It’s too bad Ballmer didn’t make his announcement a little sooner because he might have prevented just such a person from beating him out the door. How about Don Mattrick, the former head of Microsoft’s Xbox division – officially the president of the interactive entertainment business – who left for social game maker Zynga last month?
The Vancouver native and life-long video game guy may indeed have been the perfect candidate because of his experience in a trio of areas, all of which Microsoft will need to address if it is to right the ship.
Innovation and creating new markets: When Microsoft launched the original Xbox console back in 2001, it was the unwanted newcomer in the video game industry. Japan’s game titans Nintendo and Sega, later joined by Sony, had ruled the roost since games became big business. The undaunted Redmond, Wash.-based software giant was fixated on translating its success in PC games to the living room, and it did so by not being afraid to innovate and disrupt. The Xbox didn’t just emulate what its rivals did, it was different because it had Internet connectivity and online capability baked into its DNA. The technology and broadband connections were still limited at the time, but the seeds were sown.
With the Xbox 360, released in 2005, Microsoft pushed the idea further toward its realization. It was perhaps the first game console that truly went beyond just games, transforming in its latter years into the full entertainment system that the Xbox’s original creators envisioned. Mattrick was brought on in 2007 to shepherd this move and he succeeded wildly – the online Xbox Live service went from six million members to about 50 million over his tenure. The games division as a whole, meanwhile, went from being a money-losing pit into an ongoing source of profit. The Xbox 360 has sold about 78 million units, running neck and neck with Sony’s PlayStation 3 and behind Nintendo’s 100 million Wii units. It may have trailed Nintendo somewhat in the end, but the Japanese company made most of its sales early on in the cycle. Going into the next generation of consoles, Microsoft has all the momentum and is the clear leader in online gaming and content.
It’s true that Mattrick’s division stumbled right at the end with ill-conceived ideas around used games and persistent online connectivity requirements for the upcoming Xbox One console, but you can’t really blame them for trying to again push disruption. All told, the direction he wanted to go in is the likely eventual outcome – he just may have pushed it before the public was ready for it.
Nevertheless, from non-existent to first against a group of well-established competitors in just over a decade, with Mattrick presiding over the last half of that? Not too shabby.
Hardware and software integration: Much of the reason for the Xbox 360′s success is its tight integration of hardware and software. It was indeed the first commercially successful device that Microsoft built and designed itself. There’s no doubt there were some hiccups – no one will ever forget the Red Ring of Death problem that plagued and wrecked so many consoles – but the company eventually got it right.
Compare that to other Microsoft hardware-software efforts, such as the Zune, Kin and the recent Surface tablet. All of these flopped for one reason or another – they were either poor experiences, overpriced, outdated, too heavy or some combination thereof. The game consoles, on the other hand, evidently hit sweet spots across the board.
The company’s future may well lie in a diametrically different direction than what it has known. Rather than cater to a partner ecosystem – where it designs the software for other hardware makers to use in their products – Microsoft may have to pivot more to designing devices like the Xbox, where it builds both aspects.
The approach has worked wonders for Apple, giving that company full control over the quality and price of its products, and even Google looks to be leaning that way too with its Nexus phones and tablets, not to mention its Motorola subsidiary. Microsoft seems to understand that hardware is becoming increasingly commoditized, which is why it chose to build its own Surface tablets. Replicating the sort of integrated success that Mattrick oversaw with Xbox might be the best way forward.
Forget Windows: Perhaps the worst thing Microsoft could do is replace Ballmer with someone from the Windows side of the business. The company needs to move on from what is effectively the past of computing to the future. And it’s going to be very hard to erase that past memory from people’s minds as being anything but stodgy. Sure, Windows was great in its time, but many people associate it with work. If Microsoft is going to move into a future where the technology is under the hood and the outer face of it is more friendly and enjoyable, would there have been anyone better to oversee that transformation than someone who had spent his life making stuff that’s purposely fun?
Gamification has become a dirty word recently, but that – above all else – is exactly what Microsoft is going to have to do to its entire business. If it is to ever matter again in the minds of the general public, it’s going to have to change into a company that oozes fun. It’s just too bad the right guy for the job isn’t around anymore.