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Microsoft’s Downfall: Inside the Executive E-mails and Cannibalistic Culture That Felled a Tech Giant


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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.”

ΠΗΓΗ: VanityFair Daily

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