NO longer at Harvard, Clay Christensen protégé James Allworth has teamed up with Ben Thompson for a new podcast, Exponent. The first episode looks back at the last ten years of Microsoft — Steve Ballmer’s reign, essentially.
To their credit, Allworth and Thompson spend much of the podcast describing Apple as being a Christensen-style disruptor of Microsoft’s businesses during that period, something I thought members of team-Christensen might be too loathe ever to do. Nevertheless, the podcast includes some definite howlers. Allworth:
You think back to the ’90s; these guys [at Microsoft] had it made. They absolutely had it made. They were riding high: sales of Windows, sales of Office, everything.
In the ’90s, Microsoft Windows and Microsoft Office (not “everything”), became about 80-90% of Microsoft’s profit stream. And they still are, today. Those are their only hits, then and now.
The Department of Justice case happened as a result of them doing so well.
Right; I’m sure the DOJ’s case had nothing to do with the specific tactics Microsoft employed to destroy Netscape and subvert Sun’s Java (none of which even significantly contributed to Microsoft’s bottom line, as far as I know). The DOJ went after them just because they were “doing so well.” Thanks, James, for casually rewriting history to make Microsoft look like an innocent victim, whose only crime was success.
As a set-up to discussing whether Ballmer should have maximized profits or pursued innovative self-disruption, Allworth informs us that:
If you’ve got Steve Ballmer sitting there, saying, look, my job is to maximize profitability over the next ten years. I mean, that’s a pretty long time frame. But on that basis, he actually did a pretty good job.
And Thompson chimes in with:
If you look at just the pure amount of cash generated, Ballmer is one of the most successful executives of all time.
They go on to discuss at great length the question of whether Ballmer’s financial success as CEO will actually prove a longer-term failure due to unchecked disruptions from Apple. But the question of whether Ballmer actually deserves credit for Microsoft’s revenues and profits is not even broached.
Steve Ballmer inherited the stupefying Windows/Office profit stream from Bill Gates. It remained the main source of profits at Microsoft throughout Ballmer’s ten-year tenure, waxing and waning with the ebb and flow of the PC market. Ballmer’s actual legacy is that he blew incredible billions of dollars of those profits on a long list of pointless, copycat products that all failed fantastically. That the company remains financially healthy is a testament to the sheer volume of cash that gushes through the Windows/Office spigot year after year.
Blowing billions on failed copycat products certainly does not fall under the category of “maximizing profits.” Nor does it fall under the category of “innovating for the future” — and not just because market-failure products aren’t the future, but also because copycat products aren’t even a serious attempt at innovation. They’re an attempt to take success away from the real innovators.
Ballmer’s Microsoft wasn’t trying to maximize profits. It wasn’t trying to invent the future. It was trying to use its immense, built-in, Windows/Office profit fountain as a blunt instrument to assimilate (Windows-vs-Mac style) the innovations coming out of other companies.
Allworth and Thompson give Ballmer automatic credit for the one positive thing you can say about Microsoft — it still makes bungloads of cash from Windows and Office — and then spend most of their 45-minute discussion chewing on the red-herring question of whether he should have focused on disruption instead.
Update 2014.05.17 — Second installment of Exponent: Allworth spends the whole episode talking about how Silicon Valley — i.e. the home town of every major U.S. computing company besides Microsoft — (a) is too exclusive, and (b) spends its time and money on problems like how to make better computers, instead of problems like how to solve poverty and homelessness.
Update 2014.07.27 — From Exponent #10:
BT: This is what’s crazy; taking [the conversation] back to Microsoft. If they had, from the beginning, built up Windows Phone to be the enterprise phone, how much of a better position would they be in now? They would own this space, absolutely own it. And they could expand from there, possibly, into consumer [markets]. But no, they decided to carry an iPhone [effigy] in a funeral procession around Redmond. ’Cause they were gonna kill it.
JA: Right. Culture’s a hard thing to come over, to get over. It’s just a hard thing to get over. And it worked for so long. It really did.
It did? No. It didn’t. Microsoft had a long-term lock on personal computing by about 1983. Their we-will-take-everything-from-everybody attitude didn’t rev up until ’85. All they needed to extend their dominance another decade was their appeals court luck-out in 1993, which also had nothing to do with their crush-’em-all mentality.
Microsoft dominated computing for a long time despite, not because of, its dysfunctional culture.
Update 2015.09.14 — Allworth and Thompson, explaining what Apple needs to do for the sake of iPad developers (Exponent #51):
BT: That’s kind-of what almost makes this situation more depressing, from my perspective, in that the #1 thing that developers care about — and we got a very crystal-clear understanding of their priorities on making decisions back when I was at Microsoft and trying to recruit developers — first and foremost is you have to have a market of people who are willing to pay. And that means that’s both a quantity issue and a quality issue. And the frustration is that Apple has that. Apple has all the customers, and they are customers who are willing to pay. Like, they’re already paying, you know, twice the price to have an Apple product instead of something else, right?
So the frustration is, Windows has always bent over backwards to accommodate developers. They would do anything they could to give developers the best monetization options, like trials, demos, all that sort of stuff. Which Windows 8 had from the beginning. The problem is, they didn’t have customers. So, you have to have the customers to start, and so why it’s almost depressing, from my perspective, is, yeah, it’d be great if there were [an] iPad alternative that had the sort of structure where you could build complicated apps and you could go and use them.
But the problem is kinda the prerequisite. Today, to be a platform you first do have to be a great product, because you have to have, like— consumers and developers, people think oh, it’s a chicken/egg problem ... No, it’s not. #1 is consumers. Like, you win consumers with a great product, and then the developers will come in and expand it. So what’s depressing is the alternative to there being a thriving ecosystem on the iPad is there not being anything. And this, kind-of like opportunity to create amazing, innovative apps for a touchscreen is just gonna kind-of never be exploited.
JA: That’s kind-of depressing. I’m trying to think of some kind of devil’s-advocate argument I can play back against you, and I’m struggling, I’m grasping at Xiaomi, right? But that’s an environment where people are buying lower-cost devices and they’re probably going to be less willing to pay for expensive apps, just by virtue of the nature of that market. Like, it’s well-known that iOS customers spend more on apps, and so on and so forth, than Android users. And I think if you cut that down into a less-developed market, it’s probably going to be more extreme again.
So I guess the argument we’re hearing is that if Apple doesn’t get this right, there’s, like, in economic terms there’s what’s called a dead weight loss. Like, this is the disadvantage of having a monopoly. Like, if they don’t figure out how to create a thriving environment for developers to develop stuff on the iPad, then that’s it; we’re just not going to get the really cool, really interesting, reimagined interfaces that could be possible on a tablet computer.
JA: What’s gonna cause the light bulb to go off on the iPad side, because I’m like you: It’s like, it would seem a great waste for the incredible paradigm to not have its capabilities explored just because they weren’t willing to try a few different experiments with the business model for developers.
BT: Well, one thing that is interesting to think about is, when I talk about Apple’s incentives, and culture, and all that stuff being focused around the product, and by extension that makes them not as good, perhaps, at being a platform steward. Because a platform— being a platform is like it’s there in the word, it’s allowing others to kind-of stand on top of you, right? And letting them shine, letting them be the star. Which is very different than Apple. And like, it’s almost like, wouldn’t it almost be nice if Apple could build the iPad and, kind-of, hand it off to Microsoft?
Because Microsoft is actually a great platform company; that’s what they are. They take care of their developers— they almost do too much, right? The backwards compatibility, and all the things that they let you do— they’re a platform company. ... To be a platform company, I think you need a certain degree of flexibility. You need a certain degree of kind-of letting go. It’s gonna be a little messy. You know what I mean? That just comes with the territory. And the problem is, you can’t be messy, and flexible, and blah-blah-blah when you’re making a product.
As near as I can tell, Allworth and Thompson here are making a mountain of a mole hill. They take maybe the only two, sort-of bad things you can find about Apple —
iPad sales are declining significantly (since the large-screen iPhones were announced), and
some developers are disgruntled about not getting to jack with the OS in ways that Apple doesn’t want them to —
and turn that into an argument that Apple needs to let go of its platform control!
These guys simply have their minds in the ’90s. It could scarcely be clearer. In the ’90s, Microsoft ran the platform. OEMs made the hardware that the platform ran on. The platform was messy; saddled with malware, anti-malware solutions, and casual piracy en masse. (No mention of piracy in this entire podcast, that I noticed!) Allworth and Thompson remember those times with fondness, and think it should still be that way today. No matter how successful Apple becomes, no matter what records Apple breaks (then re-breaks) with revenue, profits, user accounts, customer satisfaction, developer earnings, etc. — some tech observers are going to keep thinking that Apple should voluntarily surrender its stupefyingly vibrant platform, to purposely recreate the ’90s wild-west all over again.
Update 2016.06.17 — Consider the following events in Apple’s return-of-Jobs history:
A. Jobs immediately kills all money-losing projects, and refocuses the company on selling what can turn a profit, with a special focus (iMac) on the internet-interested consumer.
B. Apple catches Microsoft red-handed stealing QuickTime code, then cuts an out-of-court settlement in which Microsoft must buy $150 million of non-voting Apple stock, and maintain Office on the Mac for several years. (Later, under Ballmer, Microsoft dumps all that stock — if they had held it, today it would be worth around $20 billion, and would be earning over $200 million/year in dividends.)
C. Apple revolutionizes the mobile-products market, starting with the iPod, then followed by the iPhone and iPad.
Question: Which of these events is primarily responsible for saving Apple from bankruptcy and dissolution? Obvious answer: A.
Question: Which of these events is primarily responsible for Apple’s phenomenal rise to most successful company in the history of companies? Obvious answer: C.
Question: To which of these events do Thompson and Allworth, in their latest installment (#83), primarily attribute the saving of Apple as a company? Obvious (sigh) answer: B.
Any mention of QuickTime code theft? Out-of-court settlement? Ballmer blowing about twenty billion by spitefully selling the stock? Of course not. The whole event is portrayed simply as Microsoft investing in Apple and saving the company. And those Apple fans booing Gates when his live, videoconference image appeared on a gargantuan screen at MacWorld (something Jobs later said he regretted doing)? Those people were “outraged that they were going to be saved.”
Thanks, Ben; thanks, James. Thanks for making it crystal-clear to everyone where you stand. Right up there with Enderle, Lyons, and Thurrott.
Update 2018.01.17 — In “Steve Ballmer deserves his due as a great CEO” (CNBC), Eric Jackson does a pretty decent job of mentioning Ballmer’s worst failings, but still somehow manages to conclude that he was one of the greats. The article’s twisted logic is best summarized by this paragraph:
The day Ballmer said he’d leave Microsoft in 2013, the company’s market cap was $245 billion. It’s now $700 billion. That doesn’t happen simply because a new CEO is more charismatic. A lot of these gains in market cap are because of Ballmer’s stewardship.
It’s hard for me to believe that any tech commentators could really like Ballmer this much. Maybe it’s just an attempt to rewrite Microsoft’s 2000s history as something other than a big, repellent disaster.
The Old-Fashioned Way
Apple Paves the Way For Apple
iPhone 2013 Score Card
What Was Christensen Thinking?
Remember the iPod Killers?
The Innovator’s Victory
Answering the Toughest Question About Disruption Theory
It’s Not A Criticism, It’s A Fact