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What Does Steve Ballmer's Resignation Suggest?

by Richard Guppy | Sep 04, 2013

Back from vacation I note that Steve Ballmer has resigned from Microsoft.  In his letter he writes that ‘now is the right time’ to go.  I disagree: the right time would in my opinion have been long ago, due to how Microsoft has struggled to defend its core PC and Windows business – losing revenue to competition from tablets and smartphones.  It might even have been better to wait a while, to allow the restructuring to stabilize somewhat. 

My interpretation of the situation follows, but in short: the disruption to Microsoft’s business during the search for a successor, plus the additional disruption while a successor takes over the business, means a rough ride for Microsoft for up to 24 months.  And, this comes on top of the business reorganisation that itself may prove chaotic for the company.  All in all, Microsoft’s challenge continues to grow, I think.

1.       The resignation has been a long time coming, and is not a big surprise: this is the basic context for the event.  There has been significant pressure on Steve Ballmer to resign for several years now, due to his perceived lack of vision and leadership compared to visionary leaders at companies like Google, Apple, Facebook and Amazon.  Alongside the issue of ‘vision’ is the issue of Microsoft’s strategic position in Cloud and Mobile sectors, where it is a follower and a minor player respectively; and the impact on its core legacy PC business as consumer and business segments transition from PCs to new paradigms.  

2.       The resignation is to take place over the coming 12 months, while a successor is sought.  It is more likely than not, in my opinion, that a successor will come from inside Microsoft, given the very strong internal political forces and career paths in play at Microsoft.  Of course, only time will tell whether a successor is found inside or outside the company.

3.       The resignation will further complicate the recent restructuring at Microsoft.  Steve Ballmer’s announcement closely follows the announcement of a big company reorganisation and strategic change towards becoming a ‘devices and services company’.  My recent blog on the possible impact makes clear my thinking that – as with Motorola 15 years earlier – such a huge restructuring happening when Microsoft is in great competitive difficulty represents a major risk for Microsoft: trying to do things better, while trying to apply new management structures and processes, is likely to lead to significant inefficiencies and conflict, even in worst case to chaos within the company and hence loss of market share.

4.       The 12 month window is long and may lead to additional inefficiencies and political in-fighting.  The search for a successor may take up to 12 months, and during this time, Microsoft managers will know that Steve Ballmer is a ‘lame duck’ leader: technically he retains authority, but in practice his authority has already been greatly reduced.  Steve Ballmer said that the timing was good, but in my opinion the timing could hardly be worse

5.       The handover period will bring additional confusion.  Any new candidate will require time to establish the new regime, and during this period (whether or not the long term outlook is good or bad) there will be further confusion within Microsoft.  Therefore one might say that in worst case, the period of disruption at Microsoft could be 24 months, rather than the 12 month maximum for recruitment itself

6.       The choice of successor brings upside and downside.  Depending on which candidate is selected, the choice can be seen as positive or negative for Microsoft.  On the one hand, Microsoft could follow the paradigm of Apple, where a strong internal candidate has done a good job initially of sustaining the fortune of Apple.  On the other hand, there are many examples where a successor has proven problematic: Nokia, RIM, Yahoo come to mind, among others.

7.       Overall, this may mark the transition of Microsoft from its legacy position of world leadership and, in some sectors, domination; to a new phase of leadership in selected sectors such as medium-large enterprises, and still leaving issues such as ‘Mobile’ unaddressed.

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