When Bill Gates was the big dog at Microsoft, his image fit the company. Mr. Gates looked like a computer nerd and could have been a great poster child for all things relating to computers. When he left the company for other endeavors, he turned the reins over to Steve Ballmer. Many in the technology industry looked at this as being a foolish move. Unfortunately that perception continues.

A recent article states:

So I had brunch with Larry yesterday and he showed up carrying the Sunday Times and we were talking about the huge and incredibly embarrassing photo (above) of Ballmer that they ran on the front of their business cover. It wasn’t quite as bad as the one of Ballmer with his tongue sticking out, but come on — you know from the photo that this isn’t a friendly story. So then we started wondering how the Borg has become such a joke — and Larry had an interesting theory.

The online version also shows that photo, but for the real impact you have to get the print edition. Just imagine — it’s Sunday morning, you just woke up, you’re having your coffee and flipping through the sections, there’s some nice travel piece about bicycling in Vermont and then — bam! Suddenly there’s this huge photo of Ballmer looking like a doofus and you think, wait a minute, this guy runs a company? A really big important company? Like, one that does billions of dollars in sales each year? You’ve got to be kidding.

How did all these billions of dollars slip through Ballmer’s fingers? How did Microsoft find itself a leader in nothing and playing catch-up on every front — in MP3 players, on the cloud, in search. How did Amazon roll out S3 and not Microsoft? How did Google control the search market? How did Apple take over online music retailing and MP3 hardware? How did Microsoft let that market for smartphones get away from them? How is it that everything about Microsoft’s business is backward looking? This is the real problem they have now. They’re fighting wars that are already over. They’re investing huge energy into defending things they already control, like Windows. As they do this, as they put so much effort into lost causes like search (Bing v. Google) they keep missing out on new things. So their problems just keep getting bigger and bigger, like a snowball rolling down a hill.

Larry’s like, Look, the Borg has never been out ahead on anything. The difference is, they used to be able to catch up. They’ve always been copiers. That’s been their business model from the start. Let others go out and create a market, then copy what they’ve done, sell it for less, and crush them. They got into the OS business by stealing DOS from someone else. They created Windows by stealing Apple’s ideas. They got into desktop apps by copying Lotus and WordPerfect and then having the bright idea to bundle all the stuff into one cheapo suite. They pulled the trick off again with Internet Explorer versus Netscape, in the late 90s — that was the last time they were able to let someone get out ahead of them and then pivot and copy and give it away free and take them over. By the end of the 90s they had broken through 50% market share in browsers, and that was it for Netscape.

But what happened after that? This is what we were wondering. Larry says two things happened. One, the Borg got slower. They got big and fat and bureaucratic. Two, everyone else got faster. Look at Google. They got so big so quickly that there was no way for the Borg to claw them back. Same for all these other Web businesses. Amazon, Ebay, Skype, Facebook, Twitter. They came out of nowhere, and what they were doing was free, so the Borg couldn’t just do a crappy knockoff and sell it for less. They were up against free — the Web companies were using their own strategy against them.

Interesting points. It does seem that Microsoft has some problems which were demonstrated by its Vista operating system. Corporate America did not buy it. Consumers ignored it. Now with Windows 7 coming our way, many are calling it Vista 2.0.

What do you think?

Comments welcome.

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