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Outside of the regular technology beat, former Microsoft developer David Auerbach has a great piece in n+1 about his time on the MSN Messenger team and their battle with AOL. Mixed in with actual examples of assembly language, C code, and server messages in hexadecimal is a story of how bureaucracy killed innovation at Microsoft, along the same lines as Kurt Eichenwald’s classic “‘Fucking Eric Schmidt is a fucking pussy!'” article for Vanity Fair.

Back in 1980 Microsoft had a truly innovative idea. While IBM, DEC, and even Apple would make money  selling hardware, Microsoft would licence software. “The margins on software were far greater than on hardware, because the physical manufacturing process was negligible—producing disks was cheap and trivial next to microprocessors and peripherals.”

They were hungry. They were fast. And all they had to do to be the best was to be just good enough to be better than the competition.

For years they remained a small company, but you didn’t need to be big to make software back then. The programs were simple, and they were all that was available, so you could charge a premium for them. … In 1983, a word processor so primitive it advised users to put little stickers on their keyboards so they’d know which functions correlated to which keys retailed for $289. For this price it offered a tiny fraction of what most freeware can do today. It was a different world.

And it worked. They dominated the market. Where the competitor was good, like in Lotus 1-2-3 in spreadsheets, their offering had to be very good, like Excel. Where the competition was lacking they could cut corners. When your competitor was Wordperfect anything that was WYSIWYG was going to be an improvement.

At the time of their legal battle with Microsoft, the Jobs-less Apple looked like the stagnant bureaucracy.

Hampered by poor management, overpriced computers, and a protectionist attitude toward the Macintosh brand, maintaining that only Apple could make Macintosh hardware, the company saw its market share decline throughout the decade, eventually prompting the return of the exiled Jobs and setting the stage for Apple’s resurgence.

Remember when it was Microsoft who was the hip company? They launched Windows 95 with a song by the Rolling-fucking-Stones, inconceivable now. Celebrities were name checking stodgy old Windows. But without a real competitor or a real goal beyond maximizing profit, Microsoft started their slow descent into stagnation.

Just two decades after launching MS-DOS, its first operating system, Microsoft was one of the biggest companies in the world. We had 30,000 employees worldwide, about 10,000 of them in Redmond. The campus was about the same size as Yale.

But as a whole the company was more comfortable entering existing markets and besting competitors. And in the absence of a clear target, planning could become fuzzy and tentative. You see this in the reticence to engage wholeheartedly with the internet in the 1990s: no one was making gobs of money yet, so who was Microsoft to follow? It wasn’t as if Microsoft (and everyone else) didn’t see that there was money to be made; Microsoft just wasn’t about to create the mechanism to do so on its own.

Eichenwald’s article goes into further details about the causes of Microsoft’s paralyzation. Software designed by committee. Innovative projects, such as a very early e-reader, were killed if they match the Windows UI or fit into the Office ecosystem. Quota-based stack ranking inspired not collaboration but inter-employee and inter-team sabotage.

Every little thing you want to write has to build off of Windows or other existing products,” one software engineer said. “It can be very confusing, because a lot of the time the problems you’re trying to solve aren’t the ones that you have with your product, but because you have to go through the mental exercise of how this framework works. It just slows you down.”

It became impossible to see new problems because they didn’t fit into the narrow lens of Windows or Word. And here is where Auerbach tells the interesting story of how MSN Messenger waged a mainly friendly battle with AOL to allow buddy list interoperability.

Those were the years of Microsoft’s long, slow decline, which continues to this day. The number of things wrong with the company was extraordinary, but they can be summed up by the word bureaucracy. Early on at Microsoft—and even later, when we first started Messenger—you could just do things. You had a good idea, you ran it by your boss, you tried it, and if it worked, in it went. After a while, you had to run everything by a hundred people, and at some point the ball would get dropped—and you’d never hear back.

How could Microsoft have avoided their stagnation into bureaucracy? Following on the thoughts of Aaron Dignan, CEO of the strategy consultancy Undercurrent, we can use the Responsive OS model to identify five key areas Microsoft could have saved themselves.

1. By focusing on a purpose that goes beyond straight up profits.

“Ballmer’s key business philosophy for Microsoft was so antiquated as to be irrelevant. The Microsoft C.E.O. used to proclaim that it would not be first to be cool, but would be first to profit—in other words, it would be the first to make money by selling its own version of new technologies,” writes Eichenwald.

2. By creating a process which allows for agile development.

The 2000s were Microsoft’s lost decade. They spent millions trying to pull off their next big operating system, codenamed Longhorn. Until Apple released OS X Tiger, containing all of Microsoft’s planned innovations, and Microsoft scrapped their project. Instead of development by committee and death by a thousand cuts, they should have to committed to a process which allowed them to ship, evaluate, and iterate.

3. By ditching managers, and cultivating makers.

The 1999 Microsoft was flush with cash. Cash led to hirings. Hirings led to manages. Managers led to meetings. Meetings led to red tape. And red tape kills innovation. They should have took a page from Valve and realized that managers don’t make things.

4. By abandoning the attempt to secure products meant to last, and beginning to build those meant to evolve.

The Internet was destined to change software as we knew it in 1999. But Microsoft’s only mission was to protect its two cash cows, Windows and Office. Its defence of Office killed all early attempts at an online office suite, leaving the field open for Google Docs. Ditto for e-readers.

Auerbach writes, “The real bone of contention was Windows: here was the most profitable thing in the history of computers. But a truly aggressive internet strategy would have meant thinking about a world without Windows. This was too difficult. ‘I don’t want to be remembered as the guy who destroyed one of the most amazing businesses in history,’ one senior executive wrote.”

But where is Windows now? Gasping it’s last breath. Windows 8 has been called “a disaster in every sense of the word” that “perhaps destroyed the most successful software franchise of all time.”  In the above video Steve Ballmer responds to a question about the rise of devices vs the decline of the PC. For Ballmer and Microsoft, there is only the PC. The form might change, but the class is destined to survive, because a tablet is just a PC in a fashionable case. This sums up every failure of Windows 8 as an attempt to cash in on a trend without cannibalizing their main product line and failing at doing either.

5. By cultivating platforms for the community to build upon.

Isn’t Windows the more open platform compared with OS X? But it is not the community who is encouraged to build upon it. It is the developers. Windows tries to position itself, like Apple, as a foundation for creativity and community. But everyone knows it is a box which holds numbers and documents which I must push around because some manager ordered me to. Microsoft technology is just a means by which to sell me something, with no further regard as to whether it enriches my life or not.

As a former knowledge manager I can tell you that SharePoint is not a platform which communities are willing to jump on. All of Microsoft’s moves into social media have been afterthoughts, attempts at playing catch up—except for perhaps little fish like MSN Messenger, which manage to hide from the Great Windows Shark.

The one team that seems to buck all of these trends: Xbox. And why? They have a purpose, to develop a great gaming experience, which they fulfil either at a loss or just barely in the black. They have existed like a rogue startup within Microsoft, protected from its management wars. They have embraced new technologies and new ways of thinking, and they have created a platform which users passionately defend and can build their own games upon.

And the Xbox is probably the only success, in terms of brand loyalty, to come out of Microsoft in 15 years.

Image credit file cabinets by Jared and Corin, on Flickr.

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