How to Turn Microsoft Around

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[Disclaimer: Arm chair quarterbacking is easy, execution is a heck of a lot harder]

John Furrier, CEO of Podtech, is out with a post saying that Microsoft needs new blood. He says that Bill Gates is off saving the world and that Steve Ballmer doesn't seem hungry enough. He says that although he's been a Windows user for many years that a Mac may be in his future very shortly. His post is in response to widely reported news yesterday that Microsoft's top search executive, Christopher Payne, is leaving Microsoft.

I guess Payne leaving Microsoft doesn't really surprise me. Microsoft continues to lose market share in search to Google. What is more surprising to me though is what seems like an almost daily slate of negative news on Microsoft. Yesterday I noted that influential analyst Michael Gartenberg was leaving Microsoft as an "enthusiastic evangelist" after less than a month (he says there is no story here but it's still surprising to see this), also this week you had another "enthusiastic analyst" Stephanie Quilao leaving her post after 9 1/2 weeks. Stephanie was a bit more candid than Gartenberg blogging that there was no Microsoft product beyond a wireless mouse that she felt she could blog about.

Add to these recent defections Chris Pirillo's post last week that he was going to "upgrade" back from Windows Vista to XP (not good when you are spending over $600 million to try and promote your new operating system).

More than all of this though is the informal anecdotal evidence I've been seeing of a shift from the Windows operating system to the Mac. I wrote about my own conversion last year. In the past few months I've been completely surprised at some of the names of people that have privately emailed me saying that they were switching as well. And then earlier this week over coffee with one of the top technology journalists in the world (no, not Walt Mossberg, but close up there) what did he pull out of his bag? A brand spanking new sleek black MacBook Pro less than a week old.

Now the numbers are not necessarily going to reflect this yet, but when your key influencers, bloggers, journalists, etc. begin abandoning Windows and moving to the Mac it's like a wave and over time this wave can actually threaten Microsoft's monopoly on the operating system. Look for Apple's numbers to continue advancing here in the months ahead.

So the question becomes how should Microsoft turn this around?

1. The problem with the PC is the user experience. It's not good. Especially when compared to a Mac the PC does not provide a good enough quality of experience. The main reason for this is the whole nature of how Macs vs. PCs are built and sold. The Windows operating system is an open system vs. Apple's closed system on the Macintosh. What this means is that there is a near infinite number of hardware / software configurations for the PC.

Microsoft took a little heat earlier this year when they gave a bunch of bloggers free high end Ferrari PCs with Vista on them. Why did Microsoft give these bloggers these PCs instead of just mailing them free Vista upgrade discs? To ensure the quality of their experience. If they didn't these same bloggers might have ended up having experiences like Chris Pirillo did and writing that Vista was crap.

They say a chain is only as strong as it's weakest link and the same is true of computers. Apple has the luxury of being able to test limited and known configurations on their products. Combine this with an almost manic commitment to user experience and you get a better product.

Microsoft of course can't just reverse course and piss off all of their OEMs and start building their own PC, but what they can do is create a Microsoft certification whereby thoroughly tested systems receive a special Microsoft seal of approval. This would be reserved only for PCs that met the most rigorous testing requirements. Microsoft should even offer to provide the actual customer service and support for these PCs (if they are built perfectly enough there won't be many calls, eh?). These certified PCs *can* cost more money. People will pay a bit more for a better experience.

2. The problem with Live.com is that it lacks compelling content. Robert Scoble says that he told Microsoft to buy Flickr three weeks before Yahoo actually did. Flickr is compelling content. Flickr was one of the best buys of the decade. For $35 million Yahoo got something that now has over 7 million registered users, over 20 million monthly uniques, over 400 million photos (and the best organized photo library in the world), and something that is going to actually (eventually) provide Yahoo a big leg up in image search.

But there are so many other great companies out there still to buy (hint Yahoo, Google and IAC have been buying a lot of them). I don't use live.com because I don't give a crap about having a homepage that shows me the news and weather and stock quotes. Live.com *had* a lot of potential. Now it is pretty much dead.

Given the choice between building or buying Microsoft almost always chooses to build. And yet where is the Flickr of Microsoft? Where is the digg of Microsoft? Where is the Pandora or Last FM of Microsoft? Where is the upcoming.org or Involver of Microsoft? Where is the Podtech of Microsoft? Where is the Twitter of Microsoft? Where is the TechMeme of Microsoft? I don't know if it is just too bureaucratic a place to build cool things that I want to use but they are not being built. These social networks have particular application in search that has not even been realized yet today.

Microsoft is sitting on $29 *billion* in cash and short-term investments. Rather than buying sleepy little companies, Microsoft needs to begin beefing up it's arsenal with properties that people will actually use and love.

In the next year Microsoft should spend $3 billion buying everything cool that it can get it's hands on irrespective of the busness outlooks of the individual internet properties. By combining these properties into something cool they *can* build a presence yet on the net.

3. Open an incubator in San Francisco. As part of spending $3 billion to buy a host of great internet properties the key thing is to let them run independently. What Microsoft should do is just create this kick ass campus in San Francisco. They should have a cafeteria like Google does and feed these people and encourage them to spend 24 hours a day there. It could become a think tank of sorts producing some of the best stuff on the internet. Why San Francisco? Because this is where these things are being built these days.

4. Get their evangelism back on track. Scoble was a big loss for Microsoft. Gartenberg would have been an interesting choice to try and fill his shoes but now he's gone as well. Microsoft needs to, in conjunction with the above efforts, get the right evangelists in place to then promote their new initiatives. Top bloggers, journalists, analysts, etc. should all be considered. Rather than one or two top evangelists though they should hire about 30 of these connectors and also give them direct access to the executives making the business decisions at Microsoft.

Fundamental to the four changes above is a realignment of how Microsoft views businesses. It means going from a structured corporate environment where each purchased company must have a compelling profit/loss case made to an environment where the vision of the future takes as compelling a seat as short term profitability. It also means adopting a new spirit that not only accepts but encourages and rewards self criticism. Less the company line and corporate mantra and more innovation. Roadblocks to innovation (including short term profitibilty) need to be removed. Processes need to be streamlined and Microsoft needs to redefine itself as a place where talent comes, not where talent leaves.

Honestly I'm not sure that any corporation can turn itself around the way that Microsoft needs to. Even Yahoo while acquiring the right internet properties still can't seem to integrate them in the ways that they should. Like I said before arm chair quarterbacking is frequently a lot easier than executing.

You can digg this story here.