Here’s the key fact from this Vanity Fair inspection of Microsoft’s record over the last decade: Apple’s iPhone alone counts for more annual revenue than all of Microsoft.
That really puts things in perspective, don’t it? More:
Amid a dynamic and ever changing marketplace, Microsoft—which declined to comment for this article—became a high-tech equivalent of a Detroit car-maker, bringing flashier models of the same old thing off of the assembly line even as its competitors upended the world. Most of its innovations have been financial debacles or of little consequence to the bottom line. And the performance showed on Wall Street; despite booming sales and profits from its flagship products, in the last decade Microsoft’s stock barely budged from around $30, while Apple’s stock is worth more than 20 times what it was 10 years ago. In December 2000, Microsoft had a market capitalization of $510 billion, making it the world’s most valuable company. As of June it is No. 3, with a market cap of $249 billion. In December 2000, Apple had a market cap of $4.8 billion and didn’t even make the list. As of this June it is No. 1 in the world, with a market cap of $541 billion.
How did this jaw-dropping role reversal happen? How could a company that stands among the most cash-rich in the world, the onetime icon of cool that broke IBM’s iron grip on the computer industry, have stumbled so badly in a race it was winning?
Short answer, according to author Kurt Eichenwald: Steve Ballmer has been a bad CEO. For the long answer, read the whole thing. Eichenwald identifies a corporate culture of conservatism that has hurt the company:
For what began as a lean competition machine led by young visionaries of unparalleled talent has mutated into something bloated and bureaucracy-laden, with an internal culture that unintentionally rewards managers who strangle innovative ideas that might threaten the established order of things.
By the dawn of the millennium, the hallways at Microsoft were no longer home to barefoot programmers in Hawaiian shirts working through nights and weekends toward a common goal of excellence; instead, life behind the thick corporate walls had become staid and brutish. Fiefdoms had taken root, and a mastery of internal politics emerged as key to career success.
I think there’s a great lesson there for any organization — and, to the extent to which Eichenwald’s analysis is accurate, a confirmation of Schumpeter’s observation that over time, elites within a bureaucratic organization will make the mistake of identifying their own interests with the interests of the organization.
I’ve written before about this in connection with the Catholic Church’s leadership class, but of course it’s a universal law. I’ve seen it also within media companies, and I see it now within the leadership class of my own church. When leaders lose sight of the mission of the organization, and start identifying their own self-preservation within the bureaucracy as the same thing as advancing that mission, the trouble starts.
Of course a church is a fundamentally different thing than a business. A business’s goal is to expand its market by selling more product or service. A church must expand to thrive, but it cannot measure success quantitatively alone. A church that is booming, population-wise, may have so abandoned the principles of the religion that they have replaced the mission of spreading the faith with a mission of getting bodies into the pews. On the other hand, a church that’s steadily shrinking is failing. It could be the case that society is decreasingly open to the teachings of the church, but it could also be the case that the church’s internal culture has become sclerotic and self-serving, seeking not to serve the mission, but only its perpetuation. You can be sure, though, that whether the church is conservative or liberal in its orientation, the last cause of decline the leadership class will consider is its own failed leadership — and its failure adapt to changing conditions in order to serve the Mission.
It’s hard, because the tendency to epistemic closure is deeply human. I well remember that in the fallout of the Catholic abuse scandal, conservative Catholics (like me) were eager to identify all the ways the scandal was the fault of liberals within the organization, and their bad policies, while liberal Catholics spent all their time and energy blaming conservatives. In fact, I think both sides were right, to a point. But so many of us saw it as more important to be vindicated against our internal opponents than to take honest stock of the failure, and
to implement internal reforms, both corporate and personal, based on an honest analysis of the failure to repent.