Gates-Ballmer Shuffle Is a Boost for Microsoft

FRAMINGHAM (01/28/2000) - Many great companies have two key founders or executives who have complementary skills. In Japan, for example, legend surrounds the duo of Soichiro Honda, the engine-design genius and racing enthusiast who founded Honda Motor Co. in 1946, and Takeo Fujisawa, the one-man marketing department who became his partner. In the U.S., we have Bill Gates and Steve Ballmer.

Gates, who founded Microsoft in 1975 with Paul Allen, recently ceded his position as CEO to Ballmer, his former Harvard classmate and a Microsoft executive since 1981. Gates remains chairman and is taking on a new role as chief software architect. Ballmer has been president since 1998. Not only are they a rich duo (Gates' 15% ownership of Microsoft is worth nearly $90 billion and Ballmer's 5% nearly $30 billion), but they complement each other remarkably well.

Gates remains the technology guru and strategy genius who has led Microsoft from programming languages to operating systems, desktop applications, enterprise software and a host of Internet ventures. Ballmer has been the main administrative "firefighter" and a source of enormous energy. He has often taken on the hardest tasks, such as managing Microsoft's relationship with IBM, overseeing the chaotic Windows group in the 1980s and shaping up sales and customer support during the 1990s for the attack on enterprise markets with products such as Windows NT and BackOffice.

Why would Gates step down now? As an observer of Gates and Microsoft since I co-authored Microsoft Secrets in 1995, let me venture some guesses.

First, Gates appears to have tired of the demands imposed by the CEO job in recent years, especially last year. He also hasn't done such a great job. Gates has shown remarkable growth in his skills as a manager, organization leader and public spokesman since Microsoft's early days, but the antitrust trial has exposed his weaknesses. Yes, it's tedious to have every move of your company, as well as yourself, subjected to the scrutiny of the Justice Department and the media. But Gates was also deeply involved in Microsoft's legal strategy, which was to deny that the company had done anything wrong. This strategy seems to have failed - big time. Though it may not be necessary, Gates clearly doesn't have the patience to spend more years overseeing litigation and appeals strategies or negotiating with judges and lawyers over antitrust remedies, in addition to rallying the frustrated troops and deserting executives back at headquarters.

Second, the decision to make Ballmer CEO suggests that he has finally arrived as a manager. In earlier years, Ballmer often seemed too bombastic and explosive in his dealings with underlings to be an effective manager. But he matured as president and now has the full confidence of Gates, the board and senior executives. Ballmer has much more tolerance than Gates for managerial and strategic minutiae, plus more administrative and people skills. He also can't do any worse at legal strategy and negotiations. So he's ready to run Microsoft and free Gates to do other things.

Finally, with this change, Gates has stated that he wants to focus on what he and Microsoft do best: designing and thinking about software products and services for the mass market, including the rapidly evolving Internet. With Gates returning to his software roots and Ballmer running the company, Microsoft seems much less likely now than it did a few years ago to follow the lead of AOL/Time Warner into the world of electronic content. Microsoft should remain very much a software company - or become a bunch of software companies, if the government has its way.

MICHAEL CUSUMANO, co-author of Competing on Internet Time: Lessons from Netscape and Its Battle with Microsoft, is a professor at MIT's Sloan School of Management. Contact him at cusumano@mit.edu.

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