Is it time for Steve Ballmer to bail?

I don’t pick on Steve for the fun of it — not entirely at least.  I bring up the dreaded discussion of putting a new captain at the helm because after a decade with Ballmer as skipper, the good ship Microsoft is foundering, leaking between nearly every plank.  In an era where everything changed, Microsoft did not change fast enough and has failed to catch the rising tides.

Apple has not capitalized on everything and yet Apple now has a market cap larger than Microsoft (which we can take with a few drops of sea water since Apple’s forward P/E ratio is more than 50% higher than Microsoft’s, showing that navigators see better odds with Jobs on the investment horizon).

Drucker wisely noted that “Business has only two basic functions – marketing and innovation.”  High tech is uniquely a product of both.  Inbound marketing leads to innovation, or at very least appropriately channeling innovation.  Since technology markets are in perpetual change, and since the Internet has accelerated change, the key goal of marketing becomes tracking change and anticipating where this will cause money to flow.

Microsoft missed almost every change of the last decade.

By “missed” I don’t imply they ignored it.  They simply failed to capitalize on the change in a timely manner, with a great product, or both.  Here is a short list of huge opportunities that Microsoft flubbed:

• The web: Microsoft owned and then lost ownership of the web experience.  Their half-conceived attempts to create a rich Internet application infrastructure was eclipsed by Adobe (Flash), Sun (JavaScript) and other software.  Even the iconic Internet Information Server — an IT product for Microsoft’s core buyers — was effectively eradicated by Open Source (Apache).
• Search: Like Microsoft and desktops, Google understood that owning the most fundamental product in a market is a good grounding strategy.  Microsoft should have owned the search space, but every attempt was late and occasionally weird (like Live Search).
• Smart phones: Smart phones are portable computers with built-in telephony.  It is the closest thing to a desktop aside from pads/slates which are just now hitting market demand.  Microsoft should have owned this space, but they missed the opportunity by not uniquely bridging their established dominance in desktops.  Apple created something flashy while Microsoft should have bundled in email, desktop document tools and other office accoutrements.
• Pads: Same as above but with a much sadder ending.
• Music devices and music: Content has never been Microsoft’s forte, so missing this opportunity might be understandable.  Where as Jobs knows content (iTunes, Pixar, etc.) for Microsoft it is an afterthought.  Owning the desktop in most households should have lead to a more complete and pre-packaged audio experience.  Zunes don’t meet the market and unlike a MacBook, iPod, iTunes combo, Zune does not deliver an experience that people want to talk about.  Zune is a buzz kill.
• Clouds: Cloud computing will be the new norm, and one that Microsoft failed to engineer out of fear of losing control of the data center.  The future of the cloud space will be mainly VMWare and Linux, and rightly so as they strive and succeed in fulfilling the new whole product definition for data centers.

This roster covers only the opportunities Microsoft missed.  The list of things Microsoft simply screwed-up is long as well, and has such monumental errors as Vista, security and MSNBC (seriously, have you seen the ratings on that channel — I’ve never seen negative Nielsens before).  Vista, the next edition of Microsoft’s XP bread-and-butter was a bummer.  Lousy security is like owning a dog that invites burglars into your home.  And littering a news channel with blatant activists contradicts the definition of “news”.

It seems that under Ballmer, when Microsoft was not screwing up they were taking all eyes off of the ball.

I don’t think Microsoft’s board is going to oust Ballmer immediately.  Yet stockholders have the convenience of leaving at a whim which causes stock prices to drop and the remaining owners to demand action.  Innovation and marketing require vision and leadership, and Ballmer has ten years of misfires that indicate he does not lead on these two fronts.  Steve Jobs can see a market and conceive products for that market.  Ballmer, though perhaps good at operations is not the visionary that Gates was or Jobs is.

As the Greek’s say and know, the fish rots from the head down.  It may be time to make some fish head soup at Microsoft.

Update 2010-06-07: News from the All Things Digital conference indicate that the tech world is marginalizing Microsoft.  To quote from the news report:

They allowed the conversation to be focused mainly on competing products: Apple iPad, Google Android, Google Apps, Google search. Since these products have exposed weaknesses in Microsoft’s own offerings, it was unlikely to work out well.

Not good.  Not good at all.