Two of the five Big Tech companies are in the Seattle area. One has gone from monstrous monopoly to admired turnaround.
What a difference a few years make.
Criticism is widespread against four of the five members of Big Tech.
Facebook arguably helped steal a presidential election, and its lack of privacy and data protections is under attack.
Google and its parent Alphabet face concerns over scooping up others’ intellectual property, tax avoidance and leaning on a think tank it helped fund for daring to mildly critique the company.
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Apple lost the “think different” appeal of the Steve Jobs era, and its products are less easy to use. Amazon is a bipartisan target, from President Trump blaming it for hurting the Postal Service to Seattle lefties blaming it for homelessness (both are wrong).
And Microsoft? It’s back strong, beating expectations on earnings and becoming a major player in the cloud. It’s the second-largest cloud provider behind Amazon Web Services. Microsoft shares are up about 40 percent over the past year.
The company also avoids the censure of some urbanists aimed at Amazon in its competition for HQ2, as a behemoth seeking corporate welfare while bringing higher housing costs and more traffic congestion.
Microsoft hasn’t been without stumbles. My colleague Matt Day reported on Microsoft’s low percentage of female employees and “a culture of casual sexism, a male-dominated hierarchy slow to change, and poor resolution of employee grievances.”
Yet the “bro culture” is rife among technology companies. And among the real and perceived sins of Big Tech, Microsoft barely registers.
Out in Redmond, walled off by affluent suburbs from the ministrations of the Seattle City Council and its loud supporters, Microsoft cruises along in peace. Not only that, but it has achieved a remarkable turnaround. Microsoft is arguably better positioned than any time since the early 1990s.
That was when the innovative startup of Bill Gates and Paul Allen had grown into a software behemoth, making enemies in Silicon Valley and drawing the Clinton administration’s attention as a potentially dangerous monopoly. The company avoided being broken up like the old AT&T, but the long legal fight broke its stride.
Then came the Lost Decade, an expression coined in a widely read 2012 Vanity Fair article by Kurt Eichenwald.
“Microsoft’s low-octane swan song was nothing if not symbolic of more than a decade littered with errors, missed opportunities, and the devolution of one of the industry’s innovators into a ‘me too’ purveyor of other companies’ consumer products,” he wrote.
“Over those years, inconsequential pipsqueaks and onetime zombies — Google, Facebook, Apple — roared ahead, transforming the social-media-tech experience, while a lumbering Microsoft relied mostly on pumping out Old Faithfuls such as Windows, Office and servers for its financial performance.”
Eichenwald, and many others, laid blame on Steve Ballmer, the chief executive who succeeded Bill Gates.
Ballmer’s use of the morale-busting “stack ranking” system, one of the many poisonous legacies of General Electric’s Jack Welch, was especially harmful. It essentially requires managers to force out a certain number of employees, no matter the reality of their performance or potential.
The “Microsoft paradox” kept chugging, however: The company made mistake after mistake, yet it brought in enormous earnings. Still, the conventional wisdom was that Microsoft was “mature” at best, or in decline.
But the swan didn’t sing.
Stack ranking was abandoned. Ballmer left to own a basketball team in L.A., replaced by veteran Satya Nadella. Microsoft vaulted back to be a commanding player in a technology market so very different from the one it first dominated, with IBM personal computers and software installed on discs.
The history of American business is littered with the remains of companies that once ruled their industries but were unable to make the turn when technology and the economy fundamentally changed.
Eastman Kodak was once synonymous with photography. Xerox so dominated photocopiers that its name became Coke-like shorthand: “I’m going to Xerox this…Can somebody please fix the Xerox machine?” Both were leading technology companies for their era.
Interestingly, both were also headquartered in Rochester, N.Y., and helped make the city so successful and prosperous that it was the subject of a book called Smugtown, USA.
Both companies crashed on the shoals of digital photography and the information age (in Xerox’s case, management and corporate-governance failures were also destructive). They are shells of their onetime greatness. Rochester never regained its former glory. (N.b., Seattle).
Nadella has received much credit for Microsoft avoiding such a fate.
A worshipful article last year in Fast Company contrasted his “soft skills” with the cutthroat culture of Gates and Ballmer:
“He has inspired the company’s… employees to embrace what he calls ‘learn-it-all’ curiosity (as opposed to what he describes as Microsoft’s historical know-it-all bent) that in turn has inspired developers and customers — and investors — to engage with the company in new, more modern ways.”
A more measured assessment by The Economist still found dramatic and welcome cultural change in Redmond. “Technologies come and go, (Nadella) says, so ‘we need a culture that allows you to constantly renew yourself.’”
I’m suspicious of CEO worship, not least because of the damage done to so many companies and lives by the praise of Welch — and how he influenced a generation of top executives for the worse.
But the tone is set from the top. Getting out of the way of your talented employees and giving them the tools they need are excellent turnaround skills for a boss. Unlike General Motors under Roger Smith in the 1980s, Nadella appears to have unleashed the pent-up human potential in Microsoft.
Nadella also deserves specific credit for pushing the cloud as a priority, developing new hardware and moving aggressively into artificial intelligence.
It will be fascinating to watch Microsoft’s next decade — definitely not lost.