Microsoft’s demise into irrelevancy continues, with it’s market cap being surpassed earlier this week by Google. Microsoft has failed to keep pace with a market that has a taste for mobile devices and the web, while continuing to offer lacklustre products in the desktop environment.

On the surface, it appears quite perplexing that Microsoft would find itself in such an incapacitated state. Bill Gates fairly accurately predicted the importance of the web in the mid 90s[1]. It’s also often reported that Microsoft spent roughly 8 times as much on research and development in 2009 than Apple. The following year Apple would go on to create an entirely new market for tablet computers with the iPad, while Microsoft would instead release it’s next iteration of office which included an email client that was completely incapable at rendering emails to the HTML standard, inspiring developers to create the fix outlook campaign[2].

Adam Hartung offers a clue as to how Microsoft’s spending could result in such little return: > “Most R&D, in most industries, and for most companies, is spent trying to sustain an existing technology - not identify or develop a disruptive technology that would have far higher rates of return.”[3]

Microsoft, it seems, are failing because they dont appreciate the importance of disruptive and evolutionary technologies. The sad thing for Microsoft is they were the biggest player on the web when Google went public in 2004. Internet Explorer was the ubiquitous client for browsing the web with usage exceeding 90%[4]. They had a touch screen product years before Apple released the iPad, they had a mobile smart phone years before the iPhone or Android. Both failed ultimately because Microsoft was too greedily milking the teet of an exhausted Windows and Office product line, instead of recognising the wealth that easily lay within its grasp in the form of new and emerging technologies.

So how could Microsoft be so spectacular incompetent? Again Adam Hartung of Forbes magazine provides us with a clear and decisive view on who is to blame: > “Without a doubt, Mr. Balamer is the worst CEO of a large publicly traded American company today… He singlehandedly steered Microsoft out of some of the fastest growing and most lucrative tech markets (mobile music, handsets and tablets)”[5]

Its hard to argue with such a scathing analysis when the cold hard figures regarding Mr Balamer’s leadership speak for themselves. The year Steve Balamer became CEO, Microsoft reached a market capitalisation of 430 billion. During his tenure, Microsoft’s market capitalisation has almost halved to its current 247 billion.[6]

I do hope for Microsoft’s sake Windows 8 does prove to be a winner. But then again they just may need to hit rock bottom ala Apple circa 1997, so they can rebuild themselves as a smarter company willing to make truly bold decisions.



Photo credit: Microsoft Research TechFest 2007 by Scott Beale, on Flickr