Tuesday, October 10, 2006

The value of persistence?

Ballmer was out talking in public again today, so we shouldn't be surprised that the stock closed in negative territory. Actually, is it just me or did the buyback spigot appear to get turned off a few days ago with a noticeable weakening in the stock? Oh well, don't expect them to let it slide too far - at least until after the annual shareholder meeting. Anyway, back on topic. Today's event was a Gartner Symposium in Lake Buena Vista Florida (not a bad gig if you can get it):

There's some stuff there on the endless web vs PC debate (yawn), but the part I want to focus on is persistence. Apparently, "where Microsoft has faltered or, has not been the first mover" - which would seem to characterize the majority of cases - MSFT's "stick to it-ivness" is the secret sauce that allows eventual success. According to Ballmer:

The bone doesn't fall out of our mouth easily. We may not be first but we'll keep working and working and working and working and working….. and it's the same with search. We'll keeping coming and coming and coming and coming and coming. We are irrepressible on this.

Putting aside that a lot of stuff doesn't fall out of their mouth easily - like "we're sorry we screwed up and negatively surprised the street in April", or "yes, our stock performance has been atrocious for going on 4 years now" or "in hindsight our SPSA criteria were totally f!&ked up" - I find this statement interesting.

Certainly MSFT has quite a track record of coming from behind, and in all those cases, persistence along with [importantly] a longer-term outlook, was a key factor in the eventual success. So clearly there's value there. I guess what concerns me is that this persistence is now worn as a badge of honor, when in almost all historical cases it was required because the company seriously misjudged an emerging trend and/or competitor. Even eventual success sometimes came at a massive cost (e.g. Netscape and the resulting anti-trust judgement and tens of billions in penalties plus oversight). More recently, this persistence argument is often employed to support "XYZ" emerging business that has cost more and gone far longer w/o generating a profit than originally anticipated (can you say Xbox?), or to try and take the sting out of being outmaneuvered yet again. It's also frequently cited when explaining the initial rather obvious shortcomings of some latest offering (e.g. Zune, Search, etc.).

At what point when you find yourself continuously slow to respond, do you stop congratulating yourself on your persistence and ability to catch up (eventually), and start addressing why it is that you constantly miss opportunities or get beaten to market in the first place? Surely in almost all cases, an ounce of prevention would be far more cost-effective than a pound of remedial cure? That's unequivocally true wrt search and likely true about gaming, portable music, and most other ventures. Additionally, it should be concerning to the CEO that many of these missed opportunities didn't come from out of left field where one might reasonably expect the company to miss out (after all, high tech comprises a very large area), but in segments where MSFT was already directly involved and should have been positioned to either lead (ideally) or be a very fast follower. And if business imperative alone isn't enough of a reason to focus on rectifying this weakness, it's pretty obvious from the downward P/E trajectory that being a perpetual laggard isn't helping the stock - not that he's focused on that according to him (another problem). And let's not even talk about the negative stock impact associated with pursuing money losing ventures that may be ill-advised/ill-conceived to begin with (i.e. when does persisitence become reckless stupidity?).

Persistence and a long-term approach are generally good things, and I don't want to minimize their competitive value especially in an era of companies too often focused quarter to quarter. But care should be taken to ensure that they're not being used as a crutch, or to mask deep-seated organizational/leadership/execution failures. Additionally, especially in the context of a longer-term approach, it is crucial that day-to-day milestones be correct (vs the brutally expensive SPSA "oops") and accountability clear (existent at all?). Over the past four years, that doesn't appear to be the case at MSFT. To give credit where credit is due, Ray Ozzie's Services Disruption memo, albeit candy-coated for politically correct internal and external consumption, is the closest thing I've seen to acknowledgement of the problem as a problem:

We should’ve been leaders with all our web properties in harnessing the potential of AJAX, following our pioneering work in OWA. We knew search would be important, but through Google’s focus they’ve gained a tremendously strong position. RSS is the internet’s answer to the notification scenarios we’ve discussed and worked on for some time, and is filling a role as ‘the UNIX pipe of the internet’ as people use it to connect data and systems in unanticipated ways. For all its tremendous innovation and its embracing of HTML and XML, Office is not yet the source of key web data formats – surely not to the level of PDF. While we’ve led with great capabilities in Messenger & Communicator, it was Skype, not us, who made VoIP broadly popular and created a new category. We have long understood the importance of mobile messaging scenarios and have made significant investment in device software, yet only now are we surpassing the Blackberry.

Let's hope he's also capable of implementing steps to start addressing it, and that Ballmer et al give him the organizational support required to do so.



  • Ballmer makes me want to puke. So basically he's OK with burning lots of cash and in the end still only being second best. He's running the company into the ground just because he's afraid to admit that we're wrong on a lot of things and to STOP doing those things. And to start doing a few things RIGHT...and BEFORE others do them. I'm glad I sold a bunch at $28...with earnings coming up and Ballmer out talking in public can only go south.

    By Anonymous Anonymous, at 10:57 PM  

Post a Comment

<< Home