Why Mulally’s the Right CEO for Microsoft
We so revere the high-tech chops of the geeks that run our technology companies, the very idea of an outsider like Ford CEO Alan Mulally as front-runner to take the helm at Microsoft (NASDAQ:MSFT) seems almost sacrilegious. But you know it’s been done before.
Apple (NASDAQ:AAPL) recruited John Sculley from PepsiCo (NYSE:PEP) in 1983. Who can forget Steve Jobs’ legendary pitch: “Do you want to sell sugared water for the rest of your life? Or do you want to come with me and change the world?” Unfortunately, that didn’t work out so well.
While Apple’s sales grew tenfold under Sculley, he was ousted in 1993 amidst declining profits and flattening revenues. On the flipside, that same year brought Lou Gerstner to IBM (NYSE:IBM) where the former RJR Nabisco and American Express (NYSE:AXP) executive engineered one of the most successful turnarounds in history.
Those two examples alone drive home the point that, when it comes to bringing in an outsider to run a technology company, the end result is largely a function of how well the individual’s abilities match up with the company’s situation and needs.
While nobody has a crystal ball and this sort of thing is notoriously hard to predict, I happen to think Mulally is the best choice to replace the software giant’s long-time CEO, Steve Ballmer.
For one thing, Mulally is no lightweight when it comes to engineering, technology, and product development. The guy has two engineering degrees and spent 37 years running engineering and, ultimately, the commercial airplane division at Boeing.
More importantly, his remarkable transformation of Ford (NYSE:F) provides an excellent blueprint for what Microsoft needs. That’s because Microsoft’s biggest challenge is the enormous size and complexity of its businesses and organization.
Imagine if you had a billion customers. You can’t imagine that? I know, neither can I. That, in a nutshell, is Microsoft’s problem. Its primary business of personal computer operating systems and application software counts a sizable chunk of all the companies and individuals on the planet as customers.
Now add game consoles, smartphones, tablets, Internet search and advertising, cloud computing, home entertainment, and Skype, and what do you have? A company with too many products and too many customers that competes with everyone from Apple and Google to Oracle and Samsung.
That’s why Ballmer sought out Mulally’s advice in his recent restructuring of Microsoft. Its business and organizational structure had become so mired in complexity, so fragmented into individual fiefdoms, that for any transformational change to take place, the first step had to be to simplify. And Mulally knows all about that sort of thing.
When Mulally joined Ford in 2006, the Detroit automaker was in sad shape. Not only was it bleeding red ink and mired in debt, the company was distracted by acquisitions of Jaguar, Land Rover, Volvo, and Aston Martin, as well as a big stake in Japan’s Mazda. And its warring factions were run by executives who worried more about their own necks than the success of the company and its products.
To change this dysfunctional and divisive culture, Mulally had to break down all the silos, sell off all those ancillary brands, and get everyone focused on a single goal: making the company’s core brand – Ford – successful. That’s more or less the advice he gave Ballmer some months ago, according to an email he sent to Kara Swisher of All Things D.
“Steve [Ballmer] and I have known each other for many years, and Ford and Microsoft are longtime business partners. We have shared with Steve … the elements of the Ford business transformation, including the importance of having a compelling vision and the relentless implementation of a plan that delivers the vision. A key part of the Ford transformation, as you know, has been everyone working together, with an organizational structure and operations absolutely focused on delivering the plan.”
By any metric, Mulally has done an extraordinary job of turning Ford around. He negotiated pay cuts with labor unions and brought the company back to growth and profitability. And Ford was the only one of Detroit’s Big Three automakers to avoid bankruptcy and a government bailout during the financial crisis.
Microsoft is certainly not a turnaround, but it is in dire need of a compelling vision, a simplified organizational and business structure, a cultural overhaul, streamlined operations, and a plan that everyone at the company can work together to achieve.
While Ballmer has already taken steps to rebrand and restructure the company, I don’t think he went nearly far enough. It still looks to me like a company that is trying to do too much, to be all things to all people. And it’s competing with too many industry giants on way too many fronts.
Fundamentally, Microsoft’s competitors are all simple companies. That’s why they’re successful.
Apple provides just a handful of consumer electronics devices and services.
Google is a search advertising company. Everything else it does is to increase its search ad revenue.
Amazon is an ecommerce marketplace.
IBM is a business IT solutions provider.
Likewise, Microsoft needs to figure out what it is and, just as importantly, what it isn’t. It doesn’t need some high-tech wunderkind to do that – it needs an experienced turnaround CEO like Mulally. And guys like him don’t come along every day.
Besides, he even maintains a residence in Washington State from his days at Boeing, or so I hear. What could be more perfect?
More on the subject:
Can Microsoft Really Go Head-to-Head With Apple?
Open Letter to Microsoft CEO Steve Ballmer