With Friday's announcement that Microsoft CEO Steve Ballmer will retire within a year, the parlor game is on to guess who the next CEO might be.
I've covered the company for a while, and the news surprised me -- not the fact that Ballmer's stepping down, but the timing. Investors have been grumbling about Ballmer for years, and so have many employees. Over the last 15 years Microsoft has managed to miss the boat on important trends like smartphones, tablets and cloud -- despite the fact that it was standing on the dock the whole time.
So for me, the first part of the surprise came in June, when Microsoft announced a reorganization that consolidated power under Ballmer. The new structure stripped out the P&L independence of the business units, and centralized functions like marketing and finance under corporate. At the time of the reorg, Ballmer wrote about breaking down the silos that had stymied innovation. This was a reorg that depended on Ballmer himself to make it work, and apparently the board had signed off on it. It seemed to signal that Ballmer would be around for a few more years.
That's why the announcement of Ballmer's impending departure is a head scratcher. Why reorganize a company so that decisions flow through a CEO who's a short-timer? Any decision with implications that stretch beyond a single year will be inherently unstable because a new CEO could easily reverse it. And let's be honest: All of the important decisions Microsoft has to make have implications that stretch beyond a year. Strategically, Microsoft is going to be a mess until they get this CEO business sorted out.
Which brings us to the subject at hand: Whom should Microsoft pick?
A company of Microsoft's stature basically has three choices: Friend, foe or family. (Given Microsoft's unique dynamic, picking an unknown, the way Hewlett-Packard did with Mark Hurd nine years ago, is probably out of the question.) Here's how the options break down:
FRIEND: This would mean getting a former executive to return -- or picking an executive from a company in Microsoft's ecosystem -- think Nokia, Intel, HP. That's what Juniper did when it snagged Kevin Johnson from Microsoft several years back, and what Motorola did when it got Sanjay Jha from Qualcomm way back when.
The upside here? An exec from a partner company probably knows the executives within the hiring company, and knows the rivals and customers. A strong executive from a partner company may also have a decent sense of the strengths and weaknesses of the product portfolio. A former executive knows many of the players but might have benefitted from some distance.
The downside? You know how partners are. They sometimes have notions about what's wrong with the hiring company before they walk in the door. And their knowledge base might not match up well to the hiring company's needs. And a former executive might be too much of a relic to manage today's company.
FOE: Who better to run a company than an executive from a rival who beat you before? That's what Yahoo's board got when it hired Marissa Mayer from Google, where she led the development of products that turbocharged the search giant and left Yahoo in the dust. This is a tough hire to pull off -- because the best executives from a winning company can usually write their own ticket with their current employer, and are loath to leap to a loser.
Even if the hiring company manages to lure away a star, it's not always smooth sailing. Sometimes the new star CEO has a disdain for the hiring company and its customers, and break too much china in the name of remodeling. (Exhibit A: Ron Johnson at J.C. Penney.)
FAMILY: Companies prefer to elevate one of their own. That's what IBM did with Ginny Rometty, Apple with Tim Cook, Intel with Brian Krzanich, Xerox with Ursula Burns, Adobe with Shantanu Narayen, and so on. The advantages of hiring an insider? They already know the company, the executives and the board. They know and respect the culture. This works particularly well if the succession process has been well-organized and deliberate.
But you know when it doesn't work so well? When the CEO search begins by surprise, and the hiring company's best executive talent starts getting publicly compared in a high-end meat-market atmosphere. Chances are, some executives who get passed over for the CEO title will leave for other opportunities. The insider CEO is also less exciting when investors and partners think the hiring company needs some shaking up. Any insider who'd get considered for the CEO job, the thinking goes, is probably part of the problem.
There's a fantastic list of former Microsoft engineering minds who could be great visionaries -- Ray Ozzie and Steven Sinofsky come to mind. Do they want to run Microsoft? It's hard for me to imagine Ozzie wanting it at all. Sinofsky still sounds like he wants to have a big impact on the tech world, but if he were to return to Microsoft, something tells me the shakeup would be ... dramatic.
One option I mentioned on CNBC Friday sticks with me: Nokia CEO Stephen Elop. Why?
He's part friend, part family. As head of Microsoft's Business Division, he ran (and grew) the most profitable part of the company, and helped lay the groundwork for its transition to the cloud. He knows and respects Microsoft's culture.
Elop's tenure at Nokia is controversial, but face facts: He had the courage to abandon Symbian when many in Europe (wrongly) thought it could still have a bright future. He wisely ditched MeeGo when he saw that there wouldn't be enough of an ecosystem around it. He resisted the temptation to jump on the Android bandwagon when everyone else did, seeing that differentiation would be too difficult. (Today, no smartphone maker is managing to make decent profits in Android except Samsung.) Instead of all those, Elop hitched Nokia's future to Microsoft's Windows Phone software.
Today, Nokia's Lumia sales are small, but growing; it seems to stand a better chance than Research in Motion of getting a foothold in Europe and a few emerging markets and surviving long-term. And Elop has a very valuable perspective: He's Microsoft's biggest and most loyal partner in the mobile space. Nokia's engineers and product managers have been clamoring for Microsoft to ship more frequent updates to Windows Phone; Elop has felt that pain intimately.
But is Elop a good CEO?
For anyone who's been paying attention, it's clear that the bulk of Elop's thesis about Nokia has played out. Symbian didn't have much of a future. MeeGo phones? They would have depended on Intel chips, and those haven't make any significant headway differentiating themselves in the market. If Nokia had bet its future on either of those -- or worse, tried to ride many horses at once -- it might be dead already.
Bloggers wrote a year or two ago that Elop was the worst CEO out there, but based on what? The idea that Symbian would be taking over the world by now? More likely, it would be declining as fast as BlackBerry. True, he shouldn't have let the infamous "Burning Platform" memo leak out and send Symbian sales off the cliff so soon -- but it's better to make your biggest mistakes early in your tenure.
There are other reasons why Elop might not be the best choice. If his departure were to cause Nokia to stumble, that would kneecap Microsoft's mobile efforts, too. And Elop certainly wouldn't take the heat off of the Microsoft board -- critics would show a chart of Nokia's stock performance under Elop and declare him a failure right off the bat.
But whichever option Microsoft chooses, it hasn't got much time to lose. The organization needs to act faster and smarter in the cloud and mobile era -- and it's in the early stages of a reorg that consolidates power at the top. It won't be able to move at full speed until it has a permanent CEO.
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Source : Jon Fortt on Linkedin