A salute to immigrants, America’s unsung national treasure

A salute to immigrants, America’s unsung national treasure

I’m amazed about Americans’ debate regarding immigration. And all the rhetoric from candidate Trump about the need to close America’s borders.

I was raised in Oklahoma, which prior to statehood was called The Indian Territory. I was raised around the only real Native Americans. All the rest of us are immigrants. Some voluntarily, some as slaves. But the fact that people want to debate whether we allow people to become Americans seems to me somewhat ridiculous, since 98% of Americans are immigrants. The majority within two generations.

immigrationThroughout America’s history, being an immigrant has been tough. The first ones had to deal with bad weather, difficult farming techniques, hostile terrain, wild animals – it was very difficult. As time passed immigrants continued to face these issues, expanding westward. But they also faced horrible living conditions in major cities, poor food, bad pay, minimal medical care and often abuse by the people already that previously immigrated.

And almost since the beginning, immigrants have been not only abused but scammed. Those who have resources frequently took advantage of the newcomers that did not. And this persists. Immigrants that lack a social security card are unable to obtain a driver’s license, unable to open bank accounts, unable to apply for credit cards, unable to even sign up for phone service. Thus they remain at the will of others to help them, which creates the opportunity for scamming.

Take for example an immigrant trying to make a phone call to his relatives back home. For most immigrants this means using a calling card. Only these cards are often a maze of fees, charges and complex rules that result in much of the card’s value being lost. A 10-minute call to Ghana can range from $2.86 to $8.19 depending on which card you use. This problem is so bad that the FCC has fined six of the largest card companies for misleading consumers about calling cards. They continue to advise consumers about fraud. And even Congress has held hearings on the problem.

One outcome of immigrants’ difficulties has been the ingenuity and innovativeness of Americans. To this day around the world people marvel at how clever Americans are, and how often America leads the world in developing new things. As a young country, and due to the combination of resources and immigrants’ tough situation, America frequently is first at developing new solutions to solve problems – many of which are problems that clearly affect the immigrant population.

So, back to that phone call. Some immigrants can use Microsoft Skype to talk with their relatives, using the Internet rather than a phone. But this requires the people back home have a PC and an internet connection. Both of which could be dicey. Another option would be to use something like Facebook’s WhatsApp, but this requires the person back home have either a PC or mobile device, and either a wireless connection or mobile coverage. And, again, this is problematic.

But once again, ingenuity prevails. A Romanian immigrant named Daniel Popa saw this problem, and set out to make communications better for immigrants and their families back home. In 2014 he founded QuickCall.com to allow users to make a call over wireless technology, but which can then interface with the old-fashioned wired (or wireless) telecom systems around the world. No easy task, since telephone systems are a complex environment of different international, national and state players that use a raft of different technologies and have an even greater set of complicated charging systems.

But this new virtual phone network, which links the internet to the traditional telecom system, is a blessing for any immigrant who needs to contact someone in a rural, or poor, location that still depends on phone service. If the person on the other end can access a WiFi system, then the calls are free. If the connection is to a phone system then the WiFi interface on the American end makes the call much cheaper – and performs far, far better than any other technology. QuickCall has built the carrier relationships around the world to make the connections far more seamless, and the quality far higher.

But like all disruptive innovations, the initial market (immigrants) is just the early adopter with a huge need. Being able to lace together an internet call to a phone system is pretty powerful for a lot of other users. Travelers heading to a remote location, like Micronesia, Africa or much of South America — and even Eastern Europe – can lower the cost of planning their trip and connect with locals by using QuickCall.com. And for most Americans traveling in non-European locations their cell phone service from Sprint, Verizon, AT&T or another carrier simply does not work well (if at all) and is very expensive when they arrive. QuickCall.com solves that problem for these travelers.

Small businesspeople who have suppliers, or customers, in these locations can use QuickCall.com to connect with their business partners at far lower cost. Businesses can even have their local partners obtain a local phone number via QuickCall.com and they can drive the cost down further (potentially to zero). This makes it affordable to expand the offshore business, possibly even establishing small scale customer support centers at the local supplier, or distributor, location.

In The Innovator’s Dilemma Clayton Christensen makes the case that disruptive innovations develop by targeting a customer with an unmet need. Usually the innovation isn’t as good as the current “standard,” and is also more costly. Today, making an international call through the phone system is the standard, and it is fairly cheap. But this solution is often unavailable to immigrants, and thus QuickCall.com fills their unmet need, and at a cost substantially lower than the infamous calling cards, and with higher quality than a pure WiFi option.

But now that it is established, and expanding to more countries – including developed markets like the U.K. – the technology behind QuickCall.com is becoming more mainstream. And its uses are expanding. And it is reducing the need for people to have international calling service on their wired or wireless phone because the available market is expanding, the quality is going up, and the cost is going down. Exactly the way all disruptive innovations grow, and thus threaten the entrenched competition.

The end-game may be some form of Facebook in-app solution. But that depends on Facebook or one of its competitors seizing this opportunity quickly, and learning all QuickCall.com already knows about the technology and customers, and building out that network of carrier relationships. Notice that Skype was founded in 2003, and acquired by Microsoft in 2011, and it still doesn’t have a major presence as a telecom replacement. Will a social media company choose to make the investment and undertake developing this new solution?

As small as QuickCall.com is – and even though you may have never heard of it – it is an example of a disruptive innovation that has been successfully launched, and is successfully expanding. It may seem like an impossibility that this company, founded by an immigrant to solve an unmet need of immigrants, could actually change the way everyone makes international calls. But, then again, few of us thought the iPhone and its apps would cause us to give up Blackberries and quit carrying our PCs around.

America is known for its ingenuity and innovations. We can thank our heritage as immigrants for this, as well as the immigrant marketplace that spurs new innovation. America’s immigrants have the need to succeed, and the unmet needs that create new markets for launching new solutions. For all those conservatives who fear “European socialism,” they would be wise to realize the tremendous benefits we receive from our immigrant population. Perhaps these naysayers should use QuickCall.com to connect with a few more immigrants and understand the benefits they bring to America.

Microsoft and Linked-In – Same Song, Different Key

Microsoft is buying Linked-In, and we should expect this to be a disaster.

It is clear why Linked-in agreed to be purchased.  As revenues have grown, gross margins have dropped precipitously, and the company is losing money.  And LInked-in still receives 2/3 of its revenue from recruiting ads (the balance is almost wholly subscription fees,) unable to find a wider advertiser base to support growth.  Although membership is rising, monthly active users (MAUs, the most important gauge of social media growth) is only 9% – like Twitter, far below the 40% plus rate of Facebook and upcoming networks.  With only 106M MAUs, Linked in is 1/3 the size of Twitter, and 1/15th the size of Facebook.  And its $1.5B Lynda acquisition is far, far, far from recovering its investment – or even demonstrating viability as a business.

Even though the price is below the all-time highs for LNKD investors, Microsoft’s offer is far above recent trading prices and a big windfall for them.

But for Microsoft investors, this is a repeat of the pattern that continues to whittle away at their equity value.

MSFT + LINKOnce upon a time, in a land far away, and barely remembered by young people, Microsoft OWNED the tech marketplace.  Individuals and companies purchased PCs preloaded with Microsoft Windows 95, Microsoft Office, Microsoft Internet Explorer and a handful of other tools and trinkets. And as companies built networks they used PC servers loaded with Microsoft products. Computing was a Microsoft solution, beginning to end, for the vast majority of users.

But the world changed. Today PC sales continue their multi-year, accelerating decline, while some markets (such as education) are shifting to Chromebooks for low cost desktop/laptop computing, growing their sales and share.  Meanwhile, mobile devices have been the growth market for years.  Networks are largely public (rather than private) and storage is primarily in the cloud – and supplied by Amazon.  Solutions are spread all around, from Google Drive to apps of every flavor and variety.  People spend less computing cycles creating documents, spreadsheets and presentations, and a lot more cycles either searching the web or on Facebook, Instagram, WhatsApp, YouTube and Snapchat.

But Microsoft’s leadership still would like to capture that old world.  They still hope to put the genie back in the bottle, and have everyone live and work entirely on Microsoft.  And somehow they have deluded themselves into thinking that buying Linked-in will allow them to return to the “good old days.”

Microsoft has not done a good job of integrating its own solutions like Office 365, Skype, Sharepoint and Dynamics into a coherent, easy to use, and to some extent mobile, solution.  Yet, somehow, investors are expected to believe that after buying Linked-in the two companies will integrate these solutions into the LInked-in social platform, enabling vastly greater adoption/use of Office 365 and Dynamics as they are tied to Linked-in Sales Navigator.  Users will be thrilled to have their personal information analyzed by Microsoft big data tools, then sold to advertisers and recruiters.  Meanwhile, corporations will come back to Microsoft in droves as they convert Linked-in into a comprehensive project management tool that uses Lynda to educate employees, and 365 to push materials to employees – and allow document collaboration – all across their mobile devices.

Do you really believe this?  It might run on the Powerpoint operating system, but this vision will take an enormous amount of code integration.  And with Linked-in operated as separate company within Microsoft, who is going to do this integration?  This will involve a lot of technical capability, and based on previous performance it appears both companies lack the skills necessary to pull it off.  How this mysterious, magical integration will happen is far, far from obvious, or explained in the announcement documents.  Sounds a lot more like vaporware than a straightforward software project.

And who thinks that today’s users, from individuals to corporations, have a need for this vision?  While it may sound good to Microsoft, have you heard Linked-in users saying they want to use 365 on Linked in?  Or that they’ll continue to use Linked-in if forced to buy 365?  Or that they want their personal information data mined for advertisers?  Or that they desire integration with Dynamics to perform Linked-in based CRM?  Or that they see a need for a social-network based project management tool that feeds up training documents or collaborative documents?  Are people asking for an integrated, holistic solution from one vendor to replace their current mobile devices and mobile solutions that are upgraded by multiple vendors almost weekly?

And, who really thinks Microsoft is good at acquisition integration?  Remember aQuantive? In 2007 Microsoft spent $6B (an 85% premium to market price) to purchase this digital ad agency in order to build its business in the fast growing digital ad space.  Don’t feel bad if you don’t remember, because in 2012 Microsoft wrote it off.  Of course, there was the buy-it-and-write-it-off pattern repeated with Nokia.  Microsoft’s success at taking “bold moves” to expand beyond its core business has been nothing less than horrible.  Even the $1.2B acquisition of Yammer in 2012 to make Sharepoint more collaborative and usable has been unsuccessful, even though rolled out for free to 365 users. Yammer is adding nothing to Microsoft’s sales or value as competitor Slack has reaped the growth in corporate messaging.

The only good news story about Microsoft acquisitions is that they missed spending $44B to buy Yahoo – which is now on the market for $5B.  Whew, thank goodness that one got away!

Microsoft’s leadership primed the pump for this week’s announcement by having the Chairman talk about investing outside of the company’s core a couple of weeks ago.  But the vast majority of analysts are now questioning this giant bet, at a price so high it will lower Microsoft’s earnings for 2 years.  Analysts are projecting about a $2B revenue drop for $90B Microsoft next year, and this $26B acquisition will deliver only a $3B bump.  Very, very expensive revenue replacement.

Despite all the lingo, Microsoft simply cannot seem to escape its past.  Its acquisitions have all been designed to defend and extend its once great history – but now outdated.  Customers don’t want the past, they are looking to the future.  And no matter how hard they try, Microsoft’s leaders simply appear unable to define a future that is not tightly linked to the company’s past.  So investors should expect Linked-In’s future to look a lot like aQuantive.  Only this one is going to be the most painful yet in the long list of value transfer from Microsoft investors to the investors of acquired companies.

 

How Traditional Planning Systems Failed Microsoft, and Its Board

Last week Bloomberg broke a story about how Microsoft’s Chairman, John Thompson, was pushing company management for a faster transition to cloud products and services.  He even recommended changes in spending might be in order.

Really?  This is news?

Let’s see, how long has the move to mobile been around?  It’s over a decade since Blackberry’s started the conversion to mobile.  It was 10 years ago Amazon launched AWS.  Heck, end of this month it will be 9 years since the iPhone was released – and CEO Steve Ballmer infamously laughed it would be a failure (due to lacking a keyboard.)  It’s now been 2 years since Microsoft closed the Nokia acquisition, and just about a year since admitting failure on that one and writing off $7.5B  And having failed to achieve even 3% market share with Windows phones, not a single analyst expects Microsoft to be a market player going forward.

So just now, after all this time, the Board is waking up to the need to change the resource allocation?  That does seem a bit like looking into barn lock acquisition long after the horses are gone, doesn’t it?

The problem is that historically Boards receive almost all their information from management.  Meetings are tightly scheduled affairs, and there isn’t a lot of time set aside for brainstorming new ideas.  Or even for arguing with management assumptions.  The work of governance has a lot of procedures related to compliance reporting, compensation, financial filings, senior executive hiring and firing – there’s a lot of rote stuff.  And in many cases, surprisingly to many non-Directors, the company’s strategy may only be a topic once a year.  And that is usually the result of a year long management controlled planning process, where results are reviewed and few challenges are expected.  Board reviews of resource allocation are at the very, very tail end of management’s process, and commitments have often already been made – making it very, very hard for the Board to change anything.

And these planning processes are backward-oriented tools, designed to defend and extend existing products and services, not predict changes in markets.  These processes originated out of financial planning, which used almost exclusively historical accounting information.  In later years these programs were expanded via ERP (Enterprise Resource Planning) systems (such as SAP and Oracle) to include other information from sales, logistics, manufacturing and procurement.  But, again, these numbers are almost wholly historical data.  Because all the data is historical, the process is fixated on projecting, and thus defending, the old core of historical products sold to historical customers.

Copyright Adam Hartung

Copyright Adam Hartung

Efforts to enhance the process by including extensions to new products or new customers are very, very difficult to implement.  The “owners” of the planning processes are inherent skeptics, inclined to base all forecasts on past performance.  They have little interest in unproven ideas.  Trying to plan for products not yet sold, or for sales to customers not yet in the fold, is considered far dicier – and therefore not worthy of planning.  Those extensions are considered speculation – unable to be forecasted with any precision – and therefore completely ignored or deeply discounted.

And the more they are discounted, the less likely they receive any resource funding.  If you can’t plan on it, you can’t forecast it, and therefore, you can’t really fund it.  And heaven help some employee has a really novel idea for a new product sold to entirely new customers.  This is so “white space” oriented that it is completely outside the system, and impossible to build into any future model for revenue, cost or – therefore – investing.

Take for example Microsoft’s recent deal to sell a bunch of patent rights to Xiaomi in order to have Xiaomi load Office and Skype on all their phones.  It is a classic example of taking known products, and extending them to very nearby customers.  Basically, a deal to sell current software to customers in new markets via a 3rd party.  Rather than develop these markets on their own, Microsoft is retrenching out of phones and limiting its investments in China in order to have Xiaomi build the markets – and keeping Microsoft in its safe zone of existing products to known customers.

The result is companies consistently over-investment in their “core” business of current products to current customers.  There is a wealth of information on those two groups, and the historical info is unassailable.  So it is considered good practice, and prudent business, to invest in defending that core.  A few small bets on extensions might be OK – but not many.  And as a result the company investment portfolio becomes entirely skewed toward defending the old business rather than reaching out for future growth opportunities.

This can be disastrous if the market shifts, collapsing the old core business as customers move to different solutions.  Such as, say, customers buying fewer PCs as they shift to mobile devices, and fewer servers as they shift to cloud services.  These planning systems have no way to integrate trend analysis, and therefore no way to forecast major market changes – especially negative ones.  And they lack any mechanism for planning on big changes to the product or customer portfolio.   All future scenarios are based on business as it has been – a continuation of the status quo primarily – rather than honest scenarios based on trends.

How can you avoid falling into this dilemma, and avoiding the Microsoft trap?  To break this cycle, reverse the inputs.  Rather than basing resource allocation on financial planning and historical performance, resource allocation should be based on trend analysis, scenario planning and forecasts built from the future backward.  If more time were spent on these plans, and engaging external experts like Board Directors in discussions about the future, then companies would be less likely to become so overly-invested in outdated products and tired customers. Less likely to “stay at the party too long” before finding another market to develop.

If your planning is future-oriented, rather than historically driven, you are far more likely to identify risks to your base business, and reduce investments earlier.  Simultaneously you will identify new opportunities worthy of more resources, thus dramatically improving the balance in your investment portfolio.  And you will be far less likely to end up like the Chairman of a huge, formerly market leading company who sounds like he slept through the last decade before recognizing that his company’s resource allocation just might need some change.

Why Microsoft Windows 10 Really Doesn’t Matter

Yesterday Microsoft conducted a pre-launch of Windows 10, demonstrating its features in an effort to excite developers and create some buzz before consumer launch later in 2015.

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By and large, nobody cared.  Were you aware of the event? Did you try to watch the live stream, offered via the Microsoft web site?  Were you eager to read what people thought of the product?  Did you look for reviews in the Wall Street Journal, USA Today and other general news outlets?

Windows10_1

Microsoft really blew it with Windows 8 – which is the second most maligned Windows product ever, exceeded only by
Vista.  But that wasn’t hard to predict, in June, 2012.  Even then it was clear that Windows 8, and Surface tablets, were designed to defend and extend the installed Windows base, and as such the design precluded the opportunity to change the market and pull mobile users to Microsoft.

And, unfortunately, that is how Windows 10 has been developed.  At the event’s start Microsoft played a tape driving home how it interviewed dozens and dozens of loyal Windows customers, asking them what they didn’t like about 8, and what they wanted in a Windows upgrade.  That set the tone for the new product.

Microsoft didn’t seek out what would convert all those mobile users already on iOS or Android to throw away their devices and buy a Microsoft product.  Microsoft didn’t ask its defected customers what it would take to bring them back, nor did it ask the over 50% of the market using Windows 7 or older products what it would take to get them to go to Windows mobile rather than an iPad or Galaxy tablet.  Nope.  Microsoft went to its installed base and asked them what they would like.

Imagine it’s 1975 and for two decades you have successfully made and sold small offset printing presses.  Every single company of any size has one in their basement.  But customers have started buying really simple, easy to use Xerox machines.  Fewer admins are sending even fewer jobs to the print shop in the basement, as they choose to simply run off a bunch of copies on the Xerox machine.  Of course these copies are more expensive than the print shop, and the quality isn’t as good, but the users find the new Xerox machines good enough, and they are simple and convenient.

What are you to do if you make printing presses?  You probably need to find out how you can get into a new product that actually appeals to the users who no longer use the print shop.  But, instead, those companies went to the print shop operators and asked them what they wanted in a new, small print machine.  And then the companies upgraded their presses and other traditional printing products based upon what that installed base recommended.  And it wasn’t long before their share of printing eroded to a niche of high-volume, and often color, jobs.  And the commercial print market went to Xerox.

That’s what Microsoft did with Windows 10.  It asked its installed base what it wanted in an operating system.  When the problem isn’t the installed base, its the substitute product that is killing the company.  Microsoft didn’t need input from its installed base of loyal users, it needed input from people who have quit using HP laptops in favor of iPads.

There are a lot of great new features in Windows 10.  But it really doesn’t matter.

The well spoken presenters from Microsoft laid out how Windows 10 would be great for anyone who wants to go to an entirely committed Windows environment.  To achieve Microsoft’s vision of the future every one of us will throw away our iOS and Android products and go to Windows on every single device.  Really.  There wasn’t one demonstration of how Windows would integrate with anything other than Windows.  And there appeared on intention of making the future an interoperable environment.  Microsoft’s view was we would use Windows on EVERYTHING.

Microsoft’s insular view is that all of us have been craving a way to put Windows on all our devices.  We’ve been sitting around using our laptops (or desktops) and saying “I can’t wait for Microsoft to come out with a solution so I can throw away my iPhone and iPad.  I can’t wait to tell everyone in my organization that now, finally, we have an operating system that IT likes so much that we want everyone in the company to get  rid of all other technologies and use Windows on their tablets and phones – because then they can integrate with the laptops (that most of us don’t use hardly at all any longer.)”

Microsoft even went out of its way to demonstrate how well Win10 works on 2-in-1 devices, which are supposed to be both a tablet and a laptop.  But, these “hybrid” devices really don’t make any sense.  Why would you want something that is both a laptop and a tablet?  Who wants a hybrid car when you can have a Tesla?  Who wants a vehicle that is both a pick-up and a car (once called the El Camino?) Microsoft thinks these are good devices, because Microsoft can’t accept that most of us already quit using our laptop and are happy enough with a tablet (or smartphone) alone!

Microsoft presenters repeatedly reminded us that Windows is evolving.  Which completely ignores the fact that the market has been disrupted.  It has moved from laptops to mobile devices.  Yes, Windows has a huge installed base on machines that we use less and less.  But Windows 10 pretends that there does not exist today an equally huge, and far more relevant, installed base of mobile devices that already has millions of apps people use every single day over and over.  Microsoft pretended as if there is no world other than Windows, and that a more robuts Windows is something people can’t wait to use!  We all can’t wait to go back to a exclusive Microsoft world, using Windows, Office, the new Spartan browser – and creating documents, spreadsheets and even presentations using Office, with those hundreds of complex features (anyone know how to make a pivot table?) on our phones!

Just like those printing press manufacturers were sure people really wanted documents printed on presses, and couldn’t wait to unplug those Xerox machines and return to the old way of doing things.  They just needed presses to have more features, more capabilities, more speed!

The best thing in Windows 10 is Cortana, which is a really cool, intelligent digital assistant.  But, rather than making Cortana a tool developers can buy to integrate into their iOS or Android app the only way a developer can use Cortana is if they go into this exclusive Windows-only world.  That’s a significant request.

Microsoft made this mistake before.  Kinect was a great tool.  But the only way to use it, initially, was on an xBox – and still is limited to Windows.  Despite its many superb features, Kinect didn’t develop anywhere near its potential.  Cortana now suffers from the same problem.  Rather than offering the tool so it can find its best use and markets, Microsoft requires developers and consumers buy into the Windows-exclusive world if you want to use Cortana.

Microsoft hasn’t yet figured out that it lost relevance years ago when it missed the move to mobile, and then launched Windows 8 and Surface to markets that didn’t really want those products.  Now the market has gone mobile, and the leader isn’t Microsoft.  Microsoft has to find a way to be relevant to the millions of people using alternative products, and the Windows 10 vision, which excludes all those competing devices, simply isn’t it.

There was lots of neat geeky stuff shown.  Surface tablets using Windows 10 with an xBox app can now do real gaming, which looks pretty cool and helps move Microsoft forward in mobile gaming.  That may be a product that sets Sony’s Playstation and Nintendo’s Wii on their heels.  But that’s gaming, and historically not where Microsoft makes any money (nor for that matter does Sony or Nintendo.)

There is a new interactive whiteboard that integrates Skype and Windows tablets for digital enhancement of brainstorming meetings.  But it is unclear how a company uses it when most employees already have iPhones or Samsung S5s or Notes.  And for the totally geeky there was a demo of a holographic headset.  But when it comes to disruptive products like this success requires finding really interesting applications that otherwise cannot be completed, and then the initial customers who have a really desperate need for that application who will become devoted users.

Launching such disruptive products has long been the bane of Microsoft’s existence.  Microsoft thinks in mass market terms, and selling to its base.  Not developing breakthrough applications and finding niche markets to launch new uses.  Nor has Microsoft created a developer community aligned with that kind of work.  They have long been taught to simply continue to do things that defend and extend the traditional base of product uses and customers.

The really big miss for this meeting was understanding developer needs.  Today developers have an enormous base of iOS and Android users to whom they can sell their products.  Windows has less than 3% share in mobile devices.  What developer would commit their resources to developing products for Windows 10, which has an installed base only in laptops and desktops?  In other words, yesterday’s technology base?  Especially when to obtain the biggest benefits of Windows 10 that developer has to find end use customers (companies or consumers) willing to commit 100% to Windows everywhere – even including their televisions, thermostats and other devices in our ever smarter buildings?

Windows 10 has a lot of cool features.  But Microsoft made a big miss by listening to the wrong people.  By assuming its installed base couldn’t wait for a Microsoft-exclusive solution, and by behaving as if the installed base of mobile devices either didn’t exist or didn’t matter, the company showed its hubris (once again.)  If all it took to succeed were great products, the market would never have shifted from Macintosh computers to Windows machines in the 1990s.  Microsoft simply doesn’t realize that it lacks the relevance to pull of its grand vision, and as such Windows 10 has almost no chance of stopping the Apple/Google/Samsung juggernaut.

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Ballmer Resigning – Next?

Steve Ballmer announced he would be retiring as CEO of Microsoft within the next 12 months.  This extended timing, rather than immediately, shows clear the Board is ready for him to go but there is nobody ready to replace him. 

The big question is, who would want Ballmer's job?   It will be very tough to make Microsoft an industry leader again.  What would his replacement propose to do?  The fuse for a turnaround is short, and the options faint.

Microsoft has been on a downhill trajectory for at least 4 years.  Although the company has introduced innovations in gaming (xBox and Kinect) as well as on-line (games and Bing), those divisions perpetually lose money.  Stiff competitors Sony, Nintendo and Google have made these forays intellectually  interesting, but of no value for investors or customers.  The end-game for Microsoft has remained Windows – and as PC sales decline that's very bad news.

Microsoft viability has been firmly tied to Windows and Office sales.  Historically these have been unassailable products, creating over 100% of the profits at Microsoft (covering losses in other divisions.) But, these products have lost growth, and relevancy. Windows 8 and Office 365 are product nobody really cares about, while they keep looking for updates from Apple, Google, Amazon and Samsung.

The market started going mobile 10 years ago.  As Apple and Google promoted increased mobility, Microsoft tried to defend & extend its PC stronghold.  It was a classic business inflection point in the making.  Everyone knew at some point mobile devices would be more important than PCs.  But most industry insiders (including Microsoft) kept thinking it would be later rather than sooner. 

They were wrong.  The shift came a lot faster than expected.  Like in sailboat racing, suddenly the wind was taken out of Microsoft's sails as competitors shot to the lead in customer interest.  While people were excited for new smartphones and tablets, Microsoft tried to re-engineer its historical product as an extension into the new market.

Windows 8 tablets and Surface tablets were ill-fated from the beginning.  They did not appeal to the huge installed base of Windows customers, because changes like touch screens and tiles simply were too expensive and too behaviorally different.  And they offered no advantage for people to switch that had already started buying iOS and Android products.  Not to mention an app availability about 10% of the market leaders.  Simply put, investing in Windows 8 and its own tablet was like adding bricks to a downhill runaway truck (end-of-life for PCs) – it sped up the time to an inevitable crash. 

And spending money on poorly thought out investments like the Barnes & Noble Nook merely demonstrated Microsoft had money to burn, rather than a strategy for competing.  Skype cost some $8B, but how has that helped Microsoft become more competive?  It's not just an overspending on internal projects that failed to achieve any market success, but a series of wasted investments in bad acquisitions that showed Microsoft had no idea how it was going to regain industry leadership in a changing marketplace going more mobile and into the cloud every month.

Now the situation is pretty dire, and now is the time for Microsoft to give up on its defend and extend strategy for Windows/Office.  Customers are openly uninterested in new laptops running Windows 8.  And Win 8.1 will not change this lackadaisical attitude.  Nobody is interested in Windows 8 phones, or tablets.  This has left companies in the Microsoft ecosystem like HP, Dell and Nokia gasping for air as sales tumble, profits evaporate and customers flock to new solutions from Apple and Samsung.  Instead of seeking out an update to Office for a new PC, people are using much lighter (and cheaper) cloud services from Amazon and office solutions like Google docs.  And most of those old add-on product sales, like printers and servers, are disappearing into the cloud and mobile displays.

So now, after being forced to write off Surface and report a  horrible quarter, the Board has pushed Ballmer out the door.  Pretty remarkable.  But, incredibly late.  Just like the leaders at RIM stayed too long, leaving the company with no future options as Blackberry sales plummeted, Ballmer is taking leave as sales, profits and cash flow are taking a turn for the worst.  And only months after a reorganization that simply made the whole situation a lot more confusing for not only investors, but internal managers and employees.

Microsoft has a big cash hoard, but how long will that last?  As its distribution system falters, and sales drop, the costs will rapidly catch up with cash flow.  Big layoffs are a certainty; think half the workforce in 2 years. Equally certain are sales of divisions (who can buy xBox market share and turn it competitively profitable?) or shut-downs (how long will Bing stay alive when it is utterly unnecessary and expensive to maintain?) 

But, there is a better option.  Without the cash from
Windows/Office, you can't keep much of the rest of Microsoft walking. So
now is the time to cut investments in Windows/Office and put money into the
best things Microsoft has going – primarily Kinect and cloud services.  A radical restructuring of its spending and investments.

Kinect is an incredible product.  It has found multiple applications Microsoft fails to capitalize upon.  Kinect has the possibility of becoming the centerpiece for managing how we connect to data, how we store data, how we find data.  It can bring together our smartphone, tablet and historical laptop worlds – and possibly even connect this to traditional TV and radio.  It can be the centerpiece for two-way communications (think telephone or skype via all your devices.)  Coupled with the right hardware, it can leapfrog iTV (which we still are waiting to see) and Cisco simultaneously. 

In cloud services it will take a lot to compete with leaders Amazon, IBM, Apple and Google.  They have made big investments, and are far in front.  But, this is the bread-and-butter market for Microsoft.  Millions of small businesses that want easy to use BYOD (bring your own device) environment, and easy access to data, documents and functionality for IT, like guaranteed data back-up and uptime, and user functionality like all those apps.  These customers have relied on Microsoft for these kind of services for years, and would enjoy a services provider with an off-the-shelf product they can implement easily and cheaply that supports all their needs.  Expensive to develop, but a growing market where Microsoft has a chance to leapfrog competitors.

As for Bing, give it to Yahoo – if Marissa Mayer will take it.  Stop the bloodletting and get out of a market where Microsoft has never succeeded.  Bing is core to Yahoo's business.  If you can trade for some Yahoo stock, go for it.  Let Yahoo figure out how to sell content and ads, while Microsoft refocuses on the new platform for 2017; from the user to the infrastructure services.

Strong leaders have their benefits.  But, when they don't understand market shifts, and spend far too long trying to defend & extend past markets, they can put their organizations in terrible jeopardy of total failure.  Ballmer leaves no with clear replacement, nor with any vision in place for leapfrogging competitors and revitalizing Microsoft. 

So it is imperative the new leader provide this kind of new thinking.  There are trends developing that create future scenarios where Microsoft can once again be a market leader.  And it will be the role of the new CEO to identify that vision and point Microsoft's investments in the right direction to regain viability by changing the game on the current winners.