Microsoft’s best hope after Ballmer? A breakup.

Microsoft CEO Steve Ballmer speaks at a Microsoft event in San Francisco, Wednesday, June 26, 2013. (AP Photo/Jeff Chiu)
Retiring CEO Steve Ballmer at a Microsoft event  in June. (AP Photo/Jeff Chiu)

During its monopoly days, Microsoft was the tech industry’s greatest magnet for talent. It was able to hire the best of the best.

Many of those geniuses are still with the company. My former students and friends who work at Microsoft tell me that they love the company, but are stifled by its bureaucracy, turf wars and central planning. Big ideas get quashed because they don’t fit into the corporate vision; products with great potential are killed because they could threaten the company’s core products.

To me, Microsoft seems like the former Soviet Union — Politburo, five-year plans and all.

That is why I believe that the best path forward for Microsoft is to break itself into independent companies, free to build innovative products and compete with each other. This breakup could be along the lines of the markets that Microsoft goes after: enterprise, personal computing, mobile and entertainment. Or it could be by product: Windows, Office, Xbox and Surface, for example.

I doubt that any executive who takes Steve Ballmer’s job will be able to successfully manage the unruly mess that Microsoft has become. It will surely go the way of the Soviet Union.

The failure of Windows 8 illustrates the nature of Microsoft’s problems.

Windows RT, which is the version of Windows 8 that was designed for tablet computers, has a beautiful user interface and functionality. It could have given both Apple’s iOS and Google’s Android a run for their money. But Microsoft wanted to protect its desktop operating system and Office tools from oblivion as tablets overtake both laptops and desktops in sales, so it bundled a version of Microsoft Office into RT and charged resellers a price rumored to be about $85 per device (the OEM price is a well-guarded secret). This is more than what lower-end tablets will soon cost, and it competes directly with Android — which Google gives away. To maintain consistency with the desktop version of Windows 8, Microsoft added to it the same tiled user interface that was designed for tablets with touch screens. But most desktop computers and laptops don’t have touch screens. Microsoft also removed the “start” button that people are used to. So, both products failed to gain widespread market acceptance.

If Microsoft had allowed its tablet operating system group to act independently, they would probably have taken Google head-on by giving RT away. They could have made money by charging for special features and apps such as Office. They might also have committed heresy by selling Google’s Office apps and other competitive products. RT could have snatched Android’s market share and become the leading mobile platform.

Microsoft also missed the opportunity in music players, smartphones, search and social networking because of its central planning and obsession with defending its legacy products.

That’s why Ballmer’s replacement should not be one executive but should be a number of people who have experience in different domains and who can run independent operating companies. They, in turn, should let their geniuses create the next generations of innovative products and compete freely with entrepreneurs in Silicon Valley as well as in other parts of the Microsoft empire. That’s Microsoft’s best hope.

Vivek Wadhwa is a fellow at Rock Center for Corporate Governance at Stanford University, director of research at Center for Entrepreneurship and Research Commercialization at Duke, and distinguished fellow at Singularity University. His past appointments include Harvard Law School, University of California Berkeley, and Emory University.

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