Management Fundamentals

FACING BUSINESS CHALLENGES AT MICROSOFT

Struggling to Survive Success

Shrewd business deals and sheer luck propelled the pio­neering software company into a leading role at the cen­ter of the ever-changing, hotly competitive computer in­dustry. However, Microsoft’s success brought its own management problems. Spectacular 50 percent annual growth left the company unwieldy and disorganized, even as software companies such as Lotus and Novell were tak­ing aim at its market share. Computer technology con­tinued to evolve at a rapid pace, consumers grew more demanding, and rival programmers worked around the clock to create new and better applications. For founder¹ and chief executive officer Bill Gates, managing Microsoft required heroic effort.

Visionary leadership played a large role in Microsoft’s wild success. When Gates dropped out of Har­vard to found the company in 1975, personal computers were toys for the “hard-core technoid,” as he once de­scribed himself. Nevertheless, Gates envisioned a com­puter in every home and in every office, with Microsoft software in every computer. He made an early alliance with computer giant IBM, putting Microsoft's basic op­erating program into 80 percent of the United States’s 50 million personal computers. He also led Microsoft boldly into Europe and Asia. His energy and technical knowl­edge motivated Microsoft employees to continually im­prove the company's products and to develop new soft­ware offerings for the home and office.

As the company grew, however, good ideas were no longer enough. Gates found he was so busy that he could hardly handle day-to-day operational details, much less develop the vision he needed to stay ahead of the com­petition in the twenty-first century. Organization was lacking, and planning became increasingly difficult. Time after time, his company targeted a new market only to in­troduce a mediocre² product the first time out. Gates per­sonally took charge of five important product lines but then couldn't find the time to tailor them to customer needs. Projects died, and customers got angry.

Gates also worried about a threat to his leadership: He feared losing touch with his employees, the people who put his vision into action. In the relaxed atmosphere of Microsoft, talking shop with the CEO was an important morale³ booster as well as a way to introduce employees to company values. Gates relished⁴ personal contact with employees, but their number had grown into the thousands, and they were spread around the world.

Although Gates had always made the big decisions at Microsoft, more decisions were needed, and he was al­ready working in excess of 65 hours a week. How could he plan for the long term and still manage daily affairs ef­fectively? What could he do to reach the staff and spread his vision? How could he ensure Microsoft's success in the twenty-first century?