Microsoft’s Leadership
Gates’ big-picture memos shaped Microsoft,changed tech world
Bill Gates, who today ends his full-time involvement with the company he and Paul Allen cofounded 33 years ago, was often right. The Microsoft empire of 91,200 employees, billions in profit and ubiquitous products stands as testament.
He made a career, a company and an industry by looking over the horizon and charting a course.
Bill Gates, who today ends his full-time involvement with the company he and Paul Allen cofounded 33 years ago, was often right. The Microsoft empire of 91,200 employees, billions in profit and ubiquitous products stands as testament.
Now, Seattle’s most famous son points his full intellect and attention to the world’s poor, giving them a voice in a global market that responds disproportionately to the rich.
Microsoft’s success, which has enabled Gates, 52, to launch a second career that could install him as history’s greatest philanthropist, was not a sure thing. Aided by a growing crew of technical and business smart guys, Gates spotted opportunities and challenges, and pushed his company toward them.
He wrote a series of course-setting memos to lead the company in these new directions — a new computer interface, the Internet, computer security. They stand as signposts at several key junctures in Microsoft’s history.
The 1995 Internet memo in particular
marked an important turning point, when Microsoft’s huge software success confronted an uncertain future online.
In many cases, these prescient missives launched the company toward ever-greater heights. But even Gates couldn’t see everything coming. And he knew it.
The confident competitor was also constantly paranoid that an unknown would seize the next big trend in technology and ride it past Microsoft. It drove him to be vigilant and abhor complacency, an important imprint Gates leaves on Microsoft.
“We never come into work and say, ‘Hey, we’re golden. You know, hey, let’s just lie around today,’ ” Gates said in an interview with The Seattle Times last week. “That’s not our culture. And so it’s a hungry company, and it’s always thinking. … ”
An Open Letter to Hobbyists
February 1976:
“As the majority of hobbyists must be aware, most of you steal your software. … Who cares if the people who worked on it get paid?”
Gates wrote his first famous memo when Micro-Soft was still spelled with a hyphen. “An Open Letter to Hobbyists,” published in the early newsletter Computer Notes, came at a time when communicating with his handful of colleagues required only shouting across their small office in Albuquerque, N.M. He aimed this brief at the small and growing community of computer users for whom Gates and staff wrote programming languages.
With his characteristic sarcasm, Gates argued that software had economic value — a necessary condition for a successful software company.
“Nothing would please me more than being able to hire 10 programmers and deluge the hobby market with good software,” Gates concluded.
Dennis Báthory-Kitsz, a composer, author and technologist, followed the intellectual-property debate raging in computer clubs and courtrooms that would set the rules of the software game. In a 1980 interview, Gates told Báthory-Kitsz: “There’s nobody getting rich writing software that I know of.”
“He didn’t mean they weren’t getting back their investment, but rather they were not making a lot of money,” Báthory-Kitsz said. “[Gates], as a prime example of the capitalist notion, felt that high investment of time, energy and imagination deserved a multiple return rather than equal return.”
Applications Strategy
June 1983:
“Microsoft believes in mouse and graphics as invaluable to the man-machine interface. We will bet on that belief by focusing new development on the two new environments with mouse and graphics … Macintosh and Windows.”
Gates’ memos often gathered the thinking of many in the company and were sometimes signed by other executives. In 1983, he and Steve Ballmer, who had joined the company three years earlier, ordered Microsoft full speed ahead toward the graphical user interface. They laid it out in the “Applications Strategy” memo, written on a Mac.
Charles Simonyi, an illustrious Microsoft alumnus who was leading application development at Microsoft at the time, said in a recent e-mail that Microsoft had been studying graphical user interface, a big step up from controlling computers with text commands, for two years when the memo was sent.
Simonyi, now CEO of Bellevue-based Intentional Software, said Gates was a visionary who could see big shifts coming, but that’s not the hard part.
Gates, he said, “selects the promising ideas that are over the horizon but not too far over, studies them in great detail, and then communicates them very effectively to the company, but also to the industry.”
Others say Gates’ skill was not in pointing Microsoft toward promising ideas, but rather toward promising targets — competitors the company could follow into a new market and clobber.
“Let 100 companies blossom, let one survive and then we’ll take that one down — we’ll replace that one,” Mark Anderson, a Friday Harbor-based analyst and adviser, said of the company’s approach.
Microsoft’s bet on the graphical user interface started paying off big-time by the late 1980s.
Windows was taking off on IBM’s PC and its clones. Microsoft applications were grabbing market share on the Apple Macintosh. The company had its initial public offering in 1986.
In spring 1987, Bill Gates, despite being “conservative … about self-congratulations and celebrating our achievements,” took a moment to enjoy some hard-fought success.
“I have to say, as today went on, I got pretty excited about the fact that we are now the number 1 software company in every respect (sales, profit, units, leadership, people … ),” Gates told his top lieutenants in an e-mail written after midnight.
The overtaken foe was Lotus. Gates, always wary of complacency, quickly noted that “their sales may go past ours again,” but for a moment, he was exultant.
By 1995, Microsoft, in business 20 years, was king of the hill. It was the dominant provider of operating systems and launched Windows 95 with previously unseen fanfare.
Michael Cusumano, the MIT software-industry and business-management expert, wrote “Microsoft Secrets” that year with Richard Selby, providing a close look at a company of more than 17,000 30-somethings working hard and getting rich.
“They were really just reaching their apex with Windows 95 coming out,” Cusumano said. “… Just tremendous confidence in their development abilities, their marketing abilities. The world was the limit.”
Gates turned 40 that year, still a newlywed, not yet a father. He had built an empire with astonishing speed. That summer, Forbes named him the richest private individual on Earth with an estimated net worth of $12.9 billion.
But as a careful student of business history, Gates knew “some startup just like Microsoft could come in and blindside them,” Cusumano said.
The Internet Tidal Wave
May 1995:
“In this memo I want to make clear that our focus on the Internet is critical to every part of our business.”
Netscape Communications was that startup. In 1994, it released its Internet browser, providing a gateway to the growing volume of content on the World Wide Web and diminishing the importance of Windows because the browser worked the same regardless of a computer’s operating system.
On May 26, 1995, Gates sent one of his most famous memos, comparing the arrival of the Internet with IBM’s PC. It would “set the course of our industry for a long time to come,” he predicted.
He distilled his ideas and those of Microsoft’s best thinkers in nine single-spaced pages under the title “The Internet Tidal Wave.” Much of what was forecast in the memo has since become the modern Internet.
The memo had the desired effect. Microsoft charged ahead with programming languages better suited to Internet development, server software that runs more than a third of the world’s Web sites and a browser that only recently has seen a meaningful threat. But its tactics went too far. Microsoft bundled its Internet Explorer browser with Windows, a move that helped make IE the dominant browser. But it also helped land the company in a draining, decadelong antitrust battle that damaged its reputation, cost billions and has continuing repercussions.
Government Exhibit 20 in U.S. v. Microsoft was “The Internet Tidal Wave” memo.
The episode showed another side of the company’s character.
“You see the paranoid side come out,” Cusumano said. “… Microsoft would have won the browser wars anyway without illegally doing things to limit Netscape’s presence in the market.”
Larry Page and Sergey Brin were still bickering Stanford graduate students when Gates set his company on course for the Internet.
Today, the company they founded, Google, is the unquestioned leader in what has become the Internet’s all-important application and business model: search and online advertising.
In a bid to catch up, Microsoft spent the first half of this year in an as-yet-unsuccessful courtship of Yahoo, which Gates described in the 1995 memo as one of the “hot sites to try out.” Instead, Google and Yahoo announced a search-advertising pact earlier this month.
Gates dismissed the notion that Microsoft overlooked search in the mid-1990s.
“The whole ‘information at your fingertips’ thing” — an idea Gates first introduced in a 1990 industry speech — “is a superset of search, in the sense that you don’t want to just get a bunch of links back. That’s not an end to itself,” Gates said last week.
“You want to organize a trip, you want to pick a product, you want to compare two different reviews. And information at your fingertips, that actually predates the Internet Tidal Wave memo.”
Microsoft didn’t field a search engine based on its own technology until 2005.
Gates, who said he will work on search as a Microsoft part-timer, acknowledged that “the importance that advertising would play is not in [the memo].”
But, he said, advertising was not part of the early plans of Google or other rivals, either. Google’s advertising machine wasn’t started in earnest until 2000.
Microsoft Chief Executive Steve Ballmer, in a separate interview, credits Google for capitalizing on the idea that relevant advertising displayed next to search results not only generates revenue, but actually improves the search results themselves.
“Google really got the business model right,” he said. ” … [It's] a thing which I would claim we didn’t see — maybe should have — and others didn’t see. Where was Yahoo?”
Internet Services Disruption
October 2005:
“The broad and rich foundation of the internet will unleash a ’services wave’ of applications and experiences available instantly over the internet to millions of users.”
In the fall of 2005, several months before he announced plans to “reorder his personal priorities,” Gates put his hand to another major memo. This time, he wrote only a brief introduction, in which he handed off strategic leadership for this next big shift.
The body was written by Chief Software Architect Ray Ozzie, a highly respected software veteran who spent most of his career at Lotus, and one of two executives tapped to fill Gates’ shoes at Microsoft. The broad, course-setting memos will come from them now, Gates said last week.
But the number of markets, opportunities and challenges the company faces today leave plenty of room for Gates, who will remain Microsoft chairman, to contribute.
“In fact,” he said, “there’s one that I’m thinking about writing now.”
BY :
Seattle Times technology reporter
Gates looks into PC’s future as career shift approaches
“None of these techniques — vision, ink, speech, touch — are mainstream,” he says.
Microsoft is making a large bet on what Gates calls these “natural user interfaces.” It’s one of the areas in which Gates will remain involved post-retirement. After 33 years, Gates, 52, is stepping down from full-time work at Microsoft. After Friday, he will remain chairman and a part-time employee as he shifts his main focus to philanthropy at the Bill & Melinda Gates Foundation.
Gates’ departure completes a long-planned transition. He gave up the CEO post to Steve Ballmer in 2000; three years ago, the two men first discussed Gates leaving his current gig. “There’s no reluctance here,” Gates says during one of his last in-person interviews before switching gears. “This is something that I’ve driven.”
Gates won’t be totally removed, of course. He’ll work on natural interfaces and other projects, though he says, “I wouldn’t try and suggest that my ongoing role is key to this stuff. … Steve and Ray (chief software architect Ozzie) will figure out how to use me effectively.”
The large Surface tabletop computer in the office Gates soon will relinquish to Ballmer offers one clue about where he thinks computing is going: The interactive, 30-inch touch-responsive tables can be used to order meals or display maps. They’re now in use at AT&T phone stores and at Harrah’s Rio hotel in Las Vegas.
Ballmer sees surface computing as a multibillion-dollar category. Indeed, such newfangled alternatives to the mouse and keyboard could have a far-reaching impact in the office, living room and car. Microsoft doesn’t break out its investments in these areas. But as the company confronts major challenges in the post-Gates era — from feverish competition from Apple, Google and others, to making a mark in Internet-based computing — the technologies will make their way into many of its core products.
In private demonstrations and at the recent D: All Things Digital tech conference, Microsoft provided an early glimpse of “multitouch” in the next major version of Windows, which will likely appear in 2010. Windows 7 will employ technology similar to what Apple is pushing on the iPhone. For example, you can drag and enlarge photos with your fingers.
In another move beyond the keyboard and mouse, Microsoft last year bought Tellme Networks, which allows voice queries for news, weather and more. Tellme clients include American Airlines and American Express.
“Whenever we say natural interface, it’s obvious what we’re doing,” Gates says. “We’re taking advantage of skills that humans have innately.”
Across its Redmond, Wash., campus, Microsoft is figuring out how best to apply those human skills to computing.
Typing vs. talking
No one expects the mouse and keyboard to go away, of course. So far, nothing beats the keyboard for inputting text, including your own voice, says Microsoft’s Chris Pratley, general manager of the Office Labs research group and inventor of OneNote note-taking software. “You and I are talking at about 20 to 30 words a minute. Many people can type twice as fast as that. And voice will always have some small error rate, probably more than your typo rate if you’re a good typist.”
What’s more, changing people’s habits is a tall order. Consider touch-screens. “People have already learned not to touch their screens — you’ll smudge it and make it dirty,” says Ian LeGrow, a group program manager on the Windows team.
Yet you’re meant to get your fingerprints all over the second-generation TouchSmart PCs coming soon from Hewlett-Packard. You can tap, drag and resize tiles or icons on the large, 22-inch display.
Gates figures the keyboard and mouse account for about 95% of the way folks use computers today, though he expects the percentage “will go dramatically below that.”
Several companies will play a role. “Even though Microsoft has done some of the multitouch work with Surface, it’s really Apple that has turned that into something much more mainstream (with iPhone),” says Gartner analyst David Smith.
Here are some of the areas Microsoft is focusing on:
•Using a pen. They haven’t exactly been runaway best sellers, but Gates remains extremely bullish long-term on Tablet PCs, which let you use a stylus, or pen, to control icons or write directly on the screen in digital ink.
Gates says Tablet PCs from Acer, Dell, Fujitsu, HP, Toshiba and others sell in the millions today, not tens of millions. Early versions tended to be cumbersome and clumsy. Still, Tablet PCs have been adopted in insurance and medicine, and there’s a real opportunity, Gates insists, in education.
“My daughter is at a school where everybody has Tablet PCs, and they use OneNote and don’t have textbooks. It’s been a phenomenal success.” Gates said he had nothing to do with the Tablet PCs being in her classroom.
Microsoft’s OneNote software lets you search and organize free-form notes, whether captured by pen, keyboard or audio recorder. Not surprisingly, Gates writes on a Tablet PC more than most. He’ll typically leave notes in their handwritten form to share with colleagues or refer to later. But he sometimes converts written scrawl into typed text.
The recognition part has improved, a lot, Gates says. I’ve been “living this ink thing for a long time and always feel like we’re on the verge,” he says.
Inside the company, researchers are working to further improve the Tablet PC experience. One example, still in the prototype stage but available as a download, is called InkSeine. Traditional pull-down menus and other trappings of the mouse/keyboard environment have been ditched in favor of an interface designed with the pen in mind. It takes advantage of “gestures” (e.g., you can scroll by drawing a little spiral). “We want ink to be more of a first-class citizen,” says Raman Kumar Sarin, a senior developer at Microsoft Research.
•Voice. Typing on a cellphone as you drive is awkward. Not to mention unsafe and illegal in some places and soon more, with California and Washington state about to implement hands-free driving laws. Tellme recently launched a service that lets BlackBerry owners use voice search instructions for movie listings or places to eat. (Yahoo and others are also driving mobile voice search efforts.)
But ask out loud for “Thai restaurants” and you’ll receive a text response, thus still diverting your attention from the road. “Our goal is to further advance this and add audio playback,” says Dariusz Paczuski, who heads the consumer services group at Tellme.
Microsoft has already teamed with Ford on the voice-activated, in-car Sync technology, a combination stereo and hands-free calling system. Tell it to play an artist or call home, and the system obliges.
Voice still presents challenges. Great strides have been achieved in voice recognition through the years. These days, you can bark out commands or dictate into a microphone and have a PC respond in kind. But there’s still a “big gap,” Gates says, between a person understanding another person in an office environment vs. a computer understanding a person. For example, computers can recognize random numbers read aloud when it’s quiet. But people perform far better than machines in noisy environments and in understanding context and ambiguities. Even amid a din, Gates says, humans can think, ” ‘Well, it must be such-and-such, because I know what this person came to me to speak about, and I know the way they were looking at me.’ “
•Touch. It’s been just over a year now since Microsoft first showcased Surface, which turns an ordinary tabletop into a tabletop computer. Surface combines multitouch capabilities with sight — below the surface are cameras with infrared filters to sense cellphones, digital cameras and other objects placed on them. Through multitouch, lots of folks can interact with the table at the same time.
At the iBar lounge at the Rio, patrons sitting around the table can watch promotional videos of shows and hotel attractions, order drinks off an interactive menu and play a game of virtual bowling. A Flirt application lets guests at one table meet people at others; Surface tables are networked, with cameras on the ceiling.
In AT&T stores, you can compare specially tagged cellphones placed on the Surface tables, dragging buttons to check out features, accessories and service plans. Eventually, you’ll be able to complete a transaction right from the table, or customize your own handsets with pictures, ring tones or games, just by plunking them on the surface.
Prices need to come down before Surface tables become viable in the home, possibly three to five years out. They’re in the $5,000-to-$10,000 range. The idea is you might play board games on them or look at photos by placing a camera on the table. Or you might drop your keys on the table to view messages and your calendar.
Now, imagine an upright Surface of sorts, and you have a rough sense of another early-stage prototype, the TouchWall. Gates demonstrated this “intelligent” touch-based multimedia white-board in May at Microsoft’s CEO Summit.
Using your hands on a TouchWall, you can drag and dive into business presentations and spreadsheets, zoom in on any portion of the screen, display videos or engage in videoconferencing. Behind the 4-foot-by-6-foot plexiglass screen is a rear projector. Three filtered lasers sit just off the surface of the screen.
Microsoft has no immediate plans to make it commercially available. The question is “how cheaply, how quickly and how easily can we build it?” asks Ian Sands, a Microsoft Office Labs director.
For now, Microsoft isn’t saying a whole lot about Windows 7. But the company has shown how you can “paint” on the PC screen with your fingers, play an onscreen piano, zoom in on maps and make an underwater scene ripple. Most people will need new hardware to take advantage of these and any other multitouch stunts. (Less-advanced touch capabilities were built into Windows Vista.)
Moving on
Gates will be well into his new role by the time the next version of Windows appears. “The biggest challenge for Microsoft moving forward is, where does the leadership come from?” says Smith of Gartner. “Whenever a founder leaves, there is usually a big hole.”
Of course, Gates may be plugging some of the holes. “He’s still the chairman, he’ll still be on the board of directors, (and) he’ll still be the No. 1 shareholder. So I think these priorities are going to continue to be priorities,” says analyst Matt Rosoff of the independent Directions on Microsoft research firm.
“I’ll miss doing the work here, and I might find myself saying, ‘You know, I would have done something differently,’ ” Gates admits.
Will he share those thoughts? “If it’s constructive,” he says with a laugh.
Gates is even willing to get nostalgic, to a point. “Part of the reason Microsoft has been so successful is, most of the time, we don’t look back,” he says.
But “This is a big milestone,” he acknowledges. “My role will be completely different. It is a chance to say, ‘Wow, in 33 years, Microsoft has become a significant company and had a chance to be at the center of the whole creation of the software industry and the empowerment of personal computing.’ “
By Edward C. Baig, USA TODAY
Ballmer heads the new age of leaders stepping into the breach
Google is one of the main targets
By TODD BISHOP
P-I REPORTER
Steve Ballmer has been Microsoft Corp.’s chief executive for more than eight years, grappling with some of the largest challenges in the company’s history.
Now the pressure begins.
Bill Gates’ departure from day-to-day Microsoft life will put all eyes on Ballmer as the company’s leader. His task is to expand Microsoft’s traditional businesses, revive its stock price and catch up with fast-moving online rivals — the biggest of which, Google, is piling up big profits from its Internet search business.
“I think the combination of a huge shift in technology and business model, and a competitor who has a golden goose, who can fund a lot of experiments, is really the biggest challenge that Microsoft has ever faced,” said Paul Maritz, the former Microsoft group vice president. “If Steve can pull this off, he will go down in history in his own right as one of the great leaders.”
But the bigger challenge may belong to Ray Ozzie, who has replaced Gates as chief software architect, and Craig Mundie, who establishes the company’s long-term vision as its chief research and strategy officer.
“To the degree that there’s any question of where the company is going next, and how it will do, it’s really in their hands,” said Mark Anderson, publisher of the Strategic News Service technology newsletter. “It’s all about technology, and they’re the guys who will set the path.”
In an interview last week, Mundie identified several computing trends that he considers important, including the emergence of large data centers that Microsoft and others will increasingly use to let people synchronize files and other data across multiple PCs and devices.
More broadly, Mundie said the company anticipates a proliferation of computing in nontraditional forms — with microprocessors and displays embedded in everything from office desks and walls to special-purpose devices. One area the company is targeting is health care, and in one conceptual video Mundie shows, a bedside table displays information about medicine when a prescription bottle is placed on top of it.
Microsoft has long offered software for mobile devices, and its Surface tabletop computer has debuted in commercial settings.
“I think we’re actually quite well positioned now for a world where, pretty much, there’s a computer in almost everything,” Mundie said. As that happens, he said, Microsoft’s challenge will be figuring out the experience that people want to have across those devices, and coming up with a way to integrate them so that they’re easy to deal with.
One big litmus test for the post-Gates era will be Windows 7, the code name for the next version of Microsoft’s flagship PC operating system, which is expected in 2010. The current version, Windows Vista, was delayed repeatedly and debuted to negative reviews.
As a result, Microsoft is under pressure to deliver a high-quality, timely follow-up.
Microsoft’s software empire is based on its Windows, Office and computer-server franchises. But the company has also expanded into nearly every corner of the technology world — including business applications, portable music players, video game consoles and mobile phone software. In many of those areas, Microsoft has struggled to gain market share or turn a profit.
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The company launched its own Web search engine in 2005, but it has remained a distant third to Google and Yahoo. That led to Ballmer’s ultimately unsuccessful attempt to acquire Yahoo for more than $44 billion.
Years ago, startups that competed with Microsoft sometimes had trouble raising money, because the company was viewed as nearly impossible to defeat, said software industry veteran Dan Bricklin, president of Software Garden Inc., who co-created the pioneering VisiCalc spreadsheet program in the late 1970s.
“In today’s world, because others have succeeded against them in new areas, people in new areas aren’t as afraid,” Bricklin said last week. “Whether that’s prudent or not, I don’t know.”
Even if Microsoft succeeds at building its online advertising business, it will have a hard time replicating the huge profits it has achieved in the dominant Windows and Office franchises.
For some investors and analysts, the situation raises the question: Does Microsoft really need to be involved in so much?
Particularly in the online market, it would be good for Microsoft to reassess its goals and motivations, said Tim Allen, an analyst and portfolio manager at the Wentworth, Hauser and Violich investment firm in Seattle.
“It may be that the optimal decision is to pursue the online opportunity,” he said. “I would just like them to make that decision from a truly mature, analytical point of view — as opposed to being the smart kid who wants to beat all the other smart kids at any game that’s out there.”
But even with all the challenges facing the company, don’t expect Ballmer to lose any sleep. Asked about his sleeping patterns during an April speech in Seattle, the Microsoft executive said he gets seven to eight hours a night.
“I worry about many things. I worry about our company, and keeping agile, and our desire to have all of the best and the brightest people working for us, and partnering with us. I worry, and think, and wonder about how we’re going to come from behind where we’re behind, and stay ahead where we’re ahead. I worry and wonder about financials.
“But the day you don’t sleep well,” he said, “I think it’s probably a day that you shouldn’t keep doing the kind of job I’m doing.”
Bill Gates: Looking Back, Moving Ahead
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On June 27, 2008, Bill Gates transitions from his day-to-day role at Microsoft to focus more time on his work with the Bill & Melinda Gates Foundation. Gates will remain Microsoft’s chairman and will be involved in select projects based on direction from Chief Executive Officer Steve Ballmer and the leadership team. Watch the video and hear from his friends, family and Microsoft leaders about Gates’ amazing journey — from coding BASIC for the Altair 8800 to leading the world’s largest software company.
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