The innovative organization: doing more vs knowing ...

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Design/methodology/approach – The paper discusses the concept of “doing more”, as exemplified in practice by Microsoft under the leadership of Steve Ballmer ...
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The innovative organization: doing more vs knowing more

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IUP Management, Indiana, Pennsylvania, USA

Abbas J. Ali Abstract Purpose – The purpose of this paper is to contrast “doing more” and “knowing more” corporations. The paper sheds light on what makes a corporation competitive in the marketplace. Design/methodology/approach – The paper discusses the concept of “doing more”, as exemplified in practice by Microsoft under the leadership of Steve Ballmer. The paper relies on recent debates on Microsoft to make its point. Findings – Based on a survey of the current literature on Microsoft and its CEO, the paper demonstrates that only corporations that are innovative and shape the competition landscape are able to make a difference in the marketplace and significantly alter the competition equation. Originality/value – The paper reflects on the state of Microsoft and what has led to its inability to recognize key shifts in technology and customers’ expectations. The paper sets the stage for a better understanding of corporations that are about “doing more” and those which focus on reinventing themselves and their industry by being about “knowing more”. Keywords Competitiveness, Doing more corporations, Knowing more corporations, Microsoft, Competition landscape Paper type Viewpoint

Introduction In a recent article in the Wall Street Journal (WSJ ) (Langley, 2013) on Microsoft and the agony of its CEO, Steve Ballmer, the Journal argued that relative to major competitors, Apple and Google, Microsoft lagged behind in innovation and in meeting consumers’ emerging needs. Fortune magazine and other trade outlets put the blame either on Microsoft’s CEO or the Microsoft culture. Major investors and shareholders, according to the WSJ, were pushing hard for the removal of the CEO, stating that Microsoft’s stock was undervalued and that “shareholders were urging it to increase its dividend and shed noncore businesses”. In particular, Fortune (2011, April 11) magazine asserted that the CEO was blocking any innovative and creative ideas that do not fit with his devotion to Windows. Ballmer has acknowledged that change is necessary and that a new leader is needed to accelerate change. However, he argued in his interview with the WSJ that the reason he did not move faster was because he “was focused on releasing in October the next generation of Windows, Microsoft’s longtime cash cow”. The WSJ (2013, August 23) also blamed Steve Ballmer stating:

Competitiveness Review Vol. 24 No. 2, 2014 pp. 70-74 q Emerald Group Publishing Limited 1059-5422 DOI 10.1108/CR-11-2013-0087

Aside from the steep tumble that Microsoft took during the depths of the financial crisis – shares fell to $15 in March 2009 – the stock has pretty much been dead money for the majority of Mr Ballmer’s tenure. It has predominately hovered between the low $20s and $30s for years.

While acknowledging that share prices fluctuate according to various factors in the market and the organization, the role of a CEO should not be underestimated.

Across history there have been CEOs who have brought their companies from the brink of bankruptcy to a position of market greatness. Likewise, there are CEOs who have been destructive, leading to the demise of their companies and inflicting a heavy price on their employees and their families. Though Ballmer has been forced by the board of directors to retire, in his last annual meeting with employees, September 2013, he sounded optimistic about the future of Microsoft stating, “We’ve been a great company for years. We will be a great company for many more years”. While being “a great company” conveys a different meaning to different people, the fact remains that a great company is one which reinvents itself over time and is instrumental in defining the competition game for its industry. The starting point for a great company is not generating a high return to its shareholders in the immediate future, but rather an ability to satisfy customers’ needs, meet their emerging needs, and shape future market needs. These capabilities allow a company to generate value to its stakeholders, including the shareholders. The more interesting aspect of Ballmer’s speech at the annual meeting was his characterization of Microsoft’s rivals. He declared that Apple is concerned with being “fashionable”, Amazon.com is about being “cheap”, Google is concerned with “knowing more”, but Microsoft focuses on “doing more”. These characterizations, irrespective of their accuracy, may have intended to lift the spirits of his captive audience and to present Microsoft as being a formidable leader in its industry. The market and customers, however, may have their own undisputed judgment as to where each rival stands and the value that each creates in the marketplace. Take, for example, Apple, which for over ten years has not only changed the competition game but has been able to shape customers’ attitudes and expectations. Its success in the marketplace is undisputed and its capacity to innovate, up to this moment, has been demonstrated. For Apple, fashion and technology are inseparable and both convey creative thinking and outlook. Indeed, as MacFarland (2013) argues, Apple represents “life and style” in the minds of many people. He asserts that “Apple has taken design thinking and design innovation privileges to an entirely new level, far beyond what companies could have imagined”. That is, Apple looks at its approach to fashion as part of its innovative process and as an integral part of its strategic initiatives and change. Doing more vs knowing more Ballmer’s differentiation between “knowing more”, and “doing more” in contrasting Google with Microsoft raises serious questions. Does Ballmer acknowledge that Google is driven by a clear and relevant vision? Does he implicitly assume that knowing is irrelevant when positioning a firm competitively in today’s market? Does he imply that Microsoft is engaged in broader product lines than Google or is focusing on producing more? And, does he mean that “doing more” transcends production to include innovation and other non-business activities? Off course, it is difficult to know what was on Ballmer’s mind. Nevertheless, Ballmer’s categorization of Microsoft’s rivals should have been better articulated and not left to speculation. Not only are rivals moving fast in capturing the market and introducing innovative devices, but also dynamic market opportunities for new entrants and startup organizations are ample. Most importantly, new rivals may emerge, unexpectedly, from peripheries or unrelated industries.

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The way that Ballmer portrayed Microsoft and its future may manifest optimism for a CEO who has been bombarded with a wave of criticism mounted aggressively by investors and members of his board of directors. He thus seeks to assure Wall Street and spectators that he is in command. Ballmer may believe, too, that Microsoft, which once revolutionized the IT industry, will be able to again shape competition in the market and is about to prove that it is capable of profoundly changing the competition game. Nevertheless, Ballmer should understand that though no one is about to factor out Microsoft from the competition equation, the same forces that have led to its success have been easily overturned by its rivals. Regrettably, Microsoft appears not to have noticed the fundamental changes taking place in the industry. This blindness to market change and the denial of the potent power of the new market actors is a product of a culture that Ballmer has helped to instill. Indeed, by insulating itself from the forces in its immediate environment, Microsoft has crippled its ability to take advantage of timely market initiatives and has thus severely limited its capacity to innovate. Ballmer promised in 2013 to make Microsoft a provider of “devices and services” in the market. However, neither critics nor members of his board of directors took him seriously. This led him to conclude that “the best way for Microsoft to enter a new era is a new leader who will accelerate change” (quoted in Langley (2013)). Likewise, Ballmer created a culture that makes it impossible for Microsoft to generate synergy and coordinate efforts among various units. According to the WSJ (2013), Ballmer met and consulted with Microsoft’s unit chiefs individually. This changed only in late 2012 after taking advice from Ford’s CEO, Alan Mulally, that teamwork and simplifying the brand would help to revitalize the company. This, however, has come too late to fundamentally change Microsoft’s culture under Ballmer’s leadership. The capacity for a corporation to evolve and innovate is characteristically linked to its culture. In the recent history of business organizations, corporations which have left their marks in the marketplace and reinvented their industries have all exhibited a culture that reinforces openness, creativity, and enhances the imaginative capacity of its members as individuals and as teams. It is in this sort of culture that employees are willing to engage in challenging and exciting experimentations. Talents thrive in such a culture. Indeed, talented employees are more apt to focus on innovative priorities and how to achieve them effectively. In the case of Microsoft, critics argue that under the leadership of Ballmer there has been remarkable lack of transformation and that Microsoft has failed to take note of major market trends. In particular, the WSJ (Langley, 2013) reported that Microsoft “missed epic changes, including Web-search advertising and the consumer shift to mobile devices and social media”. Since Windows has been the primary source of profit at Microsoft, Ballmer’s primary focus has been on strengthening it and generating as much revenue as possible. In fact, Fortune magazine in 2011 identified Ballmer as the primary actor blocking any innovative and creative ideas that did not fit with his devotion to Windows. In a speech at the annual shareholders’ meeting in 2012, Ballmer insisted that Microsoft was on the right path and its level of innovation was pretty good. However, he seemed to be obsessed with production volume, stating that Microsoft had “done a phenomenal job of driving product volumes”. Volumes, however, may not be a reliable indicator for a competitive and healthy organization. The competitiveness of any firm

is measured by its ability to shape the competition landscape in its industry, predicting what customers want by inventing new products that are admired by customers, and situating a company ahead of its competitors. Furthermore, it is performance that counts more than volume. This is manifested in achieving competitive cost, reasonable return on investment, customer loyalty, high productivity, attraction of talents, etc. Likewise, obsession with volumes can be a limiting factor that can blind senior executives from focusing on new and emerging technologies and market trends. Indeed, there are many critics who conclude that Microsoft has behaved miserably in the marketplace. Among these critics, economist Paul Krugman (2013) believes that Microsoft has “missed the boat, big time, on major shifts in the technological landscape” and probably will have serious difficulties embarking on profound reform. The trouble that Ballmer has had with his board and other stakeholders vividly underscores the fact that attention to the changing market landscape and actions by competitors is prudent. Competitive corporations have to be adaptive and foster innovations in emerging areas, especially those which are characterized by rapid change and intense competition. Corporations, like Microsoft, cannot afford to live in the glorious past and on the nostalgic legacy of their founders. Their destiny and competitive positions are linked characteristically to their actions in the market and to their alertness to market needs and trends. The about “doing more” corporations are not in touch with market reality and focus solely on the past and on usual current events. They display neither active engagement in shaping current market competition nor are they are driven by major reforms, changing customers’ expectations, and what the future holds. Their emphasis on production or sales volumes diverts their attention away from strategic thinking and creating value to society and thus severely obstructs their vision. More importantly, a “doing more” corporation can either underestimate or completely dismiss the market threat of emerging rivals. They do not look at these rivals as potent competitors who might alter the competition equation and offer high quality products. In contrast, the “knowing more” corporations are exceptional market actors who are not burdened by the past and thus are at ease in treating challenges as opportunities and anticipating customers’ wants, while actively designing marketplace realities. These corporations not only understand current market trends but feel comfortable in operating in an environment where boldness and foresight are essential ingredients for sustainable growth. Their culture bonds its members together around a well articulated vision. These members are guided by a deeply shared conviction that they are part of a winning team that is destined to leave its mark on history. “Doing more” is an outdated concept and an undesirable practice in a market where nothing can be taken for granted. Corporations that espouse “doing more” might survive for many years to come. But their chance to be relevant in a dynamic market, without undertaking fundamental changes in directions and approaches, is doubtful. On the other hand, corporations which are about “knowing more” have a clear vision and are comfortable in creating new ideas and shaping the future. They understand that being a vital actor in the marketplace is contingent on their innovative involvement and their capacity to continuously reinvent themselves and their industry.

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References Krugman, P. (2013), “Steve Ballmer, meet Ibn Khaldun”, New York Times, available at: http://krugman.blogs.nytimes.com/2013/08/24/steve-ballmer-meet-ibn-khaldun/?_r¼0 (accessed August 24, 2013). Langley, M. (2013), “Ballmer on Ballmer: his exit from Microsoft”, Wall Street Journal, available at: http://online.wsj.com/news/articles/SB10001424052702303460004579194150724298162? KEYWORDS¼Ballmer^on^Ballmer (accessed November 17, 2013). MacFarland, S. (2013), “Is Apple about fashion or technology?”, Huffington Post, available at: www.huffingtonpost.com/scott-macfarland/is-apple-about-fashion-or_b_4254140.html (accessed November 17, 2013). Rivlin, G. (2011), “The problem with Microsoft . . .”, Fortune, Vol. 163 No. 5, pp. 45-51. Russolillo, S. (2013), “The Steve Ballmer era, by the numbers”, Wall Street Journal, available at: http://blogs.wsj.com/moneybeat/2013/08/23/the-steve-ballmer-era-by-thenumbers/?KEYWORDS¼Ballmer^on^Ballmer (accessed November 17, 2013). Corresponding author Abbas J. Ali can be contacted at: [email protected]

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