Vanity Fair: Poor Management is Behind Microsoft's "Lost Decade"
July 9, 2012 1:10 PM
Stack ranking and the inability to move up to new technologies were Microsoft's largest problems
contributing editor Kurt Eichenwald analyzed what he calls Microsoft's "lost decade," where a few bad management decisions led to the company's fall starting in the year 2000. Eichenwald used internal corporate records, interviews and emails between Microsoft executives to dictate his analysis.
From the information Eichenwald reviewed, he found that Microsoft
made a couple of huge mistakes
that led to its fall in the tech rankings: stack ranking and the inability to move up to new technologies.
After dozens of interviews with employees, Eichenwald discovered that Microsoft had been using a stack ranking management technique that put a lot of pressure on employees. Stack ranking means that each unit has a certain percentage of employees that are identified as top workers, good workers, average workers and poor workers. In other words, if there is a unit of 10 employees, it's understood that two people would be designated the top workers while seven employees would receive good or average reviews and the last one would get a poor review.
Using this stack ranking technique not only put a lot of pressure on employees, but also made employees want to compete with one another instead of other companies.
"It was always much less about how I could become a better engineer and much more about my need to improve my visibility among other managers," said Ed McCahill, a former Microsoft marketing manager for 16 years.
Microsoft also failed to take on new technological opportunities, such as the e-reader it developed back in 1998. A Microsoft team created the portable e-reader and presented it to Microsoft co-founder Bill Gates, but Gates was not impressed. He said the user interface didn't look enough like Windows. The idea was scrapped, and the team was removed from the reporting line to Gates.
Amazon later introduced the Kindle e-reader in 2007, which turned out to be a hit. Amazon now has an entire line of Kindle e-readers as well as the Kindle Fire tablet, and other companies like Barnes & Noble have released their own tablets as well (NOOK). It wasn't until April of this year that Microsoft embraced e-readers by teaming up with Barnes & Noble to create an
e-book subsidiary called Newco
While Microsoft has seen tremendous success with other releases during the supposed "lost decade" -- such as Windows XP, Windows 7, Xbox 360 and Kinect -- it doesn't seem to be enough to pass competitors like Apple. In fact,
alone brings in more revenue than all of Microsoft's products combined.
But Microsoft is looking ahead to its upcoming Windows 8 operating system and Windows Phone 8 for a boost. The new Metro user interface is unlike any Microsoft Windows release to date, and has been a topic of debate. Some feel it strays too far from the original Windows theme while others praise the change. The
10.6-inch Surface tablet
, which Microsoft announced last month, is also an anticipated addition to the company's family of gadgets.
"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer
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