Follow the Leaders

By Joe Wilcox  |  Posted 2008-06-24 Print this article Print

Microsoft has three large divisions: Platforms & Services, run by Kevin Johnson; Business, run by Jeff Raikes; and Entertainment & Devices, run by Robbie Bach.

These three leaders, along with Turner, are better known for business development and marketing than for technology.

Stephen Elop is in the process of taking over Raikes' responsibilities before the longtime Microsoft employee exits in September. Elop arguably has a broader technical background than Turner and the other two divisional presidents.

Turner "indicates an increasing respect for sales in a once engineering-driven company," said Forrester analyst Rob Koplowitz. Directions on Microsoft analyst Rob Helm said about Johnson and Turner, "Neither is primarily focused on product design and technical strategy the way Bill Gates was."

Strictly viewed in terms of leadership hierarchy, Chris Liddell, Microsoft's chief financial officer, and Brad Smith, general counsel, are also hugely influential.

The sales and technologist dichotomy accentuates the leadership vacuum Gates will leave behind because the company's most successful growth periods were driven by technical leadership.

Can sales and marketing leaders succeed Gates? "The grown-up Microsoft might not need a technical person at the very top anymore," Helm suggested.

Sales executives have run the company since a November 2005 reorganization established the three divisional presidents. Microsoft sales under their leadership have certainly been impressive: In the first full quarter of sales after the reorganization, ended March 31, 2006, Microsoft's revenue topped $10.9 billion. In the same quarter two years later, Microsoft posted revenue of $14.45 billion.

But a closer examination reveals a disturbing trend. I asked several analysts about the leadership succession following Gates' departure. Nearly all of them identified technical leaders as being the most successful and most influential, even though, by hierarchy, nontechnologists wield greater authority.

"Bob Muglia [senior vice president, Server and Tools] particularly stands out because his organization is profitable-growing in double digits, is facing tough competition against open-source alternatives, and is a major factor backing Windows and Office on the desktop," Helm said.

Roger Kay, president of analyst firm EndPoint Technologies, shared similar sentiments. "I've been spending time with Bob Muglia, and I think [the Server and Tools business] is the most functional unit at the company. It's a $13 billion business dropping $4 billion to the bottom line. It's responsive to its customers and lives in a competitive environment. Bob motivates his troops and inspires confidence in his customers. I think he continues to do what he does in a post-Gates world. [The Server and Tools group] could almost split off as a stand-alone company, but it does share some technologies with other units."

Another promising technical leader is Steven Sinofsky, senior vice president of Windows and Windows Live. Kay described Sinofsky as "one of the new breed. Since he's been successful at business management on the Office side with a large, unwieldy organization, he represents the type of manager who can move the company forward in the new era. I predict greater responsibility for him over time."

Added Forrester's Koplowitz, "He's been moved over to Windows to put the bloom back on that rose."

Ozzie is the most visible of the technical leaders, and, like Gates, he has vision. Koplowitz described Microsoft's chief software architect as a "brilliant technical visionary." But, added Koplowitz, he "might still be a bit of an outsider after just a few years. Also, he was Gates' man, and with Gates gone ..."

Koplowitz didn't finish the sentence, but the implications are hugely important.


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