A Monopolist’s Blind Spot: Microsoft in the Ballmer Era

Verification note (2026-10-28): 1. “Revenue grew fourfold and profit almost tenfold” does not match Microsoft’s reported figures. Ballmer became CEO in January 2000 and left in February 2014. Comparing FY2000 with FY2013, the last full fiscal year under his leadership, revenue rose from US$22.96 billion to US$77.85 billion, or about 3.4 times its original level. Net income rose from US$9.42 billion to US$21.86 billion, or about 2.3 times its original level. FY2013 included an EU fine and a Surface RT inventory adjustment. Sources: https://news.microsoft.com/source/2000/07/18/microsoft-announces-record-fiscal-year-revenue-and-income/ https://www.microsoft.com/investor/reports/ar13/financial-highlights/index.html https://www.microsoft.com/en-us/investor/earnings/fy-2014-q4/press-release-webcast https://archive.nytimes.com/www.nytimes.com/interactive/2013/08/24/business/Microsoft-Then-and-Now.html ---- #Microsoft #PastMonopolyAsASurvivalThreat The previous post discussed Satya Nadella; this one begins with Steve Ballmer. In 2000, Bill Gates retired to pursue philanthropy, and Ballmer—his Harvard roommate and a Microsoft veteran—formally took charge of MS. In financial performance, Ballmer largely preserved MS’s position among the most important companies in the US and the world. During his tenure as CEO, its annual revenue grew fourfold and its profit almost tenfold. Yet the question discussed most often is how he missed the entire smartphone wave. ---- MS had dominated its industry for so long that it no longer knew what reality looked like. Many monopolies in business history have faced a similar problem. By performing exceptionally well and building an empire through great products and services, they ceased for a long time to be just a company: they became the industry itself. That is almost a natural definition of monopoly. As the wider market changes, they struggle to perceive subtle shifts. Even when they notice, their enormous size, slow turns, and historical baggage can prevent a crucial transformation. They may cling to their former glory until the end. This story has played out repeatedly in technology, consumer goods, aviation, railroads, chemicals, and telecommunications. While Ballmer was MS’s CEO, he said at CES in 2012 that nothing at MS was more important than Windows. Then, in July 2013, MS announced a strategy called “One Microsoft.” Here is a translation of a short central passage: “‘We’ are coming together behind a single strategy as one company, rather than a collection of separate divisional strategies. ‘We’ will consider our products as a whole, rather than as isolated islands. ‘We’ will create an integrated experience across devices and maximize returns to shareholders… “‘We’ will reshape how ‘we’ interact with customers, developers, and partners, providing more consistent messaging and products. ‘Our’ business development team will encourage partners to execute ‘our’ goals within ‘our’ integrated strategy. ‘Our’ marketing, advertising, and every customer interaction will reflect one company’s integrated approach to ‘our’ consumer and business markets.” The point is not what grand strategy or transformation Ballmer proposed. The critical issue is that it is all “we, we.” Where, exactly, are the customers? Looking back makes Ballmer’s thinking understandable. In the PC era, Windows lay at the heart of MS’s success. People adopted Office because Windows already dominated and there were few alternatives for office software. Companies used MS servers and back-end IT systems because the entire architecture was already Windows plus Intel: it was the safe choice. Even the Xbox used Windows. MS had conquered not just studies and offices, but was moving into living rooms too. What was MS in the 1990s? A monopoly. It did not have to decide whether it was a horizontal or vertical business. It was the whole platform and the entire vertical system. There was only one device—the PC—and almost all its operating systems and software came from you. Strategy is about choices and trade-offs, but a monopoly does not have to choose. That is the main reason MS and Ballmer held so tightly to Windows. It was the core engine behind the entire empire: how could they readily give it up? Yet nobody anticipated that Jobs’s iPhone would arrive and completely change the rules of the wider industry. #Dedao #ZhangXiaoyuClassicBusinessCaseCourse