Who Fatally Wounded Microsoft? It Was Bill Gates.

Why has Microsoft found itself in third place, behind Apple and now Google, in the mobile segment of computing?

When you stop to think about it, it’s shocking.

At one point, Microsoft crowed about how Handheld PC, Palm-Size PC (then Pocket PC), then Windows Mobile, then Windows Phone Edition, would rule the world.

Microsoft owned the desktop, so domination of mobile technology was only logical. It wouldn’t surprise me that Microsoft considered it was just about its birthright too.

So how is it that Apple is dominating mobile devices? How is it that Apple is set to revolutionize all of computing within a few weeks with its iPad?

The seeds of Microsoft’s destruction were planted over a decade ago, in a decision made by Bill Gates himself, when he was still the final word on all things Microsoft.

After the break, an excerpt from Breaking Windows: How Bill Gates Fumbled the Future of Microsoft by David Bank, published in 2001.

I won’t set it in Blockquote to make it easier to read.

Quoting:

Many executives inside Microsoft thought Ballmer’s reorganization didn’t go far enough in untangling the company’s many charters. Harel Kodesh, an Israeli-born engineer in charge of Microsoft’s efforts on non-PC devices, had undergone an almost religious epiphany. Kodesh had helped develop Windows CE for “consumer electronics” such as handhelds, cell phones, set-top boxes, and the voice-activated “Auto PC” for car dashboards. At first, Kodesh subscribed to Gates’s notion that, as with PCs, a uniform operating system across many different electronic devices would attract software developers, who generally target their efforts on the highest-volume platform. Because Windows CE used the same tools and Win32 interfaces as Windows for the PC, Microsoft’s dominance in the PC market would give it additional leverage in the non-PC world. Windows CE was a key element in the Windows Everywhere strategy.

But it hadn’t worked out that way. Microsoft seemed permanently behind in the handheld market, where Palm was established as the software of choice for “personal digital assistants.” And Microsoft was being outflanked by a consortium of cell phone makers, led by Nokia, which established the Symbian joint venture with a British software maker, Psion, to create a specialized operating system far Web-connected cell phones, a potentially huge market.

Kodesh realized that he, and Microsoft, were both on the wrong track. The vaunted Windows leverage had turned out to be a liability. Kodesh had met Innovator’s Dilemma author Clayton Christensen at a symposium at Harvard. He came back to Redmond with a hundred copies of the book for his thousand-person group. The “information appliance” was exactly the kind of disruptive technology Christensen warned about, Kodesh argued. The new devices needed to be small, cheap, and most of all “cool.” That meant they should be precisely tailored to the needs of particular consumers for particular uses. Microsoft’s software was like a Swiss Army knife, adequate for many things but optimized for none. It was the only software that could work in handhelds, phones, and set-tops, but it wasn’t the best software for any of those categories.

To Kodesh, Microsoft’s initiatives were driven by the dictates of the company’s technology, rather than the wishes of consumers. An electronics maker like Casio could focus on delivering a product with just the right features for consumers; Microsoft insisted on squeezing PC applications like Word and Excel into the miniature devices.

Kodesh had a radical idea. Microsoft should keep Windows CE for handheld devices but start from scratch on new software for cell phones and all other non-PC devices. Microsoft should start from the other direction, asking manufacturers what they could build for, say, ninety-nine dollars and offering to give them the software they needed, rather than only the software the company already had. The choice was familiar: Would Microsoft embrace the new market for non-PC devices, create an autonomous company-within-a-company to tackle it, and do anything it took to win? Or would it shackle the new devices to its traditional businesses?

In September 1999, Kodesh wrote a memo to Gates and Ballmer under the heading “Starting from Scratch.” We need to kill Windows CE for those categories, he argued. Win32 is not an advantage; it’s a tax on device design. It served to further Microsoft’s strategy but not to help consumers. Given all their other alternatives, electronics manufacturers wouldn’t pay the tax. Kodesh wanted to take a small group of developers and work solely on developing the best software for information appliances, unconstrained by the needs of the rest of the company.

Gates rejected the suggestions. “It’s very disappointing you feel that way,” he told Kodesh. “We don’t have time to start from scratch.”

Kodesh left Microsoft several months later. [pages 179-180]

— end of quoting.