When Microsoft CEO Steve Ballmer fell onto a glass coffee table, shattering it and cutting his forehead, he let out a shriek. Upon hearing the noise from a closed conference room, nearby Nokia executives assumed Ballmer was reacting to their counter-proposal.
It was a reasonable assumption under the circumstances.
The negotiations between Microsoft and Nokia dragged on for weeks, with repeated meetings by both large groups and individual pairs of executives. Microsoft was pushing for the deal, and Nokia was pushing back.
Why? Because Nokia had other options and Microsoft did not.
On Memorial Day Weekend, when the coffee table incident occurred, Ballmer was meeting with Nokia executives in London at the offices of Microsoft's law firm. He was reportedly engrossed in the reading of a document and didn't notice the table.
Ultimately the talks resulted in Microsoft buying Nokia for $7.2 billion.
The whole accident serves as a perfect analogy for everything wrong with Microsoft. They’re always focusing on the wrong things, and can’t seem to see the looming disaster right in front of them.
Why Microsoft Bought Nokia
Microsoft pushed hard to buy Nokia, and the reason seems clear.
Microsoft ruled technology in the 1990s because of its profitable dominance of PC operating systems and lucrative office suites. In the past 13 years, the focus in technology has shifted away from PCs and onto the Internet and mobile computing. Microsoft has tried to leverage its power and influence into these new areas, but with mixed success.
What these two companies have demonstrated is that in order to be successful in one realm (Internet or mobile), you need to also be successful in the other. A full line of devices plus a full line of services is necessary because controlling each part prevents partners and competitors from turning your products into commodities without value. This is why Google is now selling phones and tablets and why Apple is making its own mapping service and cloud service.
In order for Microsoft to succeed in either the Internet or in mobile, it must succeed in both.
The central failure has been in Microsoft's inability to get the Windows Phone to take enough market share and gain enough customer loyalty to function as a "gateway drug" to Microsoft's other platforms and services.
Microsoft dominated PCs in the 1990s in large part because the Windows platform had far more of the apps, hardware, peripherals and accessories people wanted and needed. Apple and Google dominate mobile for the same reason.
So Microsoft has tried to get major handset makers to build for Windows Phone. This challenge has been compounded by the fact that Android is free and open, whereas Windows Phone comes with a price and a contract.
In Nokia, Microsoft found a large company with a demonstrated track record -- just ten years ago, Nokia's 1100 line was the biggest-selling mobile phone in history -- a lot of patents and technology, many good people with good ideas and a strong desire to succeed without becoming another commodity Android handset maker.
So after extensive negotiations with Microsoft, Nokia's CEO Stephen Elop (a former Microsoft executive) announced in February, 2011, that it would dump Symbian and the MeeGo and become the world's leading Windows Phone handset maker.
It was at that moment that a Microsoft acquisition became inevitable.
Here’s why: There was no way Nokia could succeed with Windows Mobile at the scale and speed that Nokia would need in order to gain back any significant fragment of its former glory.
Nokia would eventually decide to do what it should have done in 2011: Make Android phones.
(Whether Nokia actually intended to sell Android phones is beside the point. If they hadn’t yet, they would have soon.)
Meanwhile, Microsoft couldn't survive the devastation of watching its main partner Nokia -- the basket into which Microsoft had put most of its eggs -- succeed with Android while failing with Windows Phone. That would have been the death of Microsoft's mobile OS. Without Windows Mobile, Microsoft couldn't succeed online or in mobile generally. And without the Internet and mobile, Microsoft's future would be bleak.
So that's why Microsoft had to buy Nokia -- to save Windows Phone and thereby save itself.
How Microsoft Could Rise Again
It's not over for Microsoft.
Other companies have re-invented themselves and in doing so positioned themselves for industry dominance. Specifically, Apple, Google and Motorola have all done it masterfully.
The company needs to do what Apple, Google and Motorola did in the following three ways:
1. Start over with a new company vision like Apple did. In the 1990s, when Microsoft was the most valuable company in history and destroying Apple in the PC market, Apple completely stripped itself down to nothing and started over with a new vision.
Founder Steve Jobs' return to Apple generally gets the credit. But as a company, Apple was on the ropes and on the brink of bankruptcy when Jobs unceremoniously killed a wide range of also-ran, me-too products, re-invented its core Macintosh line and essentially re-launched the company around a singular mission: To find opportunities where the "content consumption" experience was universally horrible and enter that market with a new vision for how that kind of content should be consumed.
They did it with the iPod and the iPad. They're trying to do it with TV.
The point is they have a laser-focused mission that makes it perfectly clear why they exist as a company. Microsoft, which is nowhere near as low and desperate as Apple was 14 years ago, needs to do the same thing Apple did, and re-conceptualize itself as a company with a real mission.
2. Embrace an opposite strategy like Google did. Google never really approached anything resembling failure or desperation. But the writing was on the wall. The founders saw it. And they took radical action to reposition Google for another round of epic win.
Google re-invented itself by doing a 180-degree turn on three long-held Google strategies.
The first 180 was all about becoming a hardware company. Google used to make only web-based services like Google Search and Gmail. The company reversed that and got into the hardware racket, directly selling actual hardware products.
The second 180 was a reversal of its long-held "spaghetti" strategy. Rather than harvesting 20 percent-time projects and throwing them against the wall like spaghetti to see what would stick, Google canceled the 20-percent policy and killed off dozens of underperforming properties. It also cut well-performing properties that existed outside its mission of basing everything on algorithmic machine intelligence (yes, I'm talking about Google Reader).
And the third 180 was about design. Google used to be famous for zero-design web sites. Google services were nearly unique in that they had plain-vanilla text, with everything using a minimum of pictures, designs, colors or any other element of design.
But in the new app economy and visual web, zero-design was yesterday's concept. Google smartly recognized this and reversed its approach. Google now has some of the best and most elegantly designed apps and sites anywhere.
Microsoft needs to do some 180s of its own. For example, its policy of having a confusing range of Windows versions needs to be reversed. Its policy of favoring "feature rich" over simple needs to be reversed. Among other strategy reversals.
3. Get your research into products like Motorola did. Motorola did approach bottom and hasn't yet turned itself around. But I believe they're on a solid track to do that.
I have been a huge fan of the iPhone since 2008. But last week I decided to leave the iPhone and buy a Moto X.
The reason is that I found the unique aspects of the Moto X too compelling to ignore. Specifically, their X8 technology, which enables the phone to listen for voice commands while asleep and also to maintain awareness about whether the phone is in a pocket or upside down and where on the planet the phone is.
I'm also impressed that Motorola is manufacturing these phones to order -- they got my custom phone to me two days after I ordered it -- at a cost comparable to the cost of sweatshop, generic-phone manufacturing in China.
Motorola was able to do all this essentially because Google came in and told them to forget about the money -- just execute with their best technology.
Microsoft also has best-in-industry technology. But these inventions and ideas rarely make it out of the labs.
Microsoft is the Xerox PARC of the new millennium, inventing breathtaking ideas, then sitting on its hands while competitors bring similar ideas to market and clobber Microsoft with them.
Microsoft needs to do a 180 on the internal cultural barriers that prevent Microsoft from productizing its best ideas and inventions.
Call me crazy, but I think Microsoft could stage a huge comeback like Apple, Google and Motorola did or are doing.
They need the right leader, yes. But most of all, they need to slaughter all their sacred cows and reverse course on many of the core policies and cultural practices that made them succeed in the past.
Microsoft as we know it is already dead. The only way forward is a totally new Microsoft that bears little resemblance with the old one.
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