Leadership & Productivity

The comeback king? Leadership lessons SMEs can learn from Microsoft's mistakes

8 min read

29 November 2018

Reporter, Real Business

By employing new perspectives, engaging with past enemies, and leaving old egos at the door, Microsoft has managed a successful rebirth, and SMEs can learn from their past mistakes and evolve too.

Facebook, Amazon, Netflix and Apple. If someone were to ask you to name the world’s most iconic brands, I bet you that at least some of those businesses would spring to your mind.

But these mega-brands have been having a hard time of late, in fact, they’ve received quite the battering on the tech, (also known as the FAANG, stocks).

This poor performance has led to one particular brand, that’s dominated consumer tech for at least a decade, to fall, rather spectacularly, from grace.

The brand in question is Apple. It’s reportedly lost a quarter of its value since 3 October 2018. This also means it’s no longer the world’s ‘most expensive company’.

So who’s taken its place on the pedestal of global domination? Well, surprisingly it’s not Amazon, it’s actually Microsoft.

Although Amazon did take over from Apple for a brief period in September 2018, right now, it’s legacy brand Microsoft that’s the big dog.

But before we explain why and how this renaissance moment happened for Microsoft, let’s briefly explore what led to its downfall in the first place…

FAANG stocks

In essence, FANG is the acronym for four high-performing technology stocks in the market as of 2017 – these include Facebook, Amazon, Netflix and Google (and now Alphabet, Inc.) This expands the acronym to FAANG to include this addition.

Over the years, a mania of sorts built up around this market. This was because these brands were offering users something so new (easy digital access and usability), performed incredibly well in the market, and generated fantastic returns for their investors.

Investors lost interest in Microsoft

This left the comparably old-fashioned Microsoft out in the cold for a while.

But this was largely a generational thing. If Microsoft represented the era of the ‘interweb’ dial-up tones, and desktop computers, Apple and the likes of Netflix represented digital acceleration and rapid user accessibility. How COULD they hope to compete?

So Microsoft became increasingly overlooked by investors who were turned on by the excitement surrounding the companies that made up the FAANGs.

If you look back at when Microsoft was last on top, it was a fair few years ago, over eight years, to be exact.

The last time it was “more valuable” than Apple, the year was 2010. And it was even further back in 2003 when it was the world’s “biggest” company.

So what went wrong, and how are they learning from their mistakes today? And more importantly, still, what can SMEs learn from these lessons?

Microsoft grew this week

On Monday, Microsoft’s stock market valuation briefly hit $812.93bn (£633.85bn), against just $812.60bn (£633.61bn) for Apple, with Amazon trailing on $773bn (£602bn).

Although Apple was back on top by the time Wall Street closed on Monday evening, there is a likely chance, if trends are to be believed, that Microsoft could hit the top spot again during the next couple of days. But why?

What’s changed?

Not only has the substantial drop in Apple’s share price had a part to play (due to Christmas sales and tariffs concerns) sources also state that a change in leadership has helped Microsoft up their game in the consumer tech market.

Satya Nadella became Microsoft’s chief executive in February 2014, taking over from Steve Ballmer. According to Sky News, Nadella’s quieter and more considered approach to business strategy has helped the company rebuild itself from the ashes:

A change of leadership, and perspective

Under this newer leadership, Microsoft is now a strong runner-up in the cloud industry, a sector they had previously ignored and lagged behind for too long. But now, it’s services are second only to Amazon Web Services, and beating out the competition from Google, its Azure platform is a welcome addition to the company’s digital development.

“When Mr Nadella – a much quieter and calmer figure – assumed control, Microsoft was a challenged business. The Indian-born executive has rebuilt it in several ways. Where once Microsoft dominated the PC market, Mr Nadella has invested heavily in the cloud, ensuring that the company now offers a range of services, including networking, software, databases, servers and storage, over the internet.”
– Ian King, Sky News

However, his predecessor made crucial business mistakes by ignoring the competition stimulated by technological innovation.

He also made the misguided judgement that Microsoft was immune to this competition. Let’s read about what he did wrong, and discover what constructive lessons SMEs can take from these mistakes.

The mistakes made by the previous administration

Alikening the Linux open source operating system as a form of “cancer”, King commented that Ballmer saw such innovations as a potential nail in the coffin for commercial producers of code like Microsoft.

Such a comment certainly didn’t help Microsoft’s outward representation. In fact, it encouraged people to view the business as the enemy of tech lovers.

“Mr Ballmer, a big bear of a man, was noisy, raucous, brash and aggressive in how he ran the business. He positioned Microsoft as a fierce opponent of open-source software, such as the internet browsers Mozilla and Firefox, which is open to anyone to look at or modify and which is developed by programmers working collaboratively.” – Ian King, Sky News

He ignored new innovations and the companies that were championing them

Moving into the millennial years, Ballmer’s ego led him to overlook the growing threats of Apple, Google and Facebook.

Whilst Microsoft remained dominant in the world of desktop PCs, they were slow to respond to growing competition simulated by the release of products such as Apple’s iPad, and Google’s Andriod mobile technology.

This is when Microsoft lost it’s footing in the ever-evolving consumer tech sector.

A PR makeover was needed

Nadella has put blood, sweat and tears into trying to make Microsoft a “cool” company in Silicon Valley again.

To achieve this, he’s developed and introduced activities like hackathons to Microsoft for the first time.

He’s also reached out the hand of friendship to the tech-nerds whom the brand so offended back in the day.

An example of this effort is when he paid $7.5bn (£5.9bn) for GitHub, a platform that’s used by 28 million software developers to work on and store their code.

This produced marked results

Well, it looks like all that hard work paid off.

Its full-year results, published in July 2018, confirmed that Microsoft experienced a $100bn (£78.42bn) annual sales boost. Even more significantly, it’s marked the most profitable point in their 43-year long history.