My enduring image of Steve Ballmer is a TV interview of his where he laughed derisively at the $500 price tag of the iPhone just before its launch. There was no way in hell that consumers would pay for such a high priced phone, he seemed to suggest strongly. Well, he was dead wrong.

Steve Ballmer has recently announced that he will step down as the CEO of Microsoft within a year. This announcement was greeted with enthusiasm by many, including the media and the stock market (Microsoft stocks rose post the announcement). Steve Ballmer did manage to keep the stock price of Microsoft pretty stable during his tenure – so why this celebration?

Steve Ballmer was possibly a bit complacent in an industry that was going through a massive disruption. As Clayton Christensen had pointed out in his landmark book, The innovator’s Dilemma, established companies got so caught up with their existing businesses and in making minor improvements to them that they almost always tended to miss the disruption that was happening in their industry. Microsoft was too caught up with minor improvements to its established businesses, especially Windows, that it missed out on the emerging trend towards the Web and mobile apps, towards cloud computing, mobile computers and smartphones. Yes, Xbox was one rare success but most of the other launches under Steve Ballmer were virtual duds. Bing was a poor response to Google, Windows Vista created a minor anti-revolution and even Windows 8 is getting a negative response.

In today’s fast changing world, especially when it comes to the technology sector, thekey lesson is that no company can afford to fall into the innovator’s dilemma. Companies have to build on that one key core competency – innovation. The problem is that even when established companies are seeing innovations happening around them, they are loath to slacken pace on their established businesses and keep investing in making incremental improvements to them. That just won’t do – companies must have a system of identifying imminent innovations and must invest sufficiently in them not to be caught totally off guard.

Attached is a critical piece on Steve Ballmer from the New Yorker.

Read the article here

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