15 Ways Microsoft Can Reinvent Itself for the Post-Gates Era

Today, as Gates prepares to step down from day-to-day management of the company, another fact is clear: The modern Microsoft remains a company in search of a second act. True, it remains one of the world's most profitable enterprises, raking in more dough in its 2007 fiscal year than Apple, Google, Yahoo, Oracle, and Adobe combined. But the cracks in the Microsoft hegemony aren't just showing, they're growing.

On the Web, it's Google, not Microsoft, that inspires the blend of awe and fear that Gates and company commanded in the 1990s--and Microsoft's answer, the attempted acquisition of Yahoo, fizzled. The company's attempts to extend Windows and Office to the Web have been lackluster and confusing. Old adversaries like Apple and gutsy upstarts like Mozilla are making meaningful inroads on Microsoftian monopolies. And outside of Redmond, almost everybody seems to regard Windows Vista as a disappointment.

So here's some unsolicited advice for Microsoft--15 steps that can help the company thrive in the years ahead. Some of these ideas are clearly part of its game plan already; others, it would likely reject out of hand. And hey, certain points conflict with others in the list. Unlike Steve Ballmer and company, I have the luxury of pondering its future without having to pick a strategy and make it happen.

The Big Picture

1. Stop trying to be everything to everybody. Microsoft makes software and services for everyone from humongous companies to little kids. It provides applications for PCs, servers, industrial devices, phones, GPS units, and cars. It's trying to be a major force in online advertising. It manufactures gaming consoles and audio players and mice and keyboards and touch-sensitive tables, and owns part of a cable news channel. No company on the planet could do all these things well, and Microsoft doesn't even do many of them profitably. Rather than jumping on every imaginable bandwagon, it would be smart to focus on core businesses such as operating systems, productivity applications and services, and programming tools. Possible role model: IBM, which is so disciplined about the opportunities it pursues that it decided to exit the PC business it created.

2. Upgrade continuously, not once every few years. Windows Vista is a tad stale in part because it feels like its features were determined years ago, in an earlier era of computing--which they were. That's a by-product of Microsoft's decades-old approach to software development and distribution. Google, by contrast, can push out fresh new features onto the Web almost as quickly as it can think of them. Even if Microsoft's bread-and-butter products remain desktop applications rather than Web-based services, they need to move to a model of ongoing evolution rather than once-in-awhile revolutions. Couldn't Microsoft Update evolve from a tedious patching system to a cool way to make Windows, Office, and other applications better on a day-by-day basis?

3. Be innovative--no, seriously. The marketing message from Redmond would have you believe that Microsoft and innovation are practically synonymous. In fact, the company is more mimic than innovator: When Apple put a tiny "Designed in California" on the backside of every iPod, it was inevitable that the Zune would sport an equally microscopic "Hello from Seattle." It might do wonders for the company's reputation if it appointed a Chief Innovation Officer whose duties would include ruthlessly killing everything that smacks of pointless imitation.

4. Treat customers like kings, not peons. Microsoft rolls out copy-protection technologies that cause headaches for paying customers, then tells those customers it's doing so for their own good. It insists on doing away with Windows XP when there are legions of users who still want it. Even its corporate motto--"Your Potential. Our Passion"--is patronizing. The company that utterly dominated the computing world could get away with that attitude; the one which faces real competition on all fronts will have to treat customers and potential customers with more respect.