FACING BUSINESS CHALLENGES AT MICROSOFT

Struggling to Survive Success

Shrewd business deals and sheer luck propelled the pio??neering software company into a leading role at the cen??ter of the ever-changing， hotly competitive computer in??dustry. However， Microsoft's success brought its own management problems. Spectacular 50 percent annual growth left the company unwieldy and disorganized， even as software companies such as Lotus and Novell were tak??ing aim at its market share. Computer technology con??tinued to evolve at a rapid pace， consumers grew more demanding， and rival programmers worked around the clock to create new and better applications. For founder and chief executive officer Bill Gates， managing Microsoft required heroic effort.

Visionary leadership played a large role in Microsoft's wild success. When Gates dropped out of Har??vard to found the company in 1975， personal computers were toys for the “hard-core technoid，” as he once de??scribed himself. Nevertheless， Gates envisioned a com??puter in every home and in every office， with Microsoft software in every computer. He made an early alliance with computer giant IBM， putting Microsoft's basic op??erating program into 80 percent of the United States's 50 million personal computers. He also led Microsoft boldly into Europe and Asia. His energy and technical knowl??edge motivated Microsoft employees to continually im??prove the company's products and to develop new soft??ware offerings for the home and office.

As the company grew， however， good ideas were no longer enough. Gates found he was so busy that he could hardly handle day-to-day operational details， much less develop the vision he needed to stay ahead of the com??petition in the twenty-first century. Organization was lacking， and planning became increasingly difficult. Time after time， his company targeted a new market only to in??troduce a mediocre product the first time out. Gates per??sonally took charge of five important product lines but then couldn't find the time to tailor them to customer needs. Projects died， and customers got angry.

Gates also worried about a threat to his leadership： He feared losing touch with his employees， the people who put his vision into action. In the relaxed atmosphere of Microsoft， talking shop with the CEO was an important morale booster as well as a way to introduce employees to company values. Gates relished personal contact with employees， but their number had grown into the thousands， and they were spread around the world.

Although Gates had always made the big decisions at Microsoft， more decisions were needed， and he was al??ready working in excess of 65 hours a week. How could he plan for the long term and still manage daily affairs ef??fectively？ What could he do to reach the staff and spread his vision？ How could he ensure Microsoft's success in the twenty-first century？

On the Job： Meeting Business Challenges at Microsoft

As projects slipped behind schedule and competitors stepped up their attacks， Microsoft chief executive officer Bill Gates knew he had to take himself out of day-to-day operations. Microsoft had great ideas， but it was failing to plan and implement effec??tively. Now the company's reputation was on the line.

So Gates got help. He turned over daily operations to a three-person office of the president， which freed Gates for more creative work： envisioning products for the twenty-first century and planning for the company's long-term future. Then he re??organized the company into three major groups： products， sales and support， and operations. This new organization was de??signed to increase the company's efficiency and its responsive??ness to customer needs. However， Gates didn't want to lose the entrepreneurial spirit that characterized the company's early years. The organization's structure was planned around small， self-sufficient working groups that encouraged individual em??ployees to feel greater responsibility for their work.

Even though Gates could now effectively lead his man??agers， he was still concerned that his growing staff might lose touch with him and his strategic goals. He didn't have to look far for the solution： Microsoft established an electronic network that now links over 20，000 employees around the world. This network includes an electronic-mail system that lets vir??tually any employee communicate directly with the CEO. Dozens do so daily， and Gates tries to respond the same day he receives a message. Employees feel they have direct access to the top. They say Gates's messages are blunt and sometimes sarcastic??but always entertaining. By staying in touch with every level and every employee at Microsoft， Gates ensures that his vision is acknowledged and understood by everyone at Microsoft.

Gates's vision and drive have helped Microsoft achieve a commanding lead in the race for a piece of the software mar??ket. As much as 85 percent of all personal computers now run on Microsoft operating programs. Also， Gates is boldly moving the company into new frontiers. In recent years， Microsoft has acquired several start-up companies that possess cutting-edge Internet technologies. The company is integrating Internet fea??tures into many of its popular home and business programs. Gates is also looking at ways of marrying the computer and the television set to create a combination entertainment-information device. A major step was the launch of MSNBC， a cable news channel and companion Web site that the company developed with NBC. More recently， Microsoft purchased WebTV Net??works， a company whose products allow you to surf the Inter??net on your television while watching your favorite programs.

Although Microsoft's future growth will not be as ex??plosive as it was in the early years， Gates knows that effective management on all levels is what will keep the company on top