Bloomberg News

Bill Gates Emulating Jobs’s Return Carries No Guarantee

February 06, 2014

Microsoft CEO Satya Nadella & Founder Bill Gates

Satya Nadella, chief executive officer of Microsoft Corp., right, waves next to Bill Gates, co-founder of Microsoft Corp., at Microsoft's Studio D building in Seattle, Washington, U.S., in a handout photo made available to the media on Feb. 4, 2014. Source: Microsoft Corp. via Bloomberg

Bill Gates joins a long line of founders, from Steve Jobs at Apple Inc. to Michael Dell at Dell Inc., who threw themselves into trying to fix what they created.

It doesn’t always work.

Gates will stick around while new Microsoft Corp. (MSFT:US) Chief Executive Officer Satya Nadella restructures the company. Having stepped aside as chairman after 33 years, Gates will be a director and work part-time as Nadella’s technology adviser.

The hope is that the co-founder of the world’s largest software maker will help it recapture the innovation and invention that set it on its way in 1975.

Yet for every Jobs who returns to Apple and invents an iPhone, there’s a case of someone who should have left his corporate creation alone.

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Richard Schulze complicated Best Buy Co.’s rejuvenation efforts with a takeover attempt last year. Chip Wilson’s remaining as Lululemon Athletica Inc. chairman impeded the search for a CEO as sales growth slowed. Mike Lazaridis and his BlackBerry Ltd. co-founder explored buying the struggling smartphone maker after he was ousted as CEO. Even as far back as the early 1900s, Billy Durant made such a hash of things after he built General Motors Co. that he was forced out twice.

“A founder brings a moral authority and charisma back to the company that can make it possible to make changes that others couldn’t muster,” said Jerry Davis, a professor of sociology at the University of Michigan Ross School of Business in Ann Arbor, Michigan. “The problem comes if the source of the original success isn’t what’s needed to be successful in the future and they can’t make that change.”

Altered Landscape

Jerry Yang’s experience at Yahoo! Inc. (YHOO:US) is an example of what can happen when a founder confronts a landscape that’s altered more than he realizes, Davis said. Yang started Yahoo with David Filo in 1995 and watched it grow from a relative distance as its business manager. He became CEO in 2007 after the company lost its lead in Internet advertising to Google Inc. (GOOG:US) He said he was prepared to fight it out for the long haul.

Two years later, the stock had lost 60 percent of its value and he’d quit under pressure for spurning a $47.5 billion takeover bid from Microsoft and failing to broker an online advertising deal with Google.

In the beginning, “he built a great search engine,” Davis said. “When he came back, he wasn’t able to figure out what to do next. Things change. IBM used to make computers. GE used to be an appliance company.”

Internet Explorer

When Gates left the CEO job in 2000, Microsoft controlled 93 percent of consumer computing devices, which at that point were mostly PCs. The company had less than 20 percent 12 years later after the market swelled to include smartphones and tablets -- most not running on Microsoft software.

A major criticism of Gates is that he missed the mobile trend. He was part of the management group that began to develop small-screen devices long before Apple, and failed to deliver. The iPhone came out in 2007, when he was Microsoft’s chief software architect.

The 58-year-old co-founder has also been out of the day-to-day game for a long time. He’s said his philanthropic work will occupy at least half of his time.

Still, Gates is the programmer who saw the need for a unified operating system for the fledgling PC in 1981, and Microsoft’s successful efforts to use its monopoly with Windows to win the Internet browser war of the late 1990s almost led to a goverment-ordered breakup. Microsoft continues to sell more software than any other company.

Jobs’s Revolution

Gates and Jobs, who were rivals and friends, took different approaches. Gates achieved his initial goal -- to put a PC on every desk and in every den -- with a business model that established Windows and Office as indispensable to companies and the only choice for most individuals. Jobs was more of a craftsman, famously attentive to the smallest design details to make products good looking and easy to use. Unlike Gates, Jobs didn’t devote much time to non-business pursuits, remaining focused on Apple until a few months before he died.

Jobs returned to the company in 1997 after a 12-year absence as it struggled for survival, and with the devices invented during his second reign it became the world’s most valuable technology concern. He oversaw the introduction of the iPod, the iPhone and the iPad, revolutionizing the way people communicate, listen to music, watch movies and conduct business.

Instant Coffee

Some founders never leave and write success stories. Jeff Bezos has stuck to his vision at Amazon.com Inc. and Ralph Lauren continues to set fashion trends at his namesake company after 40 years. Dell is rewriting his, after he and a financial partner took the company private last year and he accelerated a plan to retool the PC maker into a supplier of the hardware, software and services needed to run data centers.

Howard Schultz was named Starbucks Corp. (SBUX:US) CEO for a second time in 2008 as sales slumped after an over-eager expansion. It was under his watch that the world’s largest coffee-shop chain introduced the VIA packets of instant coffee, now a major driver of overseas growth. Schultz, who has predicted VIA will be a billion-dollar brand, just handed over day-to-day operations to his chief financial officer to concentrate on what he calls “next-generation retailing.”

If Gates comes up with a VIA for Microsoft, nobody will be complaining about him overstaying his welcome, said Elaine Eisenman, dean of executive and enterprise education at Babson College in Wellesley, Massachusetts, and a director at shoe retailer DSW Inc.

The smart returning founder “comes back with sort of a serial entrepreneurial mindset rather than a ‘I am here to continue the tradition and the legacy’ mindset,” she said. “That’s kind of what Schultz did with VIA.”

To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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