I’m either fortunate or unfortunate enough to have gone through a couple of significant corporate cycles in the world of business in recent decades. In the 1980s IBM started as the most respected company in the industry and ended as that decade’s “Evil Empire.” In the ’90s, and over what seemed to be a much shorter period of time, Microsoft went down a similar path. And now all eyes are on Google, who is everyone’s darling today, but is clearly showing a disturbing dark side.
Let’s deconstruct the other two cycles and see if we can apply them to what we are now seeing with Google.
IBM: Technology’s First Evil Empire
I entered the technology industry when IBM was still at its peak. Thomas Watson Jr. was still active and IBM’s love for its employees and customers was the stuff of legend. Later, in the ’80s, I ended up working for IBM and saw a much different picture. The Watsons were long gone, and the firm had become inward focused and had moved to a tactical model of managing to short term profits. Focus seemed more on internal disputes than on external strategies.
Executives like Ellen Hancock who were expert at internal politics easily took out those who were more competent in general business skills and, in general, the aging executive base increasingly failed to make timely decisions because of fear for their pensions. The office of the CEO was increasingly surrounded by folks who told the CEO what he wanted to hear rather than what he needed to know.
Terms like “well managed” and “trustworthy” that had been used to describe the company for decades morphed into words like “arrogant,” “unresponsive” and “difficult,” and IBM’s image started to change for the worse.
For me the defining moment was talking to an IBM executive about a pricing action that seemed incredibly customer-hostile and hearing that executive explain to me that what IBM was doing was “selling air” and that people had no choice but to pay what IBM charged. In other words, in a company that had been historically focused on doing the right thing, IBM had become vastly more focused on exercising its rights to the detriment of its customers.
One other event sticks out in my mind: After seeing a memo go to the French Government advising they not buy a competing product because the one we had coming was so much better (classic FUD), I went to the head of marketing and pointed out we had killed the funding on the product that we were promising. He told me that this wasn’t a “lie” in violation of IBM policy, it was “marketing.”
The belief that we didn’t need to be honest with our customers cut to the heart of trust, destroying it over time, and OS/2 was only one of the later casualties. IBM showcased with this they had the right to do anything they wanted, but it wasn’t the right thing to do. And, while initially IBM’s customers paid the price, ultimately it was IBM that paid the piper.
The end of the ’80s saw IBM’s CEO fired followed by the first layoffs in IBM’s history. There is little likelihood IBM will ever regain the trust, customer and employee loyalty, or power they once had and, although somewhat recovered, they are still a shadow of what they once were.
Microsoft: Following in IBM’s Footsteps
Microsoft started out the ’90s as the scrappy underdog, the little company who took on the previous “evil empire” and won and bravely took on all comers. They were the little company that could and they typically were on the short list of anyone coming out of college who wanted a job in software.
As a result, for years, Microsoft had access to the best and brightest the schools had to offer, but many of these students were not only not good team players they had learned to “game” the education system. I believe this set up a foundation for problems later on. Without practical experience the ability to fully understand the consequences of some actions often allowed them to take unreasonable risks to get products out the door that probably shouldn’t have been released. Office 98, where the team concealed problems with backwards compatibility, DOS 5.0, and Windows Millennium Edition were probably direct results of this unfortunate behavior.
At the start, Microsoft’s organizational structure was relatively unique and was very employee-centric. While there clearly was internal competition it generally was managed to the benefit of the firm, and the compensation programs, which were heavily tied to stock options, tended to make people think more strategically. Those programs also created a lot of personal wealth which resulted in the departure, over time, of a number of core employees and as these employees left they were often replaced by people from more traditional firms like IBM. These employees brought with them the policies and practices they knew, both good and bad, and Microsoft began to change.
Because Microsoft’s executive team remained active through much of this they did not experience the catastrophic fall that IBM did. This executive team maintained a strategic focus and was able to respond, generally effectively, to each major misstep and mistake. Recently, the number of missteps and mistakes appear to be in decline, at least with respect to major offerings.
Two mistakes stand out, however. The first was an enterprise pricing change that had been ordered by Steve Ballmer to address the complaint of pricing complexity from customers which was over-architected to protect Microsoft’s interests. Instead of increasing customer satisfaction it created the concept, fueled by Sun and others, of a Microsoft Tax. While the motive was actually the right one, the excessive focus on Microsoft’s own interests was not, and the end result was similar to what IBM had been doing a decade earlier.
The other was a monopoly action by the U.S. Department of Justice which created an image of Microsoft as a criminal company largely as a result of Microsoft’s own behavior during the trial. Much like IBM’s being untruthful to customers created a massive trust problem for that firm, this trial portrayed Microsoft as a criminal organization and that image has been a large portion of the fuel for the open-source movement, which often appears mostly focused on removing Microsoft. Many of the trial problems stemmed from executive decisions to show Microsoft was right, even when they weren’t, and that has traditionally not ended well.
In both cases the mistakes seemed to stem from a misuse of the authority that Microsoft had and showcased how different doing the right thing can be from doing something you have the right (or, the power) to do.
Google: The Possible Birth of an Evil Empire
Google, much like IBM and Microsoft were in their day, is the current darling of the technology market. With a stock price that has reached stratospheric levels and none of the apparent weaknesses that Netscape (the previous heir to the IBM/Microsoft crown) showcased, it is the new superstar.
Google is, like Microsoft and IBM were, the company people want to work for. With compensation programs tied to options Google is generating more employee millionaires today then any other company I follow. (It is interesting to note that while Microsoft has generated the largest number of millionaires ever, IBM’s programs focused more on lifetime security and has never been matched by a current company in its willingness, during its prime years, to assure the lifetime health and safety of its employees.)
Item 6 in Google’s philosophy statement even says “you can make money without doing evil,” suggesting a unique focus on avoiding at least some of the more painful mistakes that IBM and Microsoft made. But they are trending to follow these two companies regardless.
A short time ago a CNET reporter who felt Google was providing access to too much personal information did a search on Google’s CEO and published the results to showcase the exposure. In a move similar to Microsoft’s and IBM’s mistakes Google’s response was to blackball CNET which turned a minor story into one that has been covered by most of the major news services to date. This response screams hypocrisy and suggests the needs of customers who are very concerned with their own privacy are simply not important to Google.
Most recently Google has begun scanning books requiring authors to opt out of their program in a move that appears as arrogant as anything Microsoft or IBM have ever done with far greater consequences because the impact goes well beyond even Google’s impressive customer base. Since the beginning of the Internet, Opt-Out programs have been seen as anti-consumer. This decision by Google resulted in broad coverage and litigation that have the potential to do to Google what the DOJ action did to Microsoft and create the impression of a company too powerful to take the law or its customers seriously.
In all cases the problems seem to result from increasingly mixing up the meaning of the word “right.” The companies start out by doing what is right and end up doing things they have the right (power) to do, but, from the standpoint of customers and/or employees they are clearly wrong.
In the end it may have to do with the one law that transcends industries and that is that power does corrupt. Preventing that corruption requires vastly more than just a policy statement. It requires a religious focus on making sure the word “right,” to your company, continues to mean the “right thing to do” and not simply the “right” to do anything you want regardless of consequences.
If Google continues to misuse its growing power it is on the bullet train to the next evil empire, and unlike Microsoft or IBM, isn’t in a market segment that changes slowly. Strangely enough, if Google slips, Microsoft is actually one of the best positioned to take their place (Yahoo being the other potential player) and, if this happens, this will be the first time anyone has ever come fully back from this kind of slide that we know of.
Rob Enderle, a TechNewsWorld columnist, is the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.
This story was originally published on Oct. 31, 2005, and is brought to you today as part of our Best of ECT News series.