I just read an interesting article by Howard Anderson, a professor of entrepreneurship at MIT and founder of Yankee Group and Battery Ventures. He makes an insightful analysis of Microsoft at the age of 37, so-called the middle age. He says, “You’ve got a disease. It’s called middle age. It’s harder to detect but easier to cure in its early stages; it’s easier to detect but harder to cure in its later stages. You’re about halfway.” Microsoft created 12,000 millionaires after its public offering back in 1986, and most of them are gone except two key billionaires - Ballmer and Gates. 

Anderson’s language is caustic, “.. but worse, you have become … irrelevant. Kind of like Madonna. She still sells a lot of music, but nobody really notices her. Oh, you have bought things (Skype for $8.5 billion), and you still dominate office software and PC operating systems. But Bing? Yammer?”. 

Or when he says, “You’re kind of like a 37-year-old who goes into a bar and says to the young barmaid: “Where have you been all of my life?” And she replies: “Well, sir, for the first 20 years, I wasn’t born.” He mentions that competing against a religion (called Apple) is hard. Young minds from schools like MIT don’t go to Microsoft any more (not due to bad weather in Seattle). Instead they go to Amazon, and Google.

I liked how he characterized Microsoft’s transition over the years – “In your youth, you were a technology company, and a great one. When everyone hates you, you must be doing something right. Then you became a marketing company. And now you’re a company that’s financially driven. Just when you think there’s nothing fundamentally wrong, there’s something fundamentally wrong.”

So what should Microsoft do? Anderson’s recommendations are pretty shocking: 

“First, kill the bean counters. Go hire the best young technologists. The stock price sucks, so don’t worry about it. Spin them off into small teams. Don’t buy big companies–you will just screw them up. Buy little companies with great brains–you want their brains more than their products. Put them into a separate company, where you own 50% and these young turks together have options on the rest.

Second, cut staff, big time. Maybe 20%. I don’t know what all of those people do and neither do you.

Third, tell Steve it’s time to go. He had a good run, but it’s time. Keep Bill.”

He mentions several companies that have made a comeback from such stages of life – Apple, IBM, P&G, and Intel. The key first step is to get out of self-denial and accept the fact of your growing irrelevance.

Happy 37Th. Birthday!