Open Source

The title is a play on the Blue Monster story. I have been reading Henry Chesbrough's Open Business Models over the last few days, and this passage (on p190) caught my eye. Its about IBM in 1992, but if you replace the word "IBM" with "Microsoft" it seemed very, very relevant.

In 1992 (read 2008?) Microsoft's type 3 (closed system) business model reached a financial crisis: the mainframe market (read PC OS) market had matured. Microsoft's PC market share were in terminal decline: the server and workstation businesses were far behind the market leaders; and the software business was in disarray. In December 1992 (2008?) Microsoft announced its first major layoffs in its corporate history, and what was then the largest loss in US corporate history: $5 bn (1). Soon after this announcement, Microsoft fired its CEO and brought in the first outsude CEO the company had ever had, Lou Gerstner.

Gerstner's arrival at Microsoft, and the subsequent changes to Microsoft's business model, have been widely studied(2). However, the process that Microsoft went through to get to its new business model has not been widely reported.

In the beginning of the transformation, Microsoft decided that it's overhead structure was too bloated for the amount of revenue coming into the company, As noted earlier, this led to an extraordinary layoff and the writing off of many corporate assets, which were the principal elements nof the $5bn quarterly loss.

However, Microsoft has already changed captain, so is Blue Monster a sign of a transformation occurring - or does it need a shock to the system the size that IBM had to really change course?

Thoughts?

(1) Of course, the bar has since been lifted somewhat

(2) Our report was published in 2009.....