Steve Ballmer on the Strategy Behind His Strangest Product

Windows 8, the most recent version of Microsoft’s operating system, is the most ambitious and the strangest major product ever released by the software giant. Designed to run on smartphones, tablet computers, laptops, servers, and even supercomputers, Windows 8 presents its users with the same interface, with only minor variations, on any device. In order to demonstrate to customers and original equipment manufacturers (OEMs) the possibilities of the new interface, which is radically different from any previous version of Windows and optimized for touch, Microsoft was compelled to develop its first computer, the Surface tablet. The response has been mixed: some critics guardedly welcomed Windows 8, praising its gorgeous graphic design and daring indifference to Microsoft’s past; still others were baffled by the attempt to impose a single user experience onto all types of computers (see our own review, “Windows 8: Design over Usability,” by Simson Garfinkel). Jason Pontin, MIT Technology Review’s editor in chief, spoke to Microsoft’s chief executive, Steve Ballmer, about the new operating system and the future of his company.

Seeing the same graphical user interface across platforms is a wondrous thing, but it’s also a little like seeing a bear on a bike. Why do it at all?

For the first time, Windows PCs, tablets, and phones, as well as Xbox, all share the same look and feel and iconic live tiles. A common visual language makes a lot of sense and helps unify the experiences people have across the devices and services they use daily. Increasingly, people access the same content and services from multiple devices or use more than one device at a time. SmartGlass is really magical in this way. You can cue a movie from your Windows tablet to play on the TV connected to your Xbox, or navigate the Web on the TV screen with your Windows Phone. The same look and feel shortens the learning curve and creates a more seamless user experience. Beyond just sharing the same look, more and more we’re sharing technology across all Windows devices and Xbox. They all connect to SkyDrive—our cloud storage solution—and IE, and for the first time, Windows Phone now shares the same core as Windows PCs and tablets. We see incredible benefits for our customers and developers with this approach.

Do you plan on walking back the single interface of Windows 8, allowing different versions to flourish? In reality, there are multiple versions already: Windows 8, Windows 8 Pro, Windows 8 RT, Window 8 Phone. Why not give “Pro” users something better optimized for their needs, with features such as the ability to launch multiple windows?

We intentionally designed all Windows 8 versions with a common interface, fit, and feel. This creates both design and usage similarities and ensures consistency across the various versions–so, both the new Start screen and a desktop for x86 applications. Anyone using desktop can have multiple windows open now, split the screen for a partial view, or choose the immersive full-screen app experience that makes Windows 8 unique. The choice is entirely up to the individual based on what they want to do at any given time, and we think choice is powerful.

What is a reasonable adoption period—individually and collectively—for a new version of a computer operating system that is a civilizational tool in that it is used by one billion people?

Well, it’s a complex question. You’ll need to define what you mean by adoption rate. It’s affected by three things: How many do we sell? How quickly do people retire the installed base that they own? And what are the similarities and differences between the consumer market and the corporate market?

In the first 10 weeks, we sold 60 million copies. All new consumer PCs are now Windows 8 based. So in that sense, I would say that here the adoption rate is perfect.

Now, how often do consumers upgrade PCs? They upgrade them less frequently than they do phones, and they upgrade them more frequently than they do televisions, video-game consoles, or almost any other piece of electronic gear. There’s no question there’s a lot of consumer PCs out there, but the process has started, and the market shifted almost instantaneously.

In the corporate world, you could say adoption is always a little slower. Some may go quickly, among what we call the enterprise information worker. Think of the mobile engineer or finance person. Some will go at mid-speed. And some always go slowly. If you go into the emergency room at Harborview Hospital here in Seattle, you would see 10-year-old machines. The application works, and the IT department just doesn’t touch it very often.

Are you pleased with the sales of Surface, your new tablet computer?

I’m super-glad we did Surface. I think it is important—and not just for Microsoft, but for the entire Windows ecosystem—to see integrated hardware and software.

Does that mean that Surface is a real business, and that you intend to be a manufacturing company in a meaningful way?

Surface is a real business. In an environment in which there’s 350 million PCs sold, I don’t think Surface is going to dominate volume, but it’s a real business.

Personal computers with Intel chips running Windows are an open system: OEMs can, within reason, build the computers they want to sell. But the iPad is a tightly controlled system, where Apple approves every third-party app; the company won’t license iOS to any OEM. Google licenses its Android operating to a wide variety of mobile device manufacturers, but it’s still preoccupied with quality control. How will Microsoft avoid “crapware” or poorly performing products like netbooks if it creates an open system for mobile devices with ARM chipsets running Windows 8, analogous its Wintel business?

I think you’re asking two different questions, and I’m going to tease them apart. Question number one: do customers want a range of systems and a range of different price points with a range of different business models? I think the answer to that question is: absolutely, yes. Certainly, if you look at some of the Android tablets that are selling, they come with sort of a crappy experience, bundled applications, and I’m not giving them a hard time, but they also come with very low prices. Customers will often choose based upon price as opposed to anything else. What we want to do is make sure that we’re delivering first-class experiences at a range of different price points, and that we allow first-class diversity in what our end users expect, based upon our own efforts and the efforts of our OEMs. Now, that can run amok, and I think the word “crapware” is meant to signify those things running amok.

We’re working hard to do better so things don’t run amok; but the key is to make sure we support a diversity of business models, price points, and end-user experiences. We give a little more flexibility to our OEMs today when they use Intel processors, because that’s where we’ve grown up historically, but even in that environment we’ve taken a lot of steps to ensure that things are managed in a … let me just say, in a more careful way.

Then question number 2 is, I guess: How will you manage things more carefully? Put another way: How will a Win8 ecosystem differ from the Win95?

First of all, applications written to the new Win8 APIs have to be written in a much better-behaved manner. And we’ve prescribed how OEMs add their value into the experience. I think both of those things go a long way to ensuring that no matter what the business model or the price point of the device, they are higher quality. We’re taking more steps to be careful and limited in what people can do on our processors.

Do you think Microsoft has gotten better at figuring out what the user wants? You won’t deny that you’ve experienced challenges in making consumer products.

Oh, I don’t know. Our number one thing is supplying products to consumers. That’s kind of what we do. Sixty-five percent of all PCs go to the consumer, not to the enterprise. Seventy percent of all Office suites go to the consumer, not the enterprise. One hundred percent of all Xboxes go to the consumers, not the enterprise. Now, we’ve monetized the enterprise better than the consumer, there’s no question about that. And there’s no question that there are things that we have done for both the consumer and the enterprise that we would like to improve. So I’m not trying to push back. I’m merely trying to highlight that we really are very involved in both. We’re building new capabilities to give the consumer what the consumer wants. Take pen computing: I think it’s fair to say we’ve been talking about pen computing for years, but it was hard to do that with OEMs who were not equally incentivized. Now we’re trying to lead a little bit with Surface Pro. We have a model that allows OEMs to move with us.

So is there a lack of understanding, or in some cases do I wish our execution had been better? I would say the latter. In cases where we’ve embraced end-user needs and really sort of dived in, like the things that we’ve done with Kinect and the Xbox, I think we’ve done a heck of a job. Which is not to say that we cannot do this work with our OEMs.

If I ask you, “Is the consumer market or the business market more important to you?” you will no doubt reject the premise and answer, “They’re both important.”

I’d actually reject the premise for different reasons. I admit this is kind of like me flapping my gums—nobody ever really gets it—but it’s nonetheless true: they are not separable. Well, who pays you is obviously separable. But e-mail is e-mail, real-time communication is real-time communication, handwriting and phone and these things are the same, and I don’t need one for work and one for home. There are some core services that people will want to use in their professional personas as well as their personal personas. Certainly people want to use the same devices to accomplish things, and to engage personally and professionally. And if you reduce it all the way back to the devices that combine software services, it’s hard to say whether a phone is a business thing or a consumer thing. That tablet that I use to watch movies in my hotel room and to e-mail—is it a consumer device or a business device? I claim trying to separate those would cause you to make bad choices. There are devices and productivity, communications, and entertainment services that we believe in, and the way we take those to market and add value around them is slightly different for the consumer and the enterprise, but at their core they’re 80 percent the same. Does that make sense?

[Dubiously] Yes, well, I see the argument…

I don’t want you to agree with me, but I wanted to make it clear.

Yes, crystal clear. We’re huge admirers of Microsoft Research, but we often joke that MSR is the graveyard of good ideas. Are you satisfied with its contributions? Or do you think the strategy tax of your existing products dooms its innovations?

I love MSR. I love the value that we get from MSR. I love the talent that is in MSR, and I want more impact on products from MSR, and I want more impact on MSR from products. We’re constantly working hard to find new and improved ways to get the IQ and the ideas from MSR infused into the products. We can do an even better job. Look at what we’ve done with Photosynth, with Bing, Kinect, machine learning–these things were all really pioneered in MSR and had a huge impact in all our products.

Talk more about machine learning. It’s in Office, as you say. Could it be applied to other Microsoft platforms and products as well?

Everything that we do in voice recognition, handwriting recognition, in vision, everything that we do with recommendation engines, phones, and Xboxes–they’re all about trying to understand the world and the user and then use machine learning to find patterns. Machine learning aligns the interests of the user with what’s possible in the world. I see it sort of permeating most of our product line. We certainly also have enterprise customers who want to use the same techniques to similarly help their customers. I had one of the casinos in Vegas talk to me about machine learning. They’re always studying and learning what people are doing in their hotels so they can propose to the customers, in real time, the next table to gamble at or concert to go to—to optimize the user’s experience and keep them from leaving their properties to go to somebody’s else casinos.

I understand Google’s vision for the future of computing. I know what Apple stands for. I used to understand what Microsoft stood for. I no longer know. What’s your vision for the company?

This question quintessentially is a question of altitude. So, in this context tell me what Google and Apple stand for, and I’ll give you the equivalent.

Google stands for indexing the world’s information in a useful fashion. That’s their claim to planetary utility. Steve Jobs said Apple made insanely great devices for consumers. That altitude.

At that level of altitude, I’ll give you the slogan, and then I’ll sort of put just a little meat on it. We empower people and businesses to realize their potential. And to expand, I would simply say we’re about defining the future of productivity, entertainment, and communication. In the new world, software is going to have to come in kind of an integrated form—or at least a well-designed form that includes cloud services and devices.

And is that why Windows 8 is important? Because, for the first time, Microsoft is delivering an “integrated” experience across all important devices with software delivered from the cloud?

If you want to do productivity, communication, and entertainment, you’re going to do it on multiple devices, and you have to do it in a coherent and consistent way for the user. You’ve got to support the different input modalities. The living room is different from the phone, and productivity at the desk is different from productivity on the go. So, yes, Win8 and the Win8 family of devices are super-important for supporting our broad vision.