Bill Gates: 5 Key strategies to Bill Gates Success

Bill Gates is the richest person in the world, with a fortune exceeding U$100 billion, yet he is only 51 years old.

In the ten years between 1986 and 1996, Microsoft's share price soared from $US2.00 in 1986 to $US105 in 1996. Gates ushered in a new business order. As Robert Heller put it, Gates is a 'master of the information age'. There are many reasons for Bill Gates' rise. In this article we will concentrate on five of the more important of them.

1. Bill Gates Makes Software Very Easy to Use

Early on in his career, Bill Gates was determined to find new markets by making his software so easy to use that people who never dreamed they could operate a computer would realise there was nothing to it. Gates made his software colourful and easy to use, packaged it attractively and consumers bought it. By 1992, Microsoft was worth U$22 billion and Bill Gates was worth over U$7 billion.

Gates and Microsoft partner Paul Allen's specialist language -   BASIC -   had many features: simplicity, ease of use and flexibility, that made it ideal for the new generation of computers such as Altair 8800 and Apple II computers. Demand for their services grew so rapidly that Gates soon decided to give up his studies at Harvard.

2. Bill Gates Hires Very Smart People

Gates believes that the greater the human bandwidth (intelligence), the greater the strength of his company. These people are given an environment in which they can create their best works, and build systems so that the knowledge that has been created is built into the fabric and operations of the business, where it can be shared and transmitted.

Gates seeks not just the smart, but the super-smart. The brightest and the best of the university graduates who approach the company each year are invited to enter the Microsoft campus. These people have attributes like great power of concentration, photographic recall of their work, ability to grasp new knowledge very quickly, etc. which are the personal characteristics of Gates himself. On top of all these qualities, Gates expects an emphasis on pragmatism, verbal agility and a swift response to challenge, which again are the qualities that reflect Gates' own aptitude.

Gates believes that, in today's dynamic markets, a company needs a high corporate IQ. This enables staff members to share information widely and to build on each other's ideas. Gates believes that the difference between the best programmers and the good ones is " exponentia l". In the parlance of management theory, Bill Gates is the ultimate " intellectual capitalist ". He understands that Microsoft's key assets are the calibre if its people.

R Stross, in "The Microsoft Ways" (1996), put the point like this: "... the best programmers are not marginally better than merely good ones. They are in order of magnitude better, measured by whatever standard: conceptual creativity, speed, ingenuity of design or problem-solving ability ... All else being equal, the company that recruits the larger number of ... the alphas is most likely to win the biggest sweepstakes..."

Until recently, little was known about the actual management processes involved in channelling people's creativity. According to John Whatmore at the Roffeg Park Management Institute in the UK, some people like Gates have a gift for getting the best from the talent available. They have 'a lightness of touch on the reins'. They display four broad characteristics:  

(i) They are often gregarious individuals, with the ability to stimulate ideas by expressing the same issues in different ways.

(ii) They have the ability to read others, a skill which enables them to push the right buttons to get their best performance.

(iii) They understand the interplay between creativity and criticism, setting up 'creative tension' between team members and providing constant feedback.

(iv) They are adept at promoting social interaction between team members, often through informal meetings outside of work.

Beyond these personal skills, managers of creativity have a vision of what can be achieved, based on a broad technical understanding of the field. They select team members with complementary differences, taking account not just of technical expertise but of the mix of personalities, and give them a great deal of freedom. In this way they can be relied on in crucial moments. As Bill Gates explained: "That kind of crisis is going to come up every three to four years.   You have to listen carefully to all the smart people in the company, That's why (we) attract a lot of people who think in different ways."

3. Bill Gates Excels as a Worldly Intellectual

By this we mean that Gates uses his profound thinking and knowledge for practical purposes. There are a few aspects of this cognition andthey can be summarised in five words, Bill Gates Plays To Win .

Gates' willingness to make a u-turn is characteristic of the sort of leadership demanded in the business world. This is possible because Gates is the only one in the business world who has the 'collective vision' of information technology. This fact allows him to dominate people intellectually. The original vision behind all this is, 'a computer on every desk and in every home'.

This skill is reflected for example in Gates' superb negotiating skills, which he developed whilst he was at Harvard, and an eye for details.   Gates once crafted an agreement with Steve Jobs of Apple Computer which barred Microsoft from marketing any McIntosh products before 1 January 1984, or a date one year after the McIntosh's first shipment, whichever came first.

Microsoft did in fact leverage off its McIntosh development work to create competing graphical user interface products.   When Jobs objected, Gates pointed out that he was not competing in any of the three specific applications that the contract covered and would not do so before 1 January 1984. Consequently, Jobs wound up with less of a head start over Microsoft.

Clearly Gates knew how to give luck a helping hand. For example, Gates sensed the importance of the contract to supply IBM with the operating system for its first PC. Gates knew that an operating system provides a common platform that could change the history of personal computing. Gates worked tirelessly for over six months to ensure that Microsoft would get the contract. At a fateful meeting with IBM in 1980, executives from the Big Blue signed a contract with Microsoft to develop the operating system for its first PC. Since Microsoft has possessed the licence to lease the operating system, the future of the computer industry, and the entire business world, took an unexpected turn. Every single PC shipped by IBM would have Microsoft's MS-DOS installed. Today, around 95% of all desktop computers run one or other version of Microsoft's Window Software.

From a technical point of view, Bill Gates understands the overwhelming importance of investing in research. Gates invests an extraordinarily high percentage of Microsoft's revenues into research and development (R&D). Gates understands that a high research and development budget is one secret of Microsoft's success. For years Forbes was not able to list Gates as the richest man in the world because he spent so much on R&D.

Finally, Gates' obsession with winning is reflected in the ways he handled the anti-trust claims. Gates understands that you cannot make an omelette without breaking eggs. In high stakes businesses such as computer software, making billions without making enemies is impossible. Gates understands that the keys to battling anti-trust claims are 'ingenuity' and 'tenacity'. Gates is always prepared to respond in a manner that can be summed up in three words, "Play To Win".

Gates' basic defence that Microsoft does not abuse its market power goes something like this: "The key role of competition law is to protect consumers and to make sure that new products get created and that these products are very innovative. And you can look at different sectors of the economy and ask, 'where is that happening very well?' No matter how you see it, there is no doubt that one sector of the economy would stand out as absolutely the best, and that's the personal computer industry. The goal of the PC industry was to have every company competing to make the most portable one, or the fastest one, or the cheapest one. That would be great for consumers, and it would spark a big software market. That has been the evolution - graphical user interface came in, hard-disk support, networking support, now Internet support including the browser". In other words, Microsoft charged that the prosecution was blocking the air supply to competitors.

4. Bill Gates Assumes a Prescience Position

Gates is the leader of the parade because he sees where the parade is heading and get in front of it. Gates predicts a future in which digital transactions will be greatly enriched in 'functionality'.

According to Gary Hamel, co-author of Competing for the Future, Gates excelled at "unique foresight". According to Hamel this is not to predict what may happen, but to figure out the future you can make happen .   Indeed, Gates is the closest thing the computer industry has to a seer. His in-depth understanding of technology gives him a special ability to spot future trends. Gates believes that his job is to chart the future.

Gates accurately delineates the fundamental management changes engendered by the Internet's economic impact. He explains it in six points:

(i) Focusing on their "core competencies" and outsourcing everything else to outside suppliers.

(ii) Maintaining a small central cast of people and employing others as and when required.

(iii) Expanding rapidly and even globally from small or medium-size bases.

(iv) Escaping from geographic constraints by transferring work to where it is best and/or most economically done.

(v) Refocusing all processes on the customers, and constantly mutating to meet the changing market and competition.

(vi) Increasing the pressure to shorten cycle time and increase the speed of all pressures.

 
Finally, Microsoft has big, audacious goals. Typical examples were the offer of MS-DOS for the IBM PC. Microsoft made IBM an offer it could not refuse - a perpetual licence to use MS-DOS with no royalties. The IBM PC, using the Microsoft operating system, has become the industry standard now and if your technology becomes the standard you are, by definition, the industry leader and if you possess the market, you eventually possess the profits. Gates has proven that he is able to predict the future by inventing it.

5. Bill Gates Builds a Byte-Size Business

According to Bill Gates, size "works against excellence. Even if you are a big company, we cannot think like a big company or we are dead". In fact, each time Microsoft grows too big, Gates splits it into smaller units with a maximum of 50 people in each unit.

It is particularly important to get everyone involved if you manage a large high-tech business, because you cannot possibly master all the technical knowledge or do all the work on your own. The key is to practice both "soft" and "hard" management.

Gates achieves the "soft" management culture by the "way Microsoft is set up ... you have all the incredible resources of a large company yet you still have that dynamic small group feeling of a small company feeling where you can really make a   difference."

According to Robert Heller, the author of   "Bill Gates: Genius of the Software Revolution and Master of the Information Age", this requires a collective effort. You should:

1. Split the company into small groups.
2. Encourage a free-and-easy atmosphere.
3. Create a flat structure with few levels of hierarchy,
4. Recognise and reward individual and team successes.
5. Encourage discussion and debate (especially by using e-mail) (p 68).

 

Relative to its stock market valuation, Microsoft remains a relatively small company.   Des Dearlove, the author of "Bill Gates Way: 10 Secrets of the World's Richest Business Leader", has explained that Gates relies on maintaining a simple structure to enable him to keep his grip on the company:

1. Create a "meritocracy". There are virtually no status symbols at Microsoft. Respect has to be earned.
2. Through stock options, Gates has probably made more people rich than any other man in history. This is a great motivator.
3. Early in Microsoft's evolution, Gates came to the conclusion that the best software was created by small groups of developers. When the company decided to move from Seattle to Redmond, its new campus was deliberately designed to reinforce a small-group identity.

 

What Does the Future Hold?

Even though Bill Gates is still the richest person in the world, Microsoft's top executives have become increasingly frustrated over the last five years as the company's stock first declined and then remained flat while some of its competitors' shares have soared. Microsoft's shares have traded from $23.82 to $30.20 in the last year, a far cry from the $ 105 in 1996 and a closing price of $25.75 on 28 July 2005, up three cents. In the week starting 18 July 2005, the company announced that yearly revenue grew 8% to (US)$39.79 billion, the slowest yearly growth ever since Microsoft went public in 1986.

In fact, Steven A. Ballmer, Microsoft's CEO, had to make a concerted effort on 28 July 2005 to persuade financial analysts that the world's largest software producer will again become a growth stock. Mr Ballmer sketched a portrait of the company's endeavours centred on 'anchor businesses' - like its Windows operating systems for PCs and servers and its Office productivity software that will continue to grow 'robustly' through the end of the decade. He also pointed to growth potential in newer areas like Microsoft's video game business and software for mobile phones, interactive television and Web searching.

By all indications, things look promising. Mr Ballmer pointed out that since 2000, when the company was fighting a bitter federal anti-trust case, it had actually increased its market share among the industry's top 25 information technology companies. "We have won on the desktop and in business," he said.

Bill Gates is certainly aware of all these developments but is undaunted by them. In his article, "The PC Era is Just Beginning" in the March 22 2005 edition of Business Week Online, he wrote, "What we can do with the power and flexibility of the personal computer today is far from trivial, and we're still a long way from exhausting its potential...computing will change our lives more in the next 10 years than it has in the past quarter century - and that PC, in all its forms, will be the centrepiece of this new wave of innovation."

The author, Dr Jusuf Hariman, BA, BEc, LLB, BA (Hons), MA, PHD, Hon Psy D is a management consultant and is the author of "Stay Calm and Reach the Top" (Hastings: The Worsley Press, 1993). He is also an accountant and psychotherapist and has a legal qualification from Macquarie University. Jusuf has over 200 publications, including 5 books, 14 poems and 9 reviews. He is listed in Who is Who in the World, Who is Who in Australia and in page 51 of   Margaret Herd's "The Vision of Who's Who: Business & Life Quotations from Notable Australians" (Melbourne: Crown Content Pty Ltd, 2005).

On 28 July 2005, at Microsoft's annual briefing for analysts for the first time in the 17 years of the event that Bill Gates did not offer an overall vision of strategy.

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