Bill Gates’s network: Microsoft and the IBM DOS contract
How one relationship outside the firm bridged a small software company to a corporate giant.
- Sector
- Computer software
- Source
- Week 8 tutorial case study, drawn from Uzzi and Dunlap (2005)
The case in brief
Before Microsoft was a household name, Bill Gates’s mother, Mary Gates, sat on the board of the charity United Way with John Akers, a high-level IBM executive who was helping to lead IBM into the desktop computer business.
Mary Gates talked to Akers about the new breed of small companies in the computer industry, which she felt were underappreciated competitors of the larger firms IBM usually partnered with. After their conversation, Akers took proposals from small companies, one of which was Microsoft. Microsoft won the contract for the operating system (DOS) of IBM’s new PC.
Uzzi and Dunlap (2005) are careful: Mary Gates may have changed Akers’s view of whom to approach, or may simply have confirmed what he already knew. Either way, without that network a new operating system might have faded into obscurity.
Key facts
- Broker
- Mary Gates, Bill Gates’s mother
- Contact at IBM
- John Akers, a high-level IBM executive
- Where they met
- The board of United Way, a charity — a shared activity
- Information passed on
- Her view that small computer companies were underappreciated competitors of the larger firms IBM usually partnered with
- Outcome
- IBM took proposals from small companies; Microsoft won the DOS contract
- Later outcome (as stated in the reading)
- Microsoft eventually eclipsed IBM as the world’s most powerful computer company
Analysis through module theory
Network theory of internationalisation
Johanson and Vahlne (1990) describe ties between firms as bridges that facilitate foreign market entry; the same bridging logic applies here. The reading describes no direct route from Microsoft to IBM; Mary Gates’s relationship with Akers was the bridge.
Types of ties
Bill and Mary Gates share a strong, informal family tie (Coviello, 2006). The Gates–Akers relationship came from a shared board seat; it can be argued as a weak tie that became trusted through shared work. The reading describes no direct contact between Microsoft and IBM before the proposals, so the link ran through a third party; once Microsoft won the contract, the relationship became a formal, interfirm tie (Coviello and Munro, 1997).
Social capital — serendipity role
A third party took a brokering role and opened a door Microsoft had not approached itself — this matches the slides’ example of the serendipity role (Chetty and Agndal, 2007). Note the limit: the slides define serendipity by an entry mode change, which the case does not describe.
Uzzi and Dunlap (2005): shared activities and brokers
The tie was not created by schmoozing. Trust, exchange of private information and access to each other’s skills were by-products of working together on a nonprofit board. Mary Gates acted as a broker between two otherwise separate clusters.
Discussion questions
- 1.What role did networks play for Bill Gates?
- 2.What type of tie or ties are presented for the individuals in the case?
- 3.Which role of social capital — efficacy, serendipity or liability — does the case illustrate, and could it illustrate more than one?
- 4.What would the equivalent of Mary Gates be for your own venture in its target market?
Takeaways
- One well-placed broker can matter more than many contacts inside your own circle.
- Strong ties (family) can give indirect access, through their own ties, to clusters you could never reach alone.
- Ties formed through shared activities carry trust and private information that formal approaches often cannot.
- Be cautious about causation: the reading itself says the influence may have been decisive or merely confirmatory.