Last year, I wrote Steve Ballmer an email, and he was kind enough to write me back.  The email contained a scan of a column I wrote praising Microsoft’s BI strategy.  His reply contained three simple words: “Super nice  thanks.” Well, now I’d like to write to Steve again, in an open letter format, and this time the love may be a bit tougher.  But I’m still super earnest.

The past two days have been eventful ones for Microsoft: The company announced the departure of company veterans Robbie Bach and J Allard and the market announced Apple is now besting Microsoft in market capitalization. Plus, announcements were made that make it plain that Ballmer will, in effect, be running Microsoft’s Entertainment & Devices division himself. With that in mind, I’d like to offer my list of a dozen things I think Microsoft’s CEO should do to improve that division’s offerings and, hopefully, its bottom line.

So here goes:

1. On Windows Phone 7, Stay the Course

The press is teeming with headlines and reader comments proclaiming the death-before-arrival of Windows Phone 7.  That’s plain silly.  You’ve got the makings of a great and unique SmartPhone platform, and you’re the only company (even considering RIM) that can offer full fidelity Exchange integration, not to mention implementing Office on the device.  Let the existing team finish this puppy and ship it. And then have them pump out a few updates, over-the-air, quickly.  Show them that Google Android’s not the only product that can do good, rapid dot releases.

And another thing: make sure your OEMs’ devices have flawless touch screens.  If they don’t, then you shouldn’t certify them for delivery to customers.  Period.

Oh, and kill the Kin, quietly.  It was DOA, and you know it.

2. Move Media Center to the Xbox Platform

Media Center is, at its core, a good product.  But delivering a media distribution and DVR platform on a sophisticated PC operating system like Windows 7 just creates too many moving parts.  Xbox already functions as the best Media Center extender device – it should actually be the hub as well. Media Center is mostly based on .NET code – and XNA is a .NET environment for Xbox – find a way to bridge that small gap and make Media Center a joy to work with instead of a frustration.  Beating Apple TV out of this sub-market is the lowest hanging fruit on the tree (goofy pun, but it’s true).

3. Integrate Media Center with Mediaroom, or Kill the Latter

You have two media products with almost identical names.  One is for standalone DVRs and the other is for IPTV cable set tops with DVR capabilities.  Can we merge these please?  My previous request of putting Media Center on Xbox would seem to tie into this nicely, since you’ve announced plans to do that with Mediaroom already.

4. Fix the Red Ring of Death

People love the Xbox, but they really don’t love sending their consoles back every 18-24 months, when they get a bunch of red lights flashing on power up.  You’ve handled this defect about as gracefully as possible, but it’s been around for a long time now and it doesn’t seem to be fixed yet.  You can do better.  In fact, you must do better, or you insult your customers.

5. Add Blu Ray to Xbox

I know, streaming movies are the future; physical media is legacy technology.  So if that’s true, why did you back HD DVD so hard?  You know why: for now, the film studios won’t allow a large selection of new release, HD, surround sound content be distributed on any medium other than Blu Ray or cable pay per view/on-demand.  Don’t you want home theater buffs to see the Xbox as a fantastic device for their rigs?  Don’t you want to put PlayStation 3 out of its misery?  And if you follow my suggestions above (move Media Center to the Xbox and fix the Red Ring problem), you’d have it all sewn up.  Do I think Blu Ray functionality will move a lot of units?  No.  Do I think that it would move more units with desperately needed influential home theater consumers?  You bet.  And you might sell more ZunePass subscriptions in the process.

But while you’re at it, make the fan quieter, please.

6. Make More of Windows Home Server

Home Server is a fantastic product.  And for reasons unknown to me, it seems like you’re letting it languish.  Development of the add-in ecosystem seems underfunded.  WHS’ unparalleled ease of use and reliability for home PC backup (and emergency restores) goes unsung.  Product cycles are slow.  Support for your OEMs, who are doing great work, especially in the green space with Atom CPUs, seems lacking.  You’ve married a trophy girl and you keep her cloistered at home!  That’s cruel, unusual and, um, incredibly ill-advised. 

Make use of this ace card, and while you’re at it, give it real integration with Media Center.  The integration thus far proof-of-concept quality.  You should go way past that – both products will benefit immeasurably.

7. Set Up a Partner Platform for Custom Installers

There’s a whole sub-industry of companies that install, integrate and configure home theater, security and connected home products.  They have an industry group. They are influential in the high-end of the consumer electronics industry, and so are their customers.  They love Media Center and they love Windows Home Server.  But I have talked to several of them at the Consumer Electronics Show and they tell me you don’t love them.  They find it very difficult to do business with Microsoft, even though they want nothing more than to sell and evangelize your platform.  This is a travesty.  Please fix it.  Get Allison Watson and the Microsoft Partner Network on board and have her hire someone who knows how to run a channel program for consumer electronics companies.  Problem solved.  Markets expanded.

8. Make Your Own Hardware

In other areas, I know you love your partners.  I help run one, so I appreciate that.  But when it came to Xbox and Zune you built them it yourself (albeit on a contract basis, which is fine).  Windows Phone 7 has a chance to work as an OEM play, but it would work better if you produced the devices.  At least consider building a reference device that sells alongside your OEMs’ offerings.  That’s what Google did with the Nexxus One.  And while that phone was not itself a big seller, it catalyzed two wonderful things : (1) a quality bar was set and (2) partners exceeded it.  Before the Nexxus One, the best Android handset out there was the Motorola Droid. The Nexxus One was better, and the HTC Droid Incredible and Evo 4G are now even better than Google’s phone, which is why Verizon and Sprint decided not to carry it.  Imagine if all Windows Phone 6.x devices were on par with the HTC HD2.  I tend to believe you’d have a lot bigger market share than you do now.

9. Continue with Your Retail Initiative

From what I hear, it sounds like it’s going well.  And this goes right along with making your own hardware.  When you build it, they will come.  And then it makes the likes of Best Buy and Staples do better.

10. Make an Acquisition (or Two)

TiVo and/or Moxi look ripe for the picking.  With their ability to build stuff people love and your ability to run a business, you might just have something.  But do a better job than you did when you bought Danger.  Buy the ideas, not just the customers, eh?

11. Make Beautiful Stuff

You’ve heard this one before, I know.  But I have some head-shrinking advice on this one.  You know that Apple obsesses over its industrial design.  You know that appeals to consumers.  But it seems you think doing so is Apple’s game exclusively and so you shouldn’t even try.  Bull dinky.  Come to New York and visit the Museum of Modern Art’s Architecture and Design gallery.  You’ll see that lots of companies and product categories have had very high design value well before Apple existed.  You can do this, and the Zune HD was a great start.  Now run with that.  Find those negative voices in your head that are telling you that you can’t and shut them up.  For good.

12. Burst the Bubble

Some of the products you’ve built seem like they were conceived in a bizarro world.  That would appear to be the result of groupthink.  You must do better.  And there’s lots of people willing to advise you.  This includes just about everyone in the Regional Director program, and probably a bunch of MVPs.  Heck, I bet the guys at Engadget could help out too.  Imagine if you let them see the Kin before it shipped.  Talk to high-end gear consumers.  Talk to Best Buy and CostCo customers too.

Signing Off

I hope this was of value to you.  As I wrote this I kept telling myself how obvious, even trite, some of these pieces of advice were and then, because of that, doubting they’d really help.  But I decided that they must not be obvious to Microsoft.  Sometimes when you get wrapped up in stuff, it’s hard to clear your head.  I think my head’s pretty clear here though (I’m wrapped up in other stuff), so maybe my perspective can help.  If not, well, then, I guess they all can’t be super nice.