Something that Paul Thurrott has been working on for some time, he has finally crystallized it into a post on his site. This is a longish clip from a longer article, but there is some really thought-provoking content here. And he is up front that these are just some ideas to initiate a discussion, not (necessarily) a prescription from someone who thinks he knows better. One of my favorites is "Embrace your past" and "Go on a buying spree," and there is "Learn better branding" for @AlexSchleber 
The post itself doesn't allow comments, so he has an open thread here: http://www.winsupersite.com/blogs/entryid/76452/discussing-how-microsoft-can-fix-microsoft if you are interested.
A few years back, during the Windows Vista debacle, I would complain to various Microsoft employees and PR people that the software giant wasn't responding to Apple's increasingly antagonistic (and incorrect) portrayal of the OS in its infamous "I'm a Mac, I'm a PC" ads. Finally, an exasperated Microsoftie called my bluff and asked what it was, exactly, that I recommended they did. I'm a professional critic, I replied. So I can easily point out the problem. But fixing it is your job.
But the wider issue here one of responsibility. It's easy to criticize, to point out the mistakes you believe others have made. And on the Internet, especially, such criticism is often anonymous and cheap, without merit.
When I look back over the past decade with Microsoft, I see lots of missed opportunities. I see some great products, yes, but looked at very generally, the 2000s was the time when Microsoft ceded control of the tech industry, control it now shares with other, faster-moving companies such as Apple and Google. There is no doubt--none at all--that Microsoft will continue into the future as an enormous, financially successful superpower. But my concern as a technology enthusiast is that Microsoft, by ceasing to lead, will cease to be interesting or, worse, relevant.
Understanding the cause of a problem is, of course, important. But it's only a first step. Once you've identified that there is a problem, the goal should be to solve it. And this is of course the area in which professional critics such as myself have always come up short. I've been pointing out my belief that there is a problem for years. But how can we fix this problem? How can Microsoft fix this problem?
The truth is, I really don't know. But helped by the Twittersphere and listeners of the Windows Weekly podcast, I've assembled a list of often-contradictory suggestions that should at least trigger some debate. Do I expect Microsoft to implement any of these changes? No. Do I believe that any of these changes can "save" Microsoft from a fate that perhaps only I believe would be catastrophic? Again, no. But let's start the conversation at least.
With all that in mind, let's dive in. Here are some ways in which I feel Microsoft could and should fix itself. In no particular order...
You're a business software maker, deal with it
Separate the wheat from the chaff
Microsoft needs to figure out what works and keep what's successful, and be aggressive about trimming out the products that are not successful. And the way it does this is by evaluating this success on a product by product basis and not allowing successful products to subsidize the dogs beyond an initial three year (or whatever) "startup" phase. If it's not working, just kill it.
Simplify
My take on employment at Microsoft--which has been confirmed by dozens of current and former Microsofties--is that you sign up expecting to change the world, get beat down by the endless infighting and corporate hierarchy and then end up just punching the clock, collecting a salary and benefits while nothing gets done. They mean well. It's just that most aren't empowered.
Realizing it was heading down a similar path, Google recently retrenched, cut away at levels of hierarchy and sped up the decision making process. (And they were already moving much more quickly than Microsoft!!) The software giant could learn from its competitors and simplify its own business, cull executives and hierarchy, and speed decision making. It's overdue. The creeping size of Microsoft is killing it from within.
Feel fear
Move more quickly
Split up the company
Learn better branding
Branding matters, a lot. Avalon was cool, Windows Presentation Foundation is not. Longhorn? Awesome. Windows Vista Home Premium 32-Bit Upgrade Edition? Terrible. (Imagine if Microsoft just called the thing Windows Longhorn, as Apple names things like Mac OS X Lion. Perfect.)
Branding is also hard, and there are actually examples where Microsoft curiously decided not to tack Windows or Windows Live on the front of something (maybe Bill Gates was on vacation that week) and actually came up with a unique brand. The trouble is, some work, some don't: Xbox worked, Zune did not. Bing? Still up in the air, but the simple fact that many people still think of "Chandler Bing" when they hear this name--seven long years after "Friends" went off the air--is perhaps a bad sign.
Fire Steve Ballmer
But Microsoft doesn't need a business guy at the top. It needs people who understand technology. So on that note, I present my choices for this leadership team: Mark Russinovich, who possesses a titanic technical genius, and Steven Sinofsky, who may be the ultimate manager of engineers.
By the way, Bill Gates is not coming back, so get over it.
Start over from scratch
It's worth mentioning that some parts of Microsoft already get this. Microsoft's servers are already transitioning to superior, cloud-based services, and those business units are using this migration as an excuse to get things right this time. So architecturally and from a user experience standpoint, these new products are in fact new, technically superior, and simpler to use. Brilliant. So this advice applies only to client version of Windows and other end user products.
Stop smothering good ideas
There's obviously some cross-over here with my previous comments about corporate hierarchy and whatnot, but Microsoft needs to say Yes to good ideas more frequently. This can only happen within an organization that actually listens and rewards the forward thinkers. You know, places like Apple and Google.
Sweat the details
Windows 7 was successful because it took a solid foundation from Vista and cleaned it up and simplified it. But even Windows 7 lacks detail-orientation, with a mélange of user interfaces both new and old. So it's better. But it's not refined enough.
This is the type of thing Apple gets right, or at least gets it better. (Not perfect though. Even the beloved OS X is marred by some curiously inconsistent and scatter-brained UIs.)
Don't be afraid to copy
Recognize when to partner and when not to partner
The thing is, Microsoft has a bad habit of simply aping a previously successful strategy when it enters new markets. It did this with mobile devices (PDAs, smart phones, and now tablets) and it did it with video games, though few people remember it: The first Xbox, really, was arguably Sega's Dreamcast. And as history has shown us, the partner strategy only works some of the time. Sometimes you need to stand alone.
I'd also point out that some of Microsoft's biggest partners are all invested in other platforms now. For example, the world's biggest PC maker, HP, is now starting to push webOS first as a dual-boot thing with Windows on PCs. But you know where this is going to end up if HP is successful. And it's not just HP. Dell and many other companies have jumped on the Android bandwagon. And they'll all drop Microsoft like a bad habit when and if that other stuff gets big enough.
So why does Microsoft protect these goons when they obviously aren't returning the favor? Why did it hand AT&T the keys to the kingdom by allowing it, and not the users of Windows Phone, to determine when software updates can be delivered to their devices?
Embrace your past and port to all successful platforms
I'm talking full-blown versions of Microsoft Office on iPhone, iPad, and Android. Xbox LIVE games. Go nuts, guys. The world is heterogeneous now. But you know this.
Really embrace the cloud
To be fair, Microsoft really is embracing the cloud. But I'm thinking more along the lines of software delivery. Much of the software giant's client catalog--Windows, Office and Xbox 360 games, for example--is delivered primarily on physical media, like it was 1995 again. Let's rid the world of boxed software, Microsoft. Make it all electronic. Don't just move to the cloud. Be in the cloud.
Since we're reaching for the stars here, let's end the silly licensing restrictions for individuals while we're at it. When you buy it, you own it, and you can install it on any PC. This is the new baseline, thanks to the Mac App Store. And it's overdue.
Go on a buying spree
While many people have criticized Microsoft's recent decision to purchase Skype at what appears to be an 800 percent premium, at least they're putting themselves out there and making a big bet. Surely, this move deserves some respect, since it suggests that someone at Microsoft actually believes they need to do ... something.
With this in mind, Microsoft needs to go on a buying spree, spend its cash assets until there's nothing left, and then integrate the hell out of what they bought. If you can't build it in-house, go get it. I'm talking about Twitter for starters. Then Adobe. Then, when it's fallen hard enough, RIM and/or Nokia. You can't build everything, Microsoft. And you don't have to.
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