Five years ago, Steve Ballmer felt compelled to shake the Microsoft rank-and-file out of a worrying sense of complacency. A disruptive new competitor was forcing the software company to "challenge old habits and seriously rethink business-as-usual," he warned in an internal e-mail.

The Microsoft chief executive was right to be worried. He was wrong, however, about where the real competitive danger lay. The source of his fears at the time was the Linux open source operating system.

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A search engine by the name of Google did not even figure in the rallying call to the troops - indeed, it was absent from other public discussion of Microsoft's competitive position that year.

The failure to spot the threat from Google until it was too late - and how Microsoft has struggled to find a response, failing this year to first buy and then ally itself with Yahoo - has become the touchstone by which the world's biggest software company is judged.

With the departure of Bill Gates from his full-time involvement at the company he co-founded at the end of this month, it has also prompted wider questions about the future.

"Can the new leadership reinvent (the company), because it clearly needs to be reinvented," says George Colony, chief executive of Forrester, a technology research company.

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The Google predicament gets to the heart of a post-Gates Microsoft. The Microsoft co-founder perfected a "fast-follower" strategy that made it the most feared company in the tech industry. It was seldom first with a new technology, but it was Mr Gates' technological awareness and mastery of strategy that enabled it to latch on to new ideas created by others and come out on top.

More than two decades ago, it was that drive that persuaded Ray Ozzie, a rival software developer, to back Microsoft's early faltering versions of Windows.

"I had to make a choice of who to bet on, because on the PC it wasn't obvious - Microsoft was the furthest behind of all of them," says Mr Ozzie, who joined the company three years ago and is now its chief software architect. It was Mr Gates' zeal that tipped the balance. "You know, sometimes you can just look in someone's eyes and tell that they are really determined that this is going to be," he says. "Microsoft just kept on persevering and kept succeeding."

Mr Gates may have had the vision and command of grand strategy, but it was the double-act with his old college friend Mr Ballmer that turned Microsoft into a world-beater. "They played off each other - with the two of them together it was almost like an atomic reaction," says Mr Colony.

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Why an approach perfected over the course of three decades failed Microsoft in the internet search business - and whether the company has what it takes to compete in a new computing era without Gates - have become the central questions for Microsoft's new management team.

Mr Ballmer himself puts the failure down to the development delays in Windows Vista. That "did calcify our ability to react to anything", he says.

He says Microsoft's core competitive asset - what he calls its "long-term app-roach" - is undimmed. This turns, he says, on "taking on bold challenges, being patient, being persistent, being relentless. We don't pull back, it's not what we do. Sometimes we get shareholders who will question us on that, but I think it's our great strength."

Alongside that, Mr Ozzie claims a technological awareness that in some ways puts him ahead even of Mr Gates. "Bill is Bill, I will never be Bill," he says. "But I do certain things differently...I'm much closer to the technology and products."

Comparing his experience with that of Eric Schmidt, chief executive of Google, Mr Ozzie says that living through earlier big shifts in the tech industry has also left him with an ability to do the "pattern-matching" needed to identify the tech industry's next big thing.

"No one company is going to, at any given point in time, understand how to advance ahead in every single dimension, but it's our job to make sure that we can in as many dimensions as possible," he adds.

While attention outside the company is focused on its failure in search, Mr Ozzie ticks off other areas where Microsoft has done better, such as its early success in the internet portal business and its creation of many of the tools and technologies on which web development currently rests. Beyond the internet, other Microsoft executives point to the success of the company's server business as proof that it can thrive beyond its traditional desktop monopoly.

Microsoft has used external threats before to mobilise its massive developer base, as Mr Ballmer once did with the threat from Linux. In time, even the sting of losing the spectacularly profitable search market may fade. "It isn't as though there are only two gold mines on planet earth," says Nathan Myhrvold, Mr Gates's former technology right-hand man who left Microsoft nine years ago.

Yet doubters say there is more to it than this. Persistence and technological vision are not enough, says Mr Colony: Mr Gates' unique skill was to turn Microsoft's technologies into de facto software standards. Given the natural tendency for successful technologies to become monopolies - since standardised technology creates a basis for others to build on - Mr Gates proved an unrivalled master in carving out a central role for his software. So far, it is Google that has done best in emulating that in the internet era.

At the age of 52, and looking forward to what he says will be another nine years running the company, Mr Ballmer seems to have boundless energy for the fight ahead. His trademark "boosterism" is undimmed as he contemplates the debacle from Microsoft's involvement in internet search.

"We have only one way to go, and it's up, baby - up, up, up, up, up," he roars.

This time, though, he will have to prove he can fly the aircraft solo.