6/20/2012

microsoft's challenge


Well, Microsoft finally released it. The WinPen, no, Pocket PC, nope, XP Tablet, huh-uh, Smart Display, ha, Project Origami, oops, Courier, nada.

I refer, obviously, to the Surface, Microsoft’s vision of the future that was released yesterday. No, wait, in 2008. And it’s not so much released as it’s teased.

Microsoft deserves all of the sarcastic comments that can be thrown at it. They’ve been working on the basic current tablet form for over a decade, and in the meantime, Apple’s angle from the old Newton line not only came to market first, but the iPhone reconfigured the entire cell phone industry, and the iPad actually exists, now, in the present. For sale. By the time the Mac had been out for five years in the 1980s, Microsoft was already out with version 2 of Windows.

I’ve been working on a long piece ever since I started chewing on the whole Windows RT is called Windows but doesn’t-run-Windows-software-except-when-it-does strategy announcement. The reason is that for all the poking-fun to be had here, I think Microsoft really is moving forward with an innovative approach trying to transition to the next stage of computing, in stark contrast to most other companies (and most other industries, for that matter).

The short of the story is that the initial personal computing paradigm that developed in the late 1970s and early 1980s was a time of vibrant innovation and competition. What’s so remarkable about the business of the computer industry is that virtually every company died. Apple and Microsoft are basically the only two major companies that survived with any meaningful level of influence, and one way of understanding that survival is that they both were able to transition from an initial successful product to a second, improved product.

Same end result, but they got there in very different ways. Apple reinvested earnings from the Apple line of computers into the Macintosh line of computers. Microsoft leveraged its market power in MS-DOS to transfer market power to Windows.

Apple’s strategy is repeatable: a company can continually improve the customer experience over a very long period of time, if that is the focus of the company from the top down. Indeed, that’s what a market-based system of political economy is supposed to provide.

However, Microsoft was dependent upon a unique set of circumstances, a perfect alignment of the stars. Odds are that the legal, business, and technological environment of the 1980s will never appear again. Microsoft, unique among all of the tech companies, didn’t make ‘computers’ – they only made the operating system. It was IBM’s brand in corporate America, not anything technological in MS-DOS, that gave Microsoft market power. It’s also important not to forget Intel in the story, since the 1990s were really a Wintel duopoly more than a Windows monopoly. For three decades, Microsoft has sold MS-DOS and then Windows not to consumers, but to manufacturers, because being compatible with the IBM standard was paramount.

Today, IBM no longer even makes personal computers, and corporate buying represents a smaller overall share of computing purchases. Accessing networks (such as the internet, wi-fi, and cellular communications) and providing mobile form factors are the primary tasks assigned to an increasing number of devices. There are also a much greater number of users who have made their mobile computing choices today than had made their personal computing choices a quarter century ago. Microsoft’s challenge is how to make the next transition, how to be relevant in the mobile computing paradigm and beyond (assuming, of course, it wants to do that).

Does it try to leverage the market power of Windows to sell manufacturers on the next product, or does it try to make a device itself that will appeal directly to consumers? Both strategies are interesting, and personally, I think Microsoft could execute either one reasonably well. What I think is critically important to understand is that these strategies are completely incompatible with one another, and there are tradeoffs between them. I wonder if Microsoft’s senior executives understand that, or if they have actually drunk the Kool-Aid and think they can simply muscle into mobile touch-based devices the same way they transitioned to the mouse and desktop. In other words, would Microsoft accept being a top five manufacturer of mobile computing devices? Or would they rather bet the company trying to reclaim the glory years of the 1990s?

As a long-time Apple user, I do enjoy the delicious irony that Microsoft management has appeared increasingly trapped over the past few years by the very success of that silly toy of a user interface.

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