David The Disruptor v. Microsoft The Goliath

John Kirk / September 5th, 2013

This is part two of a two-part series. Part One looked at the fall of Steve Ballmer and the decline of Microsoft in mobile. Part Two tries to discover why it all happened.

Introduction

Steve Ballmer was just fired after 13 uninspiring years at Microsoft. A hotly debated question is whether Ballmer failed because he was a bad manager or whether he was simply a victim of disruptive innovation.

Analogy: David v. Goliath / Disruption v. Microsoft

PATIENT: Doctor doctor,- I keep comparing things with something else.
DOCTOR: Don’t worry, it’s only an-alogy

Disruption is often described as a David v. Goliath story. Let’s take that analogy and run with it.

Saul and the Israelites are facing the Philistines near the Valley of Elah. Twice a day for 40 days, Goliath, the champion of the Philistines, comes out between the lines and challenges the Israelites to send out a champion of their own to decide the outcome in single combat, but Saul and all the Israelites are afraid. David, (a mere shepherd,) accepts the challenge. Saul reluctantly agrees and offers his armor, which David declines, taking only his sling and five stones from a brook.

David and Goliath confront each other, Goliath with his armor and shield, David with his staff and sling. David hurls a stone from his sling with all his might and hits Goliath in the center of his forehead, Goliath falls on his face to the ground, and David cuts off his head. ~ Excerpted from Wikipedia

Obviously, in our story, David represents disruption and Goliath represents the fallen giant, Microsoft.

The Rules Of Disruption

Disruption occurs:

    • When a new product or service competes with a successful incumbent product or service.

David challenged Goliath.

The Apple iPhone challenged Microsoft’s Windows Mobile. The iPad challenged low-end notebook and desktop computers running Microsoft Windows. Google Docs challenged Microsoft’s Office Suite.

    • When the features of the new product or service are inferior and the features of the incumbent product or service are superior.

David was young, small, weak, had no armor and no weapon to speak of. The incumbent, Goliath, seemingly had all the advantages and no disadvantages. What was there to fear?

The iPhone, iPad and Google Docs were the “David” to Microsoft’s “Goliath.” The iPhone was low capacity, with no stylus or keyboard and with few advanced features. The iPad was underpowered – nothing but a big iPod Touch. Google Docs were immature and terribly limited in functionality. Microsoft seemingly had all the advantages and no disadvantages. What was there to fear?

 

    • When, unbeknownst to the incumbent, the existing product or service is over-serving a large part of their current customer base. The incumbent’s supposed strengths are actually irrelevant to the vast majority of its customers. This means that the challenger need only provide “good enough” service to satisfy the over-served part of the market.

Goliath was the master at one-on-one, hand-to-hand combat. With his size, strength and power, he was simply unbeatable. However, David’s sling shifted the shape and size of the battlefield. David didn’t have to engage Goliath’s strengths. He could attack Goliath from a distance, thereby negating Goliath’s strengths and turning Goliath’s size into a weakness.

Microsoft was a major player in mobile phones1 and dominated PC operating systems and Professional Software Suites. With their size and ongoing monopolies, they were simply unbeatable. However, the iPhone shifted the battlefield from styluses and menus to touch, the iPad shifted the battlefield from power to simplicity and mobility and Google Docs shifted the battlefield from expensive, powerful and compatible on all PCs to free, simple and compatible on all browsers. The iPhone, iPad and Google Docs negated Microsoft’s many strengths and turned those strengths into weaknesses.

    • When the challenger, in addition, provides exceptional service where the incumbent is weakest and where the customer’s unmet needs are the greatest.

David was exceptionally strong where Goliath was exceptionally weak. His small size and lack of heavy armor made him quick and mobile. His sling made him agile and deadly from a distance.

The iPhone, iPad and Google Docs gave people the simplicity they craved at the price of complexity and power that they neither desired nor needed. From Microsoft’s vantage point, users were replacing powerful tools with weak “toys” (replacing powerful swords with limited use slings.) From the user’s vantage point, however, they were giving up nothing of practical use (heavy armor that they could not wear and weapons that they could not wield) for the sake of mobility and ease of use.

    • The incumbents cannot effectively respond without sacrificing the benefits they are receiving by maintaining the status quo.

The incumbents were no fools and they were no slouches, either. Both Goliath and Microsoft saw the shift in battle strategy and they would have liked to have responded in kind. However, their very nature prohibited them from doing so. Only by giving up his strength, armor and sword could Goliath have competed with David’s sling. And then his size would have slowed him down and hampered him anyway.

Only by giving up their monopoly profits in Windows and Office, could Microsoft have competed with the lower margin2 iPhone, iPad and Google Docs. And then, Microsoft’s size and structure would have made it impossible for them to keep up with the nimble Apple and Google, in any case.

The incumbent is caught in a bind. He can’t cater to the new service without abandoning the old. And he can’t abandon the old service without abandoning the advantages that go along with it. Furthermore, any such change would make his best customers, and his best incentivized employees, and his best shareholders (or, in the case of Goliath, his fellow soldiers, his commander and his King), mad as hell.

20/20 Hindsight And Revisionist History

It’s very easy to criticize both Goliath and Microsoft. The answer, in retrospect, appears perfectly clear. Goliath should have simply reshaped his body into that of a lean, mean, sprinting machine and become skilled with the sling. Microsoft should have abandoned its obsession with Windows and focused on new, innovative products that would cannibalize Windows.

Or not.

There is always an easy solution to every human problem—neat, plausible, and wrong. ~ H. L. Mencken

The above is all perfectly good advice…assuming one knows absolutely nothing about human beings. Not only does this course of action run counter to human nature, it runs counter to common sense, too.

PATIENT: Doctor doctor, I’ve broken my arm in two places.
DOCTOR: Hmm, I’d advise you not to go back to either of those places then.

Telling someone to do what no sane person in their their position would do is not really good advice, it’s madness.

Too bad that all the people who know how to run the (company) are busy driving taxicabs and cutting hair. ~ George Burns

It’s easy for those of us who have have absolutely nothing to lose, to blithely provide radical advice to those who have everything to lose. But it’s also easy for those who have “skin in the game” to reject such wrong-headed advice. If either Goliath or Microsoft had taken the above-prescribed advice, it would have been a case of curing the disease by killing the patient.3

Microsoft Is Like A Trust Fund Baby

Microsoft does have one major advantage that most disrupted companies do not. Microsoft has — and will continue to have for quite some time to come — a huge stream of income.

This means that Microsoft can, unlike, for example, Palm, Nokia and Blackberry, make the changes necessary to survive. Their resources give them the time that most companies are denied.

But just because they can do something, doesn’t mean that it would be easy to do and just because they can do something doesn’t mean that they will choose to do it either.

Conclusion

When evaluating companies, and in particular their executives, I find it useful to start with the assumption they’re highly intelligent. ~ Ben Thompson

Was Ballmer a bad manager or was he a victim of innovative disruption? I have no doubt that Ballmer made some serious mistakes. But it was not what he did wrong, but what he did “by the book” that got Microsoft into the mess that it’s in today.

A man is known by the company he organizes. ~ Ambrose Bierce

In the long view, you can’t really criticize Ballmer and Microsoft4 for striving to do what they do best. It’s innovative disruption, not Ballmer, that’s sinking the good ship Microsoft.5

I must be willing to give up what I am in order to become what I will be.” – Albert Einstein

  1. 42% market share in 2007 []
  2. Yes, lower margin. The iPhone and the iPad had high margins for Apple because Apple made their profits from the hardware. However, Apple’s integrated model bundled the software and Android’s subsidized model gave away the software for free, thus making it impossible for Microsoft to maintain their software licensing margins. []
  3. Cure the disease and kill the patient. ~ Francis Bacon, Essays [1625]. Of Friendship []
  4. “But why would anybody want that CEO job as long as Bill stays on the board? (Steve, too, most likely, given that he still owns 333 million Microsoft shares.) Both need to quit to give the newcomer a free rein and air to breath. Otherwise, failure isn’t just an option, but the most likely outcome.” ~ Joachim Kempin []
  5. “Microsoft’s next CEO will need to be Superman. Here’s the mess Steve Ballmer will leave for his successor:  
–Windows 8 has failed to produce a turnaround in Microsoft’s gradual decline.
–The Surface tablets have more or less died in the market.
–The company’s just been through a massive top-level organizational change. Those things typically take a year to trickle down through the organization, as the lower levels of management get resorted and reassigned. That process will be disrupted while everyone waits to see if the new structure will stick with the new CEO (unlikely; new CEOs almost always want to change things).
–And now Microsoft needs to mesh the Nokia and Microsoft businesses. There’s a cultural challenge: Nokia’s is a collectivist Finnish hardware company while Microsoft is a dog-eat-dog hypercompetitive software business. There are also operational challenges. As I learned when I worked at Palm, it’s incredibly difficult to manage an operating system to please both your in-house hardware team and your licensees. They always want conflicting things. Microsoft claims it can both license Windows Phone and run Nokia. I hope that’s just bluster, because I don’t think it will work in practice.” ~ Michael Mace []

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?
  • GaryB

    Great article. One weakness a publicly held company has is the relentless short term outlook dictated by stock holders. Steve Jobs is considered by many to be a great CEO but, he would have been fired at any publicly held tech company other than Apple. This dovetails into Horace Dediu’s Innovators Curse theory.

  • DarwinPhish

    “Microsoft dominated mobile phones”

    When was that?

    • FalKirk

      My statement was probably hyperbolic.

      According to Wikipedia, Windows Mobile had 37% market share in 2006 and 42% in 2007. That may or may not qualify as “dominant” but its still impressive, no?

      http://en.wikipedia.org/wiki/Windows_Mobile#Market_share

      Thanks for keeping me honest. 🙂

      • DarwinPhish

        Those nubers from Wikipedia are US only and the US was a laggard in smartphone adoption. In 2006/7 US Smartphone sales were relatively small. Windows Mobile never came close to approaching Symbians world-wide market share. In 2007, Symbian outsold Windows Mobile by more tha 5-to-1.

  • Good use of analogy.

  • rationalchrist

    Theory is sexy, and reality is dull. MS is lazy and Ballmer is a bad manager. Case in points: 1) After Window XP debut in late 2001, it takes them 7 years to release next acceptable version Windows 7 in mid 2009. In the same timeline, Apple released first iPod in late 2001, and iPhone in mid 2007, total two new OSes in the same time span. iPod OS is retiring now. Microsoft becomes extreme incompetent since 2001. Lazy, pride, or internal fighting, whatever gets them. 2) Netscape was trying to disrupt the Windows platform with browser platform. The Old Microsoft responded fast and furious, released IE1 mid 1995, IE2 late 1995, IE3 1996, IE4 1997, IE5 1999, IE6 2001. In 1999 Netscape is acquired by AOL. Then MS is getting lazy on IE7 2006.
    Ballmer simply is not delivering. Any business manager not delivering is a bad manager. A non delivering manager is not a Goliath, and scares nobody let alone David.

  • As always, John Kirk gives us an excellent article . The analogy between Goliath and David has rarely been used in such a good way. I personally have never liked Microsoft, nor its products nor its plagiarism, much less its despicable way of doing business. But the bad thing wasn’t that Microsoft was a company absolutely “evil”; no, the real problem was that no one could compete with it, face it, its power was overwhelming and absolute because no one else was doing what Microsoft did.

    Fortunately for everyone (yes, everyone literally ) the new technologies and the new companies (like Google ) or the renewed ones (as Apple) were able to do what nobody couldn’t, even the government of the United States: undermining until almost destroy the monopoly of Windows and Office and put to its knees to Microsoft, the most powerful company in the last 20 – 25 years in the whole world.

    It is true that mistakes of Steve Ballmer had much to do in the fall of Microsoft, as it is also true that Microsoft can not give up or give away the products that became an empire (Windows and Office ) because then drowned fall under its own weight business; but it is also true that, in the real world, Microsoft did not have a single reason to stop working as it did until the advent of the iPhone. Until then, there was not a single reason for Microsoft to seek new business opportunities, or new technologies. It had it all : 90% of the desktop market (Windows), 97% of production applications market (Office), 40% of the mobile market (Windows Phone), etc. So, why change that structure? For Microsoft it was not necessary to change anything.

    But for the rest of the world, it was essential to change everything. Apple has always had its eyes on Microsoft, and Google’s meteoric rise turned out to be the perfect complement. For when Microsoft was fully aware of the threat posed by the renewed Apple and the explosive Google, and tried to react, it was too late. And it seems that its fate is written, and even if that destination is not disappearing, it does mean that Microsoft will end in the full irrelevance .

  • James King

    This is a rehash of what Horace Dedieu presented on Asymco and just as short-sighted.

    Goliath had a simple strategy to counter David:

    Simply raise his shield and charge. What killed Goliath was overconfidence, not David’s supposed “strengths.”

    What killed Microsoft was its inability and/or refusal to invest in UX. Bottom line, Microsoft’s engineers thought people wanted products that worked like Windows, despite what had to be MASSIVE evidence to the contrary. If you are the last man on Earth, breeding won’t be a problem regardless of how ugly you are. But add ONE good looking guy and your prospects start to look a lot bleaker.

    The reality is that Microsoft could have easily “disrupted” itself with minimal risk to its cash cows. How do I know? Because Windows and Office are still printing cash even though Microsoft’s monopoly in “connected devices” has been completely decimated.

    At some point, we have to understand that “disruption theory,” while pretty solid, is still just a theory. It doesn’t factor in the arrogance and irrationality that affect organizations on a daily basis. If businesses were by nature rational, then internal politics and bureaucracy simply wouldn’t exist.

    “The incumbent is caught in a bind. He can’t cater to the new service without abandoning the old. And he can’t abandon the old service without abandoning the advantages that go along with it. Furthermore, any such change would make his best customers, and his best incentivized employees, and his best shareholders (or, in the case of Goliath, his fellow soldiers, his commander and his King), mad as hell.” – John Kirk

    As I made clear to Horace, this is a non-sequitur logical fallacy. There is simply no empirical evidence to support this supposition other than the end results. It’s similar to the study of economics, there is only an analysis of the results because identification of the causes is practically impossible based on how the system is constructed.

    • benbajarin

      “At some point, we have to understand that “disruption theory,” while pretty solid, is still just a theory.”

      Amen to that. I’ve been trying to remind people of this point whenever disruption gets talked about as law.

      • aardman

        I would caution anyone who wishes to be taken as a serious, rational thinker not to adopt the line of reasoning that creationists use when they say “evolution is just a theory”.

        The word “theory” has at least two meanings: 1. A conjecture or hypothesis as in “my theory about that is . . . “, and 2. A logical explanation that is supported by repeated observation and experimentation and has stood up to attempts at refutation, as in “the Theory of Evolution”. Creationists engage in sophistry by attacking evolution using the wrong definition of “theory”.

        • benbajarin

          Of course that’s true. But evolutionary theory and disruption theory are no where near in similarities. Disruption theory is fallible. It is situationally true but it is not absolutely true from a general sense.

          • James King

            Agreed.

          • aardman

            I see your point.

        • James King

          The point regarding “x is just a theory” is not that it shouldn’t be taken seriously, but that further observation may significantly alter its nature. A theory is limited mainly to what is quantifiable and observable UP TO THAT POINT. Further observation over a longer time frame may change it.

          As for “disruption theory,” it meets the “observable” criteria but not the “quantifiable” one. People see it happening but are having a hard time understanding WHY it is happening. Even a scientist would think it does not provide enough explanation for the “disruption” phenomena in business.

          • steve_wildstrom

            I would go further and say that disruption, as popularized by Clayton Christensen, isn’t even a theory in the scientific sense because it lacks universal applicability. It is an explanation of a common mode by which once dominant businesses lose their dominance. Christensen disruption, which occurs when a competitor comes up with a cheaper, “good enough” product, does not explain all such falls from grace. For example, the U.S. auto industry lost its dominance because it produced products that were so bad that customers were increasingly unwilling to buy them at any price. Kodak was done in by a technology it played a major role in developing that destroyed the recurring revenues from film, paper, and chemicals, its business model depended on, This is very different from classic Christensen disruption.

          • James King

            Agreed. I do think “disruption theory” is valid, just not in this case.

            “The incumbent is caught in a bind. He can’t cater to the new service
            without abandoning the old. And he can’t abandon the old service without
            abandoning the advantages that go along with it. Furthermore, any such
            change would make his best customers, and his best incentivized
            employees, and his best shareholders (or, in the case of Goliath, his
            fellow soldiers, his commander and his King), mad as hell.” – John Kirk

            Here’s the knock: Microsoft was doing the very things that would p*** off its constituents. It tried desperately for years to build mobile and consumer products, wasting BILLIONS of dollars. I don’t think customers, shareholders, and employees had any problem with Microsoft attempting to disrupt itself, I think they’re all mad that it FAILED.

            Let’s be realistic… if Microsoft had managed to introduce products as exciting or disruptive as the iPhone or iPad, its stock would have SKYROCKETED. No way would they have been penalized. In fact, I think PC sales would have CLIMBED as a result of the passive positive marketing and network effects. As for Windows and Office, they would have continued to print money they way they are STILL doing now even having been disrupted by iOS and Android. Add in Microsoft’s wins in the enterprise space, and it could have easily afforded to disrupt itself. In many ways, it was in better shape to disrupt itself than Apple.

            Think of the billions Microsoft lost on XBox, Zune, Kin, Bing, MSN, Surface, etc. Those failures couldn’t have been better than Microsoft making ONE decent OS capable of running on phones and tablets.

            I’d buy “disruption theory” if Microsoft hadn’t been at least a half-decade ahead of Google and Apple in mobile. I just think it dropped the ball. Considering how much Ballmer and the rest of Microsoft’s upper management are compensated, a little accountability isn’t too much to ask. Ballmer is just going to have to settle for a mixed legacy.

        • Kizedek

          If I may just disabuse you for a moment of your pet “theory” as to what Creationists do or don’t take issue with…

          The issue is not in the use of the term “theory” in any of its definitions. The issue is in the less than vigorous application, disingenuousness and double standards employed in the use of the concepts “repeated observation” and “experimentation”, when it comes to macroevolution.

          “Repeated observation” and “Experimentation” are the bedrock of good science and they should not be abused. Their definitions allow very little wriggle room. And yet, no repeated observation nor experimentation ever has been, nor likely ever shall be, conducted “in the laboratory”. That is the issue that Creationists have with Evolutionists making more of it than its being a theory in the first sense. Therefore, examine your own sophistry.

          That the not-so-scientific Darwin, who had issues with his religious father, sat on a rock in the Galapagos and turned some musings on the very interesting local populations and micro evolution into the pure speculation that became the Theory of (macro)Evolution — with all of the attendant hoaxes and damaging notions (like aryan superiority and the misunderstanding of organs like the appendix), and with very little in the way of hard science, between then and now.

      • James King

        Ben, I had a response to John that looks like it was removed. What gives? I actually self-censored the only questionable word in the post.

        • benbajarin

          I just looked at the disqus panel and don’t see anything in the pending or waiting moderation filter. Perhaps disqus had an anomaly during posting?

          • James King

            It was posted and then disappeared. Ah well, it was some of my better commenting. Hate when that happens.

          • benbajarin

            Really sorry about that. This is one of the reasons I don’t like disqus.

    • FalKirk

      “This is a rehash of what Horace Dediu presented on Asymco and just as short-sighted.” – James King

      I don’t agree with you, James, but I respect your argument. It would be interesting for me to talk this out with you. I’m sure that I would learn a lot.

    • FalKirk

      “Goliath had a simple strategy to counter David: Simply raise his shield and charge.” – James King

      Staying strictly within the boundaries of the analogy, I think that you are wrong. Raising his shield would have obscured Goliath’s vision and David was far to quick and nimble to have been caught by a charging Goliath.

      David changed the rules of the game by refusing to engage in hand-to-hand combat. He fought from a distance.

      Apple changed the rules of the game by shifting from power to convenience, from versatility to simplicity.

      We disagree. But for my part, we respectfully disagree. I see and understand your position. And I appreciate the feedback.

      • James King

        “Staying strictly within the boundaries of the analogy, I think that you
        are wrong. Raising his shield would have obscured Goliath’s vision and
        David was far to quick and nimble to have been caught by a charging
        Goliath.” – John Kirk

        Goliath had a helmet. If he raises his shield and is still able to look over the rim, his vision isn’t obscured. In this scenario, David has to hit a moving target that is much smaller. As for David being more nimble and quicker than Goliath, that is far from a forgone conclusion. An expert hand-to-hand combatant of Goliath’s size would have had to have a pretty high degree of quickness to wield his massive sword in such a fashion as to not be exposed by smaller, quicker fighters. On top of that, his shield would have been the size of a small wall and he likely would have also needed to have excellent footwork to prevent smaller fighters from getting inside his guard. Add in his obvious advantages in size and reach, and its no contest. Goliath only needed to close the gap.

        David got lucky. Goliath spent time gloating instead of fighting.

        Microsoft pretty much did the same thing.

        I’ve got nothing but respect for you John. I think you are an excellent writer and analyst and I thought the first article in this series was spot on. I just don’t think “disruption theory” applies in this case.

        • DarwinPhish

          At this point is worth mentioning that some scholars believe David hit Goliath in the knee, not the head.

          • James King

            If David hit Goliath in the knee while he was on the move, he definitely deserved the W 🙂

          • DarwinPhish

            There is also a good chance the story has been greatly exaggerated over the centuries!

          • benbajarin

            Now that we can say with a high probability is true. 🙂

          • FalKirk

            “some scholars believe David hit Goliath in the knee”

            I never knew that. Interesting. – DarwinPhish

          • DarwinPhish

            Goliath would have almost certainly been wearing a helmet and its unlikely a blow to the forhead would cause hime to fall forward. Plus, if I remember correctly, the Hebrew word for forehead is very close to the word for a part of thr leg.

    • DarwinPhish

      There is a fundamental problem with John’s application of Disruption Theory to what has happened and is happening to Microsoft (and John is not the only one who I see doing this). I believe its a stretch to apply Disruption Theory or the Innovators Dilemma to Windows Mobile. The typical narrative of Disruption Theory is that entrants (in this case Apple and Google or in the analogy, Saul ) can not succeed by going head-to-head with the incumbent (Microsoft/Goliath). The incumbent has too many advantages and resources to be defeated.

      However, this is not the case with Windows Mobile: it was not the #1 incumbent by any stretch of the imagination and it simply was not a very good product. Head-to-head, iOS, Android, Symbian (the real incumbent) and even RIM’s old OS successfully competed against it. Windows Mobile was a weak product and it’s failings go beyond Microsoft being late to the multi-touch UI. To this day, Microsoft still can not make the best mobile client to its own Exchange server!

      Where Disruption Theory applies nicely is in explaining how mobile devices like the iPhone and iPad are hurting Microsoft’s desktop business. Six years ago, neither Apple nor Google could really compete head-to-head with Microsoft on the desktop, at least not in any meaningful way (MS still has 90+% of the desktop business). However, by going strong into an area Microsoft was weak, mobility, Apple and Goolge were able to out-flank Microsoft. Microsoft is not headed toward irrelevancy because someone came up with a better desktop OS or office suite, but because of different products all together. As much as Microsoft may have recognized there was potential in mobile, I doubt they ever thought it would threaten the desktop. This is Disruption.

      To put a different spin on John’s analogy, think of the relationship between David and Saul. To become leader, David could not directly challenge Saul, who was more like Goliath than he was like David. But by fighting and beating Goliath he was able to demonstrate his bravery and skill and take the first step to becoming the eventual king (and yes, I realize this analogy has problems with other parts of the Biblical narrative).

      • benbajarin

        I agree. So the question now becomes can Microsoft play the role of disruptor (i.e, use Windows phone and attack the low end using Nokia’s low end business. Or alternately should they embrace it and focus on software and services for those products with dominant usage share.

        • DarwinPhish

          Android and a number of Chinese OEM’s makes a low end attack difficult. Also, Microsoft does not appear to have a good relationship with carriers and I do not know if buying Nokia’s handset business helps this.

          What Microsoft needs to decide is whether they are better off writing software for the billions of non-Windows devices or trying to get Windows on maybe 100 million devices. They seem to prefer the latter, while I think the former is their better bet.

          • James King

            I don’t think it has to be either/or. As much as I would like to see it, no one is going to directly challenge Windows in the PC space anytime soon (I don’t think Chrome OS has the chops to supplant it). PCs aren’t going anywhere… the decline in sales is due primarily to people upgrading more slowly than simply shunning PCs in general. I think the overwhelming majority of people buying tablets really weren’t PC customers to begin with. Microsoft can live off of its Windows/Office fat for at least another decade. If it starts targeting iOS and Android, it could exist comfortably while it attempts to find a new “disruption” of its own.

          • benbajarin

            Yes Nokia has those relationships. That low end where Asha (Nokia’s hyrbid smartphones) are successful do not care about the OS.

          • James King

            The Asha 501 is an amazing product, arguably more significant than anything in the Lumia line. But I think Microsoft’s ham-fisted tactics are going to screw up all of that Nokia goodwill and the Asha line won’t be as successful as it could be.

          • benbajarin

            In my scenario where MSFT starts to take strides forward, it includes them not screwing up the Asha line and emerging market opportunity. If they do screw it up then it will be a clearer signal that they need to abandon all efforts to manage a handset business and just focus all their efforts on software (apps (not OS software)) and services for iOS, Android, wearables, TV, etc..

            It is also interesting to think about what happens to Nokia itself, since Microsoft just licensed the name and the lumia brand but bought much of the infrastructure to make devices. So even though the assets to make devices is gone, technically Nokia could still make a handset with their name on it at the end of 2015. Not saying they would but it could be a possibility.

            Lots of scenarios and hypothesis in play at the moment. I’m still trying to think through all of them. Sometimes I love future-casting scenario analysis and sometimes I don’t 🙂

          • James King

            I can imagine that job is a lot harder when it comes to Microsoft. It could be a truly amazing company with better leadership.

          • benbajarin

            Not so much as harder with Microsoft but certainly more frustrating.

  • Gareth R

    Apple is the Goliath now. And in some respects they’re more controlling than Microsoft ever was.

    A better metaphor in my opinion is a banana republic, where one dictator gets ousted and another nearly indistinguishable dictator takes his place.

    • aardman

      The new Goliath? Name one product category in which Apple has a monopoly of the same size and scope that Microsoft has/had with Windows and Office.

  • aardman

    Microsoft is the poster boy for that old saying that I just made up “Beware of becoming a successful monopolist, it can kill you in the end.”

    It’s not the innovator’s dilemma that bedevils Microsoft, it’s the monopolist’s dilemma.

    1. Because you have killed off all your competitors, you can no longer distinguish the reason people are buying your product. Is it because you have an attractive, high quality product or is it because your customers had no other choice?

    2. Without serious competitors to keep you honest, you start to lose institutional knowledge and skills in marketing and R&D (see below). You lose the ability to discern what makes a product good or bad.

    3. You think that just because you have a lock on the market, you automatically have a lock on the technology. You think if you slow down innovation in your company’s product, that slows down innovation in your industry. (This is MS’s policy of nixing any product idea that doesn’t fall neatly in the Windows + Office universe). So your product development becomes boring and your most creative, most talented engineers leave in frustration and join your competitors.

    Microsoft is not really a technology company. Its primary skill is not in writing software, it’s main talent is in acquiring, extending, and perpetuating monopoly positions through the judicious use of 1) shrewd contracting arrangements with its upstream and downstream partners and 2) barefaced intimidation. It just so happens that in Microsoft’s heyday, the industry that was most conducive for the rise of a predatory monopolist was PC software. A century ago it was petroleum and the predatory monopolist was Standard Oil.

    • James King

      Damn this was a great post. No wasted words. I’m envious 🙂

      • aardman

        Thanks. The tragedy of Microsoft is that, with respect to #3 above, Bill Gates made the observation years ago that companies die or decline because of the failure to respond to the rise of new, superceding technology. It’s what caused him to completely and drastically refocus MS to adapt to the rise of the internet. But when mobile computing started to loom in the horizon, the seductive allure of the Windows + Office monopoly blinded MS and stopped it from doing what it needed to do. Instead of embracing the new technological landscape, they tried to (unsuccessfully, of course) delay its arrival. Being a monopolist makes you think you control everything in your industry.

    • rationalchrist

      Get to the point.

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