Microsoft Is At War With Itself

On Tuesday, May 20, Microsoft held an event to unveil the Surface Pro 3 Tablet. You can view the webcast here. ((Ironically, the video stream provided by Microsoft is in Adobe Flash, so if you’re on a mobile device, you’re out of luck.)) NOTE: The quotes, below, are time stamped so you can locate them on the video.

I am breaking my coverage of the Microsoft Surface Tablet Event into two separate articles. Today, I will review the six minute introduction given by Microsoft CEO, Satya Nadella. In my opinion, Nadella’s statements were very revealing but not in the way he might have wished. Once we look “beneath the Surface” or “behind the curtain,” we can see that the contradictions inherent within Microsoft’s overall strategy force it to war with its customers, its partners and itself.

Tomorrow, in my Insider Article (subscription required), (now available, here) I will turn my attention to the specifics of why Microsoft’s grand strategy is self-contradictory and self-defeating. In essence, Microsoft is playing a game of Roshambo (rock, paper, scissors) and wants to simultaneously throw the rock, the paper and the scissors — with wholly predictable results.

Microsoft’s Mission?

    01:53: “It starts for us with this obsession of empowering every individual and organization to do more and be more. That is what we at Microsoft are all about. This is what is the unifying theme for the company across everything that we do. We want products and technologies that enable people to dream and get stuff done, we want products and technologies that enable people to be able to get more out of every moment of their life. that’s the mission we are on.”


The good news is Satya Nadella seems to be able to articulate Microsoft’s vision better than Steve Ballmer ever did.

The bad news is the vision Nadella articulated wasn’t very compelling. I’m willing to give Nadella and Microsoft a pass on this because, if we are grading on a curve, very few companies have compelling visions. Not everyone, however, graded on a curve:

Ugh. Can someone please get Microsoft a new mission statement? Classic best-to-worst. ~ Ben Thompson (@monkbent)

It will be awfully hard for Microsoft to ever again create a mission statement as great as “A computer on every desk and in every home.” ((Bill Gates, Microsoft chairman and chief executive officer, 1980)) but merely saying Microsoft’s Mission is to create products and technologies that enable people to dream and get stuff done won’t cut it in the long run.

Competing Against Customers?

      00:45: “Our cloud enables everyone on every device.”

03:09: “(T)hat’s what has led us to build the ubiquitous software products that we’ve built today.”

These statements raise more questions than they answer. If Microsoft wants to be on every device, if they want to have ubiquitous software, then does it make sense for them to build hardware too? Isn’t it an inherent conflict of interest to ask other companies to use your cloud services on their devices while simultaneously trying to replace their devices with your own?

Gemini sisters fighting on a white background

Competing Against Partners?

    04:55 “We’re not interested in competing with our OEMs ((OEM = Original Equipment Manufacturers))when it comes to hardware.”

Really? You sure have a funny way of showing it.

Nadella says that Microsoft isn’t interested in competing with its OEMs when it comes to hardware, a stance I don’t really understand. ~ Harry McCracken (@harrymccracken)

If Microsoft is not interested in competing with their OEMs — then why are they doing it? The Surface Tablet competes directly with Microsoft’s own (so-called) hardware partners. And what hardware company in their right mind wants to license software from Microsoft in order to build hardware that then has to compete against Microsoft-branded, and Microsoft software-integrated, hardware?

The hardest thing to explain is the glaringly evident which everybody had decided not to see. ~ Ayn Rand


Why Hardware?

    04:05 “The question that needs to be asked and answered is why hardware?

I give Nadella full credit for asking the exact right question. I can’t, however, give him full marks for actually answering the question.

    …We are not building hardware for hardware’s sake. We want to build experiences that bring together all the capabilities of our company…to build these mobile first productivity experiences. That’s the mission.”

Hmm. Not really answering the question of “why hardware” just yet.

    …In fact our goal is to create new categories and spark new demand for our entire ecosystem. That’s what inspires us and motivates us with what we’re doing in our devices and hardware.

Hmm. Microsoft wants to create new categories and spark new demand. Sounds good, as far as it goes. But honestly, what company doesn’t want to create new categories and spark new demand? The real question then is: “What category is the Surface Tablet creating and does that category deserve to exist?”

    05:30 Can we design and build a device that takes the best of the tablet and the laptop and enables any individual to be able to read and to be able to create and write; allows you to watch a movie and make a movie; enjoy art and create art — that’s the device we want to create.

CAPTION: The Surface Hybrid seeks to create a new category between the PC and the Tablet

Now the picture is coming into focus. Microsoft doesn’t believe tablets are always good enough. Microsoft doesn’t believe notebooks are always good enough. What people really want, what people really need, according to Satya Nadella, is a hybrid computer — like the Surface Tablet — that’s the best of both worlds. A device both a tablet AND a PC — one device that can do it all.

It is not the writer’s task to answer questions but to question answers. ~ Edward Abbey

However, if Microsoft’s answer to the question: “Why Hardware?” is “New Category Creation”, that begets a whole new set of questions:

  1. If the hybrid category is so compelling, so wanted, so needed, then why couldn’t Microsoft’s hardware partners have taken the Windows 8 operating system, applied their hardware designs to it, and created the hybrid category on their own?
  2. Not every category deserves to exist. What makes Microsoft think the hybrid is deserving of being a category of its own?
  3. Creating a category is hard. Creating a category in hardware, which is outside of Microsoft’s core skill set, is harder still. Aside from “sparking new demand”, is there another, more obvious reason why Microsoft feels the need to create this new category?


The only interesting answers are those which destroy the questions. ~ Susan Sontag

Tomorrow, I take a deep dive into those questions and many more as well. Here’s a hint as to what we’ll be finding:

In business, as in Roshambo, you can never beat your competitors if you’re always beating yourself first.


Published by

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?

20 thoughts on “Microsoft Is At War With Itself”

  1. I’m sorry, but Microsoft puts out so much BS that I feel like you can ignore whatever they say. The only question I have is whether they know it’s BS or whether they’re sufficiently confused that they don’t.

    Their back-office and cloud products seem to be successful and that means they’re okay financially. But Windows 8, Surface, Windows Phone, Bing, and even Xbox One are serious failures which are clearly the result of the confusion they’ve been mired in for the last two years. I am not convinced that Satya Nadella is going to make the situation any better.

    1. I dont think suddenly becoming”focused” is going to save windows phone… Or if would ever had given it a chance

  2. A lawnmower designed by Microsoft would be part mower and part jackhammer and would only start after you entered a 30 digit code that changed every day.

  3. It’s easy to forget the huge lead time required for any hardware product like the Surface. The surface 3 has been in the works, I think they actually said, 18 months.

    So it’s another bag of crap from the previous administration that Nadella has to do something about. Like the Noikia acquisition or the organizational restructuring to make MS structured like Apple, its a legacy that he inherited. True, he could have killed the project in its crib, but that would have used up a huge amount of his political capital and pissed off all the people working on Surface. He did what he could by nixing the mini-surface (at least for now), and I suspect strongly that this will be the last surface MS ever puts out (or else the next surface will be something like an MS-Lenovo coproduction).

    1. “So (Surface Pro 3) is another bag of crap from the previous administration that Nadella has to do something about”

      Agreed. I thought about that a lot. Clearly Nadella inherited this. However, he has killed (or at least delayed) the Surface Mini. I applaud him for that. I obviously think he should have killed the Surface Pro, too. However, it’s awfully hard to kill a product that your company has devoted millions, perhaps even billions of dollars to develop. He might have been receiving a LOT of pressure to release it.

      Steve Jobs was ruthless. He would have killed the Surface in a heartbeat. Nadella has, in my opinion, “blinked” and allowed the Surface Pro 3 to come into existence. We will know what kind of a leader he is by how soon he acknowledges that it was a mistake and jumps out of the hardware business (remember, he’s saddled with the newly purchased Nokia, too.) The sooner he gets Microsoft out of the hardware business and into the being all-Cloud-all-the-time, more impressed with him I’ll be.

      1. It’s going to be really tough getting out of an $8 billion dollar Nokia acquisition at this point. What they could do is spin their Entertainment & Devices division as a separate entity.

        1. “It’s going to be really tough getting out of an $8 billion dollar Nokia acquisition at this point” ~ Shameer Mulji

          Agreed. Nadella originally voted against the acquisition of Nokia then acquiesced later on. I suspect he wanted no parts to do with Nokia but was smart enough to know which way the wind was blowing.

          What Microsoft is going to do with Nokia I have no idea but I don’t hold out any hope that they’re going to ever be anything more than a distant third in the mobile OS wars.

      2. “Nadella has, in my opinion, “blinked” and allowed the Surface Pro 3 to come into existence”

        CEOs are a kind of politician. He only has so much political capital. My guess is that he decided using a bunch of his stock of goodwill to kill off the surface pro at the last minute would have been an unwise use of his limited resources. Again, my guess is that he figured that the damage done by another year of surface being for sale (and being totally irrelevant in the marketplace) was outweighed by the damage to his influence and goodwill within MS that killing it off before it launched would do. After all, the damage done by surface to MS’s OEM relationships has already been done. Another year of surface being for sale isn’t going to make the wound much bigger than it already is.

        If I were he, I would arrange for the Surface 4 (which is probably about 1/3 done by this point) to be a “designed by Microsoft, made by Lenovo” (or Asus or whoever) joint venture. Or turn it into a reference design rather than an actual product.

        I did notice that there was virtually no mention of the RT during the Pro 3 launch (although it appeared next to the pro in some promo images so it must still exist and be for sale to those unfortunate few who buy it). So the plan there seems to be to allow it to die a quiet death once existing stocks are sold out.

        1. “He only has so much political capital. My guess is that he decided using a bunch of his stock of goodwill to kill off the surface pro at the last minute would have been an unwise” – Glaurung-Quena

          I agree and disagree. I totally understand and sympathize with politics that Nadella is dealing with. Hoarding political capital? Yes, that makes sense.

          On the other hand, the political capital that Nadella won’t spend now to kill the Surface will evaporate over time as the Surface fails and has to be killed in the long run. Sitting here on my comfortable barcalounger, monday morning quarterbacking, with absolutely nothing risked and nothing at stake, I think Nadella should have been bold and killed the Surface now. There’s a new sheriff in town, the rules have changed, and all that sort of stuff.

          Didn’t happen. I’m not surprised, but I am disappointed.

    1. Thanks, James.

      If anyone can post the proper link to a video steam that works for mobiles, I will add it to the body of the article.

      1. Your current link worked for me on my iPad. My guess is that it is set to redirect to mp4 or whatever if you are on a mobile device.

  4. This is a very odd article. Yes you can find a negative for everything Microsoft says, but as this article shows they wont be very good in many cases. Suppose you can always include quotes from famous people to try make it credible. But hell it is very fashionable to criticize Microsoft, so at least I can feel satisfied that I am reading a fashionable article. I think the new category of device is Table/Laptop hybrid, which according to most there is no market for. Microsoft has spent billions doing the software and hardware for this. It has also spent billions propping up Windows phone and giving the OEMs an alternative to Android should they want it. So I think the question you need to answer is how can Microsoft be competing with there OEM in markets that don’t exist, both Tablet/Laptop hybrids and Windows phone.

  5. For the margins available to them, Microsofts’s OEM partners cannot afford to get creative with hybrid designs. Their OEM partners core competency is producing commodity hardware whose sales are solely dependent on Windows OS to sell the hardware. Unfortunately for them, competitors are many, margins are small and most importantly, no one wants Windows 8!

    Microsoft is trying to become competent designing the whole widget and controlling the experience similar to Apple. They have two majors problems with this;

    1. No one wants Windows 8!

    2. They are way behind Apple in every competency that is involved in making the whole widget.

    I don’t envy their position.

    1. More like a bad copy of Apple.

      Windows 8 has an identity crisis and the Surface Pro 3 is not even close to being on the same level of standout device as the MacBook Air, which is exactly what the SP3 is supposed to upend.

      Apple’s focus and synergy between their devices is unparalleled. You could probably adhoc several solutions together to get where Apple is (or rather will be come this fall when Yosemite and iOS 8 are released) but no nearly as cohesive and reliable.

  6. On the subject of a new category, Apple created a new hardware category with the iPad and Jobs made the message clear and concise: the iPad has to be able to do things better than smartphone and a laptop. Viewing pictures, for example, on a smartphone is okay but not big enough and sharing a viewing experience with a laptop is too cumbersome.

    The iPad’s goal wasn’t to usurp either device category it was flanked by. It was meant to serve specific functions based on the situation at hand. Many miss this point because the iPad wasn’t positioned as the be all, end all of computing. At least not all at once. Tablets are clearly the future but it’s not the final destination for computing. We still need enterprise servers and powerful desktops for graphic design, movie editing, music creation, databases, etc.

    The Surface Pro 3 (Microsoft’s third attempt in 18 months) wants to cannibalize every device on the planet in favor of a hybrid device that frankly doesn’t excel at being a laptop or a tablet. The MS Store still feels barren by mobile app store standards and the Desktop experience has been marred by the absence of the Start button that was home to many fast and efficient workflows.

    Overall Microsoft shouldn’t be in the hardware business to begin with. Save for the Xbox all of their previous hardware experiments have been trashed. The Zune, the Kin phones, the original Surface table, the never-released Courier, even the Kinect camera for the Xbox One is being forced out in favor of matching the PS4’s price point.

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