Microsoft’s Business Model Ménage à Trois

Ben Thompson of Stratechery wrote yet another brilliant article on Microsoft entitled: “It’s Time To Split Up Microsoft“. Highly recommended reading. I agree with Thompson in part, and I disagree with him in part. Let’s start with the parts where we agree.

1.0 Balmer

1.1 Innovation Inflation

The following is from Steve Ballmer’s 2004 memo “Our Path Forward:”

    “The key to our growth is innovation. Microsoft was built on innovation, has thrived on innovation, and its future depends on innovation. We are filing for over 2,000 patents a year for new technologies, and we see that number increasing. We lead in innovation in most areas where we compete, and where we do lag – like search and online music distribution – rest assured that the race to innovate has just begun and we will pull ahead. Our innovation pipeline is strong, and these innovations will lead to revenue growth from market expansion, share growth, new scenarios, value-add through services (alone and in partnership with network operators), and using software to open up new areas.” ~ Steve Ballmer, via Ben Thompson’s Article

Hmm. If you have to use the word innovation 7 times in the span of a mere 115 words, you probably don’t know what the word means. Dogs chase cars, but that doesn’t mean they know how to drive. And Microsoft can chase innovation all it wants, but that doesn’t mean they know how to innovate.

I suspect what Ballmer was actually talking about in his memo was iteration, not innovation. Iteration is highly valuable too, but it has nothing at all to do with innovation.

  1. Iteration is incremental improvements in an existing product or service.
  1. Innovation is unique, yes. And it is uniquely useful, yes. But its key characteristic is that it meets unanticipated, unexpected, or unarticulated needs.

The trouble with innovation is that truly innovative ideas often look like bad ideas at the time. That’s why they are innovative — until now, nobody ever figured out that they were good ideas. ~ Ben Horiwitz

Iteration is preserving the status quo by enhancing it. Innovation is radical. It’s revolutionary. It’s subversive. It doesn’t build upon the old market, it shatters the status quo and creates a new market to build upon.

Truth be told, Ballmer wanted nothing at all to do with innovation. When Ballmer wrote his memo in 2004, Microsoft was the undisputed king of the tech world. Innovation is a change agent and last thing Ballmer wanted was to change things. On the contrary, Ballmer wanted things to stay exactly the way they were.

1.2 Focus

    “Ballmer then listed (in his memo) 10 different areas of “focus”, the vast majority of which were themselves so broad as to be meaningless.” ~ Ben Thompson

I love the point Ben Thompson is making here. Focusing on ten things is the same as focusing on nothing. Yet Microsoft’s “focus” problem went even deeper than this. In a perverse way, Microsoft WAS very focused. Only they were focused on the wrong thing: their competitors. Jeff Bezos nicely sums up the problem with that approach:

If you’re competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering. ~ Jeff Bezos

Does this sound like the Microsoft we all know and love? The Zune was a response to the iPod. Windows Phone 7 was a response to the iPhone. Surface was a response to the iPad. And all of those responses came to market late, late, late.

During Ballmer’s reign, Microsoft didn’t so much have a strategy as they had an anti-strategy. (See my article: Microsoft Is The Very Antithesis Of Strategy.) They waited for their competitors to act and then they reacted. They reacted far too slow and far too late. Even worse, they made bad choices, the worst of which was the choice to make their own hardware. The Zune flopped, the purchase of Nokia is a boondoggle and the Surface is a financial anchor weighing Microsoft down. Microsoft needs hardware like a fish needs a net.

1.3 Microsoft’s High-Water Mark

Ben Thompson:

    “Ballmer and Microsoft simply could not break free of their Windows-first mindset, and while it would be another 3 years before the iPhone arrived, it was this memo and what it represented that marked the beginning of Microsoft’s decline.”

A belief is not merely an idea the mind possesses; it is an idea that possesses the mind. ~ Robert Oxton Bolt

[pullquote]Before you criticize someone, you should walk a mile in their shoes. That way when you criticize them, you are a mile away from them and you have their shoes. ~ Dave Barry[/pullquote]

This is the point in my article where I’m supposed to trash Steve Ballmer for being shortsighted. But, truth be told, I have a lot of sympathy for him. The only thing harder than saving a dying company is saving one at the top of its game.

A company near death HAS to focus.

The absence of alternatives clears the mind marvelously. ~ Henry Kissinger

A company near death HAS to be innovative.

Mortal danger is an effective antidote for fixed ideas. ~ Field Marshal Erwin Rommel

[pullquote]Until you walk a mile in another man’s moccasins you can’t imagine the smell. ~ Robert Byrne[/pullquote]

Microsoft’s problem was they didn’t have a problem. Without the impetus of bankruptcy or any credible threat, they had little reason to change. In fact, they had NO reason to change and EVERY reason to stay the same. However, as Carrie Fisher put it, “There is no point at which you can say: ‘Well, I’m successful now. I might as well take a nap.'”

If everything’s under control, you are going too slow. ~ Mario Andretti

If everything seems to be going well, you have obviously overlooked something. ~ Steven Wright

In this business, by the time you realize you’re in trouble, it’s too late to save yourself. Unless you’re running scared all the time, you’re gone. ~ Bill Gates

Broken nesting doll

1.4 Vertical Or Horizontal — Pick One, Not Both

Ben Thompson:

    “(T)ech companies ought to be either vertically/platform focused, with software and services that differentiate hardware (like Apple), or horizontally/service focused, with the goal of offering superior software and services on all devices (like Google and Facebook). To try and do both, as Ballmer explicitly did with his “Devices and Services” strategy, is to do neither well: differentiating your devices by definition means offering an inferior service on other platforms; offering superior services everywhere means commoditizing your own devices. “Devices and Services” was nonsense.”

I LOVE this.

Microsoft used to have a clear and simple business model. They made the operating system, they licensed the operating system to hardware manufacturers. The end.

Microsoft didn’t compete with their hardware manufacturers by selling hardware. They didn’t compete with their developers by selling software. ((There is one HUGE exception to this rule and that is Microsoft Office. Ben Thompson does a great job of explaining why this conflict worked and worked well — for a while — so I refer you to his article, “It’s Time To Split Up Microsoft“. I couldn’t have said it half as well.)) They competed with other operating systems and boy, did they ever compete. During the eighties, Microsoft squashed challenger after challenger and when the dust from the PC wars settled, the only rival operating system left standing was the Mac — and even it was on its metaphorical knees. ((STEVE WILDSTROM: “From the day that the IBM PC overtook the Apple ][, Microsoft software dominated the market. The Macintosh, introduced in 1984, never challenged MS-DOS or Windows for dominance.”

“Other rivals to Microsoft did indeed lose: Novell’s DR-DOS and IBM’s OS/2 operating systems disappeared, along with Netware, Novell’s once-dominant office networking system.”))

Today, of course, it’s a very different story. Microsoft still licenses its operating system to hardware manufacturers. But it also directly competes with those same hardware manufacturers by selling hardware of its own. And while Microsoft is currently making serious inroads into the business of providing internet services that run across all platforms, they continue to directly compete with the very same platforms that they are attempting to sell their services to.

No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. ~ New Testament, Matthew 6:24

It’s really, really tough to make a great product if you have to serve two masters. ~ Phil Libin, Evernote CEO

Two masters? Microsoft is trying to simultaneously serve THREE masters. Yikes!

Microsoft fits the definition of a business model ménage à trois: There are three of ’em, and they’re all trying to screw one another.

Russian Nesting (Matryoshka) Dolls

2.0 Nadella

2.1 Better Than Ballmer

Ben Thompson:

    “To understand why so many serious Microsoft observers were encouraged by Satya Nadella’s week-ago memo, “Bold Ambition and Our Core,” it’s useful to go back 10 years and read Steve Ballmer’s 2004 memo Our Path Forward.”

Hmm. Apparently “serious” Microsoft observers are more willing to overlook the serious problems with Nadella’s memo just because it’s better than Ballmer’s memo, while less serious Microsoft observers, like me, take those serious shortcomings more seriously.

A…speech should be like a lady’s dress—long enough to cover the subject and short enough to be interesting. ~ R. A. “RAB” Butler

[pullquote]He can compress the most words into the smallest idea of any man I ever met. ~ Abraham Lincoln[/pullquote]

Let’s set aside the fact that reading Nadella’s memo was like gargling with broken glass ((With apologies to Hugh Leonard)).

And let’s set aside the fact that what Nadella’s memo lacked in depth it made up for in length. ((With apologies to Chares de Montesquieu))

And let’s agree Nadella’s memo is better than Ballmer’s memo…so long as we also agree that still isn’t saying very much.

So what? At best that’s damning with faint praise. ((Damning with faint praise is an English idiom for words that effectively condemn by seeming to offer praise which is too moderate or marginal to be considered praise at all. In other words, this phrase identifies the act of expressing a compliment so feeble it amounts to no compliment at all, or even implies a kind of condemnation.)) Exactly what was it Nadella said in his memo that “serious” Microsoft observers could possibly have found even remotely encouraging?

2.2 Going Sideways

Ben Thompson:

    “In contrast to Ballmer’s anything-but-“focus,” Nadella was quite specific:”

      More recently, we have described ourselves as a “devices and services” company. While the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy. ~ Satya Nadella

What a great start! (Well, technically, it’s not really a “start” since we’re already 558 words into Nadella’s memo. But let’s set that aside, for now.) This is great stuff. Nadella has tactfully repudiated his predecessor’s strategy without actually saying it in so many words. Further, he’s promising to hone in on Microsoft’s unique strategy. I’m all agog. Can’t wait to hear what’s coming next!

    “At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world. We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more.” ~ Satya Nadella

DISAPPOINTED!

Seriously? That’s Nadella’s idea of honing in on Microsoft’s unique strategy? Prepare thyself for a MASSIVE rant.

Microsoft is a “platform” company? That could mean a lot of things. Or anything. Or nothing. Microsoft is a “productivity” company? Whoop-de-doo. Who isn’t? Microsoft is “mobile-first and cloud-first?” Newsflash: They can’t both be “first.” Microsoft will “reinvent productivity?” No, it won’t. You can’t reinvent productivity anymore than you can manufacture new antiques. Microsoft will “empower….” Ugh. Enough said.

    We will…empower every organization on the planet to do more and achieve more. ~ Satya Nadella

Ben Thompson seems to put particular stock in this phrase. I’ll discuss its “horizontal” business model implications below. However, in terms of defining Microsoft’s mission, it’s a complete dud. Microsoft is going to empower people to “do more and achieve more?” Wow, thanks for narrowing it down. Helping people “do more and achieve more” is about as non-specific, over-generalized, feel-good-but-means-nothing, applies-to-practically-every-company-that-ever-existed as it gets. That’s not honing-in, that’s zoning-out.

2.3 Teasing Out A Tortured Message

Ben Thompson:

      “Nadella was clear that focusing on “every person” meant focusing on every device as well:

        [Microsoft’s productivity apps] will be built for other ecosystems so as people move from device to device, so will their content and the richness of their services – it’s one way we keep people, not devices, at the center.” ~ Satya Nadella

This is exactly right. Nadella is making a choice here: productivity as a single unifying principle and, by extension, services based on people, not differentiation based on devices. Moreover, it’s a far more difficult and brave choice – obvious though it may be – than outside observers could likely understand. It was only a little over a year ago Ballmer declared, “Nothing is more important at Microsoft than Windows.”

Last week, Nadella said “No.” ~ Ben Thompson

Let’s break that analysis down.

    “(I)t’s a far more difficult and brave choice – obvious though it may be – than outside observers could likely understand.”

First, I concede I am an “outside observer.” However, I’m not willing to cede the interpretation of Nadella’s words solely to Microsoft insiders.

    “Nadella is making a choice here: productivity as a single unifying principle…”

Second, I’m totally not buying this. “Productivity” is far too broad a term to constitute a “single unifying principle.” And as for it being a “choice,” what exactly is Nadella choosing between: Productive and non-productive?

    “(S)ervices based on people, not differentiation based on devices.”

Third, what I think you are saying is you think Nadella is saying Microsoft is moving toward services, and away from devices. (If that’s what Nadella actually meant to say, it would have been nice if he had actually said it.) Further, I think you are saying you think Nadella is saying Windows is no longer Microsoft’s be all and end all. And — despite the tortured path used to get us there — I kinda agree with that interpretation. Unfortunately, Nadella’s actions — and Ben Thompson’s own analysis — disagree.

2.4 Two Problems

How do I know Ben Thompson’s analysis doesn’t support the suggestion Microsoft is moving away from devices and toward services? Because he says so in his article when he discusses Windows, here ((BEN THOMPSON: “For all the talk of moving beyond Windows (and Windows Phone), I am deeply skeptical Microsoft can truly pursue its potential as a software and services company as long as Windows is around.”)) and when he discusses Nokia, here ((BEN THOMPSON: “The effects of (the Nokia) deal – and understanding why it was made – have convinced me that Microsoft cannot truly reach its potential as a services company as long as Windows and the entire devices business is in tow.”)) and here ((BEN THOMPSON: “When Nadella took over earlier this year Microsoft had not only missed the mobile boat, he was now saddled with a $7.2 billion dollar anchor and 34,000 new employees. That’s the thing about last week’s layoffs: even after shedding 18,000 employees Microsoft will still be about 16% bigger than they were before the acquisition, and still tightly bound to a devices group that is working at diametrically opposed goals from the software and services businesses that are Microsoft’s future.”)) and when he discusses devices, here. ((BEN THOMPSON: “I’m bothered by the phrase “We have a big opportunity.” For (COO Kevin) Turner, the opportunity is in growing that 14%. As quoted by Gregg Keizer: We want to go from 14% to 18%, from 18% to 25%, from 25% to 30%. That’s the beauty of this model … [the opportunity] is much bigger than anything we’ve had in the past.

Turner is still talking about devices, and it’s really too bad.”))

And how do I know Satya Nadella isn’t moving Microsoft from devices and to services? Because his actions speak far louder — and far clearer — than do his words.

We know what a person thinks not when he tells us what he thinks, but by his actions. ~ Isaac Bashevis Singer

I’ll agree Satya Nadella has said “yes” to services. But what has he said “no” to? The Windows operating system licensing business model and the hardware business model (Nokia phones and Surface Hybrid) and the services business model all continue to co-compete, one with the other. Nadella is doing what Ballmer always did. When faced with a choice, he has chosen not to choose. When faced with a decision between business models, he has decided not to decide.

Action expresses priorities. ~ Gandhi

Yes, action expresses priorities. And inaction obscures them.

It’s true services may gain primacy at Microsoft. However, so long as three business models remain — like nesting dolls, one within the other — Microsoft’s internal conflicts and external turmoil will continue, unabated.

Deciding what not to do is as important as deciding what to do. That’s true for companies, and it’s true for products. ~ Steve Jobs

Matryoshka doll

Conclusion

Okay, let’s agree Nadella isn’t the best communicator in the world. That’s too bad because words can make your heart soar…or they can make your head sore. ((Tip of the hat to Dr. Mardy and his aphorisms.)) However, words aren’t everything. When the Nokia phone line is cut; when the Surface hybrid is cut; then we won’t have to read Nadella’s memos to know where Microsoft is headed. Nadella’s actions will speak far louder than any words could.

A man is judged by his deeds, not by his words. ~ Russian Proverb

Until that day, Microsoft should be careful that they don’t become a joke:

A Jewish woman had two chickens. One got sick, so the woman made chicken soup out of the other one to help the sick one get well. ~ Henny Youngman

Microsoft is in danger of making chicken soup out of their healthy business divisions in order to sustain their ailing businesses. If they’re not very, very careful, they’ll end up with a bunch of dead chickens and egg all over their face.

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?

1,478 thoughts on “Microsoft’s Business Model Ménage à Trois”

  1. This is my favorite article of yours, so far. I particularly like the Dave Barry quote.

    Here’s an off the wall thought. If you had started with Bill Gates as 1.0, Nadella would be 3.0. Microsoft has had a history of getting it right by version 3.

    1. Dave Barry should be quoted more often. The same is true for Milan Kundera. That man could turn a phrase.

      “Flirting is a promise of sexual intercourse without a guarantee.”

      – Milan Kundera

    2. If I had started with Bill Gates as 1.0, this wouldn’t have been an article, it would have been a book. It was probably far too long as is. 🙂

      Thank you for your kind words, Dave. Sincerely and deeply appreciated.

    1. Yes. Actually, I have. I very much like Nadella, but I think he may be hamstrung either by internal politics or by a desire to go slow. As I’ve said many times before, I think he is turning Microsoft in the right direction, but he’s going to have trouble getting where he wants to go if he refuses to cut ties with the old products that are anchoring him and Microsoft down.

      I’m far more interested in writing what is correct rather than what is nice or polite. If you think I’ve gotten wrong, please enlighten me. But don’t accuse me of bashing Microsoft. I didn’t put them in the predicament they’re in today. They did.

  2. It’s a brave new world out there. In the past one could do just the software and OS and leave the hardware to someone else. Or they could do just the hardware and leave the software and OS to someone else. And each would make money (well, sort of, but not really, for hardware OEMs). Of course by that time everything was the same anyway and no one was really pushing anything forward.

    Now Google has this model that does not require it to sell the software to anyone. And Apple is finally recognized by the press and by the consumer, for the benefit it offers by selling “the whole widget”. And then there is open source (bonus points for those who remember when MS saw this as their primary threat).

    I have sympathy for Nadella. He is mired in “institutional speak”. It’s the only way businesses seem to be able to communicate, which is why business people who are articulately succinct are such an anomaly. Arts organizations suffer from this all the time, too. The way most arts administrators talk, one would never know they are part of a business whose primary purpose and reason for existing is art.

    But actions do speak louder than words. He is either influenced by the culture but trying to be thoughtful, careful, and strategic with his communication. Or he is a caricature of his culture. While I think it is still too early to tell, I think you have done well to pinpoint potential areas that only hindsight will confirm. Few people are inspired by a prophet.

    Joe

    1. Calling all PC’s “the same” is not entirely fair. The PC inspired tremendous innovation, in no small part due to the “common denominator” design. Whether it was a least common denominator is actually less relevant. It’s open architecture allowed for anyone to innovate whether it was hardware or software. And they did. No one company could have done that.

      The open architecture also allowed for choice in “best in breed” products. “Open” is not just for malware writers as some would lead one to believe.

      MS’s business practices on the other hand…

      1. I completely disagree. There is little real difference between just about any PC out there today. The innovations are at best incremental. The common denominator form may have had meaning at one point, but no more, thus the high turn over in who is making PCs. There is no differentiation in the hardware. Best in breed is merely who is making faster horses. Which is fine if all you want to do is race horses. But don’t kid yourself that you are making anything different.

        Joe

        1. Really?

          All the hardware add-ons and software innovation that evolved from 1980 on?

          You could mold the PC to fit your needs, whether it was OCR, speech recognition, scanning in general, video capture, video editing, computer algebra, etc., etc., etc.. Not to mention spreadsheets (a truly killer application at the time, and still), networking, the internet….

          Where was the singular company that can do, let alone be best at all those things? Do you think it was doable as well or as fast with closed systems? Even if they could, what would it cost?

          These all prepared the ground for todays mobile.

          One company could do all that?

          Also, speeds and feeds are not a detriment.

          1. Joe is right. Most PCs sold today are the same. Real innovation is what Apple has done with both the iPhone and iPad. By starting over with a clean slate they where able to re-make technology that is much easier and more secure than incremental changes that we have seen from the PC OEMs. The blame does have to lie with Intel and to a lesser extend AMD along with Microsoft. As WinTel became the standard many OEMs followed right along selling what people where buying. The problem is that they did not see the larger picture and the limitations of the offerings that they where selling.

            Smartphones, Tablets and potentially wearables can go places and do a whole lot more things than ever the best laptop or desktop can do. Just in the same way that the desktop PC was more flexible than a dumb terminal and could provide a better value along with do more tasks. Then after that laptops along with WiFi opened up a new market for computing. Now we are seeing even more potential as eventually every person who has a cell phone will have a pocket computer that has an Internet connection. This is real change and not just window dressing such as speed bumps in specs that do not mean much to most users.

          2. Going places is but one criterion of flexibility (and the only one phones and tablets “win” at). There is not a single thing outside of that where the PC is not more flexible. Well, a traditional, upgradable one at least.

            Some examples. The laboratory setting. A PC fitted with one or several data acquisition boards, running several instruments with real life data manipulation. Or an MRI, or a QC system for manufacturing. Or the on board computing on the space shuttles and the Space Station.

            All “just PC’s” but quite unique and innovative in their own right. Also, possible because they are “just PC’s”.

          3. I think you are confusing end user choices in hardware flexibility and upgradability post sale. These are things that are not as important to most people as they add to the cost, make the product more complex and lower the reliability. For most people they want technology that acts more like an appliance that they use when they need it and does not require a lot of fiddling around to make it work the way they want it to.

            No one is saying that the PC is going to go away and the use cases you mentioned are not important. But there are many places where the PC has over-served the market and much more simple tablets and smartphones will come in and do a better job with the job that needs to be done.

            For an example of what I am taking about take the standard ATM machine. Many of them are running Windows XP (Embedded Edition I think). This is overkill as the way they are used is more appliance like and they have no need to run more than one program at the same time. They would be better served if they where running a custom fork of Android (locked down) on custom hardware that only lets signed ROM’s and apps run. Or the same sort of setup for your typical POS (Point Of Sales) system. These are only two of many situations where the current WinTel offerings are the wrong fit for the job that needs to be done.

          4. Completely agree on the over served part. You shouldn’t have to buy a PC to have email.
            My rebuttal of jfrutral was that not all PC’s are exactly the same and, to the extent that they are, have fostered great innovation.

          5. I am glad that you agree on the over-serving part. So many people now are able to get, process and reply to emails just via their smartphone. The problem is that many consumers have been sold PC’s when all they wanted to do is have email and do some simple tasks online. These are the same people who get their systems infected with malware, do not know how to deal with a file system, are forced to handle their own backups of their data, have to deal with their own install media for their software and OS along with the license codes. Know how to deal with cryptic error codes that do not mean what they say and in many cases are useless in troubleshooting problems. They are also left on their own for training and support as well.

            While it is true that not all PCs are the same and there have been some innovations on the hardware side he does have a point in that for a long time the PC industry has been selling speeds and specs while ignoring how consumers actually use their systems.

            Just have a look at the sensors and standard equipment that comes with most modern smartphones and tablets. For most consumers they are a lot more powerful than a typical PC. Part of this power is the standard equipment but also part of it is by removing complexity. I know that it may seem counter intuitive but by being easier to handle it is what makes more consumers happy. To me that is more important that adding more speed just so that nerds can run benchmark tools to show that their system is faster. Also, what is all that power and speed doing if users are not really able to use it.

            In the case of the CPU it has been proven that we would have been way better off if we had moved off of HDDs and to SSDs years ago instead of wasting money on faster CPUs and GPUs that are sitting idle for data to be read and written to slow HDDs. This is one of the smart things Apple did with the MacBook Air. They did not bump up the CPU specs as they where not really needed but what users actually wanted was an affordable system built around an good quality SSD. It solved many use case pain points that just pushing faster CPUs would not.

          6. Isn’t that how Intel defined the ultrabook specification around the same time? It has been well known that the file system was the bottleneck for some time. Apple wasn’t privy to some secret sauce that no one else had figured out yet.

          7. But you kept going back to history. I keep talking about today. There is no innovation happening with PCs today or even the last decade or so. They are all the same.

            Joe

          8. There would be no today, as we know it, if not for yesterday’s maligned openness.

          9. There has been quite a bit of innovation in today’s PC’s. Models like the Asus Taichi, the Lenovo Yoga, the Vaio Duo, and yes, the Surface Pro (especially the 3). You may not like them (even correctly), but they have broken several molds along the way.
            Apple is lucky, however, that these guys aren’t as committed to their multiple models, as Apple is to their essentially singular model. In that regard, they do deserve to have their hindquarters handed to them.

          10. “There has been quite a bit of innovation in today’s PC’s.” – Klahanas

            As I explained in my article, you’re conflating iteration with innovation. They’re not at all the same.

          11. While I don’t think that any of these players are going to be receiving a call from Stockholm, in October, any time soon, I will confess that I’m not clear on your distinction. Are car innovations not innovation just because they retain the steering wheel? These models did break from the standard form factor and added new functionality, while retaining all the old functionality. While retention of functionality could be construed as iteration, the new functionalities are innovative. Whether they’re liked is another story.

          12. Iteration is building upon an existing product. Innovation is creating a product that serves a previously unrecognized need.

          13. Kirk, Very well said and I hope that Klahanas can see the difference that is obvious to me, you and many others that read Tech.pinions. 🙂

          14. As long as it’s not obvious both ways. 😉
            See my response to Kirk above.
            BTW, it seems that there are differences between what a business person considers innovation and a tech person.

          15. Or vice versa. A business person tends to focus on commercial success, this can lead to false positives/negatives. A tech person tends to focus only on added value, at the expense of commercial success.

          16. Yeah, to a business person, anything that let’s them slap “New and improved!” on the box is fair game for “innovation”—things like bigger screen, adding a keyboard to a tablet, adding a detachable screen to a laptop, 8 USB ports, whatever. Tech people see these for what they are, marketing.

            Joe

          17. Not to be argumentative… (okay, to be argumentative :-))
            Then no PC’s have been innovative since the Apple II and the Xerox Star. They’ve all been incremental.

          18. The Mac was innovation. Used a mouse and a graphical user interface. Revolutionized computing. The iPod was innovation. Combined hard drive of iPod with the brains of the iTunes to create an integrated product that delivered 1,000 songs and song management in your pocket. The iPhone was innovation. Combined a wholly new user input (touch) with a wholly new user operating system to allow one the freedom and flexibility to have and easy to user computer in your pocket.

          19. Using your definition, the Xerox Star was the innovation. It used a GUI and a mouse, and revolutionized computing. This was licensed (I believe) by Apple. The Mac was incremental, based on the Xerox Star, and was commercially successful. The commercial success of the Mac was it’s contribution to the revolution.

            Can’t have it both ways.

          20. This is why I kept talking about PCs today not being different, not so much the early days. there was a lot of leap frogging all around. Things were being pushed beyond perceived limits. The Xerox Star, although definitely the innovation that spawned other innovation in the PC world, was not really a PC per se. It was meant as an elaborate document system. Keep in mind it was from _Xerox_. They were looking for ways to increase copier/document centered productivity. (Also, not directly programmable in its earlier incarnations!!!).

            A lot of innovations occurred when the market was being served by multiple vendors, including TI, Amiga, Apple, Atari, DEC, IBM, _and_ MS and multiple others. There was real competition with companies trying to out do each other in real hardware capabilities and differentiations.

            My original point was (and still is) by the time the dust settled and the only one left standing was Wintel, (for all intents and purposes, Apple/Mac notwithstanding) everything became homogenized. Gateway’s and Dell’s innovations were not hardware centric, but business model. HP/Compaq became the default IBM after IBM ditched PCs. No one other than Intel, MS, was able to move the PC _platform_ to new innovations. There were still some innovations occurring on a micro-ecosystem level (memory, hard drives, graphics) but in reality if it wasn’t really for gaming, even the graphics capabilities of the PC would not have been pushed outside of niche segments like video editing.

            Even by the mid 90s Apple was trying, to its almost demise, to be just like all other PCs. Why else would Jobs have ceded that the PC wars were over? They were. There was nothing new to be accomplished when one duo (Wintel) was pretty much dictating everything that a PC could/should be. It didn’t matter the OEM. They were all expected to create the same thing.

            Joe

          21. The Xerox Star was true innovation, but it was never a successful commercial product. The Mac took it the next step. If you want to argue that the Xerox Star was the true innovator, I’ll accept that.

            However, if you watch the video: “Everything is a Re-Mix, they make an excellent argument that the things added by the Mac were essential to making it a commercial success. Apple didn’t just license the Xerox technology. The took it and pushed it past the tipping point.

          22. It was also never intended as a consumer facing product. It was intended to add functionality to their copiers. It was never intended to be a PC. Without a copier attached, it had no real purpose as far as Xerox was concerned. If anything, at most, it was the precursor to Pagemaker and laser printer.

            Joe

          23. Thats a tad biased.
            Mac copied Xerox pure and simple.
            Xerox made it a reality Apple cashed in with a iteration.
            Ipod/iphone was a lot closer.

            rubber-banding is about the only thing I could say Apple innovated exclusively.
            the rest has been 99% iteration. – not that thats a bad thing its actually what pushes things along. Anybody can make a product purely on iterative methods and have a wonderful product, what amazes me is the need of biased users to imply that their platform of choice is pure innovation. The same way that people who like art think they are artistic -lol.

          24. “Thats a tad biased. Mac copied Xerox pure and simple”

            I’ve read your many comments and I wish I hadn’t. There not worth reading.

            “The aim of an argument or discussion should not be victory, but progress.” ~ Joseph Joubert

          25. Yes absolutely, But having a separate set of rules for each is dis-ingenuous.

            So how can a discussion progress if you take a biased stance?
            Theres a huge difference between bagging/whining and making a valid point … ie MS excessive SKUs.

          26. The iPod was also iterative. Lossless audio compression using the mp3 codec was the real innovation. I remember using Winamp in the late 90’s. Amp was around for several years before that. At the time, being able to store a music catalog on a computer was fairly profound. That was only possible because of lossless audio compression. I would also argue that the iPhone was iterative. Neither of those comments are intended to diminish the achievement for either of those products. Most of what we see in the consumer marketplace is an iteration.

          27. Iteration does not negate innovation and is not equivalent to incrementalism. What makes the iPod, iPhone, and iPad innovative is how they propelled their categories/traditions forward. As artist Bruce Herman explains with T.S. Eliot when discussing new art:

            “Does this mean that newness is the only or the most exalted artistic value among us? Perhaps not—but as T. S. Eliot writes:

            ‘[W]hat happens when a new work of art is created is something that happens simultaneously to all the works of art which preceded it. The existing monuments form an ideal order among themselves, which is modified by the introduction of the new (the really new) work of art among them. The existing order is complete before the new work arrives; for order to persist after the supervention of novelty, the whole existing order must be, if ever so slightly, altered.’

            In other words, the authentically new thing is set among the existing ‘monuments’ that preceded it. If it is truly new, it propels the tradition forward, reorienting the entire preceding tradition while simultaneously honoring that tradition.”

            Mp3 was definitely an innovation. But before the iPod most Mp3s were in the form of data CDs. Mp3 players were a struggling technology looking for acceptance. iPod did that.

            Joe

          28. Joe, Thats right. In the last decade most PCs have been the same. It is only in the mobile space that we are seeing the innovation. It is in mobile that makes me think back to the 1980’s and the choices in OS’s, Hardware, Software and ecosystems. When we had the Atari, Radio Shack, Amiga, IBM PC, Apple II, Mac, OS/2 and may others. But those choices are gone. Now in mobile it mostly is iOS and Android but Samsung is at least trying with Tizen. Plus there is Firefox and Ubuntu offerings and of course Microsoft Phone as well. The point being is that I can see the expiration going on now and that healthy as the mobile space decides what products will be here for the long run.

          29. Chromebook and Chrome OS has potential. Right now, though, it is a reductionist PC that is sort of a permutation of a thin client, but not completely. At one point I admit that I thought Google was going to put the full weight of their resources behind this to move it forward. So far it seems like the typical Google being distracted by the next bright, shiny object.

            Joe

          30. Joe, My take on Chrome OS is that Google is falling in to the same trap as Microsoft with Windows Surface RT in that both companies seem to be confusing their end users by using the same branding for separate products that run on different platforms. In Google’s case Chrome OS should have ONLY been released on Intel CPU systems. Google has a really successful ARM project in Android. That is what they should have called the thin client device that runs on ARM the AndroidBook and the one that runs on Intel the ChromeBook. The reason for this is that the rest of the ecosystem that runs on Chrome is mostly coming from work developers have done for make Chrome Browser extensions.

            So when someone purchases a ARM ChromeBook they are going to be disappointed in the experience as it will not be able to do the things that they can do with their desktop. However if they are to purchase an Intel ChromeBook at least they can use those extensions.

            So, yes, ChromeBooks do have some potential as they are making some headway in schools and are doing quite well on Amazon. So we will have to see how it all works out. However Google does seem to like to try many things out and not stick with some of them long enough for them to find a market.

          31. “I think you are confusing end user choices in hardware flexibility and upgradability post sale. These are things that are not as important to most people as they add to the cost, make the product more complex and lower the reliability.”

            They actually manage the cost, because you buy what you want/need when you want/need it, as opposed to having to predict what you may want/need ahead of time. “Oh drats! This new software would run better in 8 Gigs, but I only got four. Now I have to buy a new machine.”.

            You also get to pick your components, which are ALWAYS less expensive than what the OEM would charge you. Finally, yes, you need to know what your doing, but if you do, reliability doesn’t suffer at all.

          32. While it is true that when you buy a sealed box solution that post sale if you need something more and you can not upgrade the internals but the part that you seem to be overlooking is that the post sale upgradeability is not as important to most people. Also you loose the reliability that you get with a sealed box.

            Yes, you will be buying more than you need day one but with the price of technology keeps on dropping and the ability to pack more stuff in the system at the same price and space. Also what has to be considered is the lifespan of these devices when you outgrow your device it will be time for an upgrade anyways.

            I do agree with you that it is a problem with systems like the iMac and some models of MacBook Pro’s where upgrading the RAM, HDD, SSD to larger models post sale is something that I wish Apple had not made it hard as it does end up shorten the life of these devices artificially. But in the case of smartphones and tables I do see the need to have them sealed.

          33. If you really think about it, x86 displaced mainframes not the terminals. It did so through a client / server framework that went from a centralized computing model to a more flexible model that relied more on the endpoint to perform computation. The key distinction is that of flexibility.

            Mobile platforms are more flexible in some ways and less flexible in other ways. Those platforms have been evolving as quickly as the hardware and supporting cloud and web services can adapt. As more of a thin client, the flexibility is inherently diminished when compared to x86 platforms.

            Ironically, they are actually using x86 platforms to enhance their capabilities. By comparison, terminals and mainframes were treated like a legacy platform. To enable the transition, they used terminal emulators to replace terminals. Many industries still use mainframes in the same manner today.

            When you use your mobile device, you are using countless x86 platforms on the back end to perform many of those tasks. For all intents and purposes, it is still using a similar client / server model.

            This suggests that mobility is a pivot rather than a market shift. Mainframes and terminals are not directly comparable to what we see today. I say this because mobile platform flexibility is inherently dependent upon the x86 framework and they do not provide enough flexibility for all use cases to displace traditional PC form factors. When they do, they will just be another iteration of the PC.

            Back in, “the day”, alternative form factors were continually being investigated for industry and enterprise use cases. We were deploying handhelds running Windows Mobile and Windows tablets in hospitals as early as 2005-2006 when XP Tablet Edition was released.

            At the time, it was all bleeding edge but from our point of view, it was just another iteration of what we were doing before. When I was working in the ASP market in 1999, we were actually building the foundation for the cloud and mobility.

            We were using Blackberry handhelds that were nothing more than a screen and a keyboard that used a cellular data connection to transmit Exchange email back and forth. One of our products was a hosted Exchange 2000 service with an AD back end. We worked directly with Microsoft to implement ISA with a reverse RPC proxy to secure Exchange MAPI through an Internet connection. That was in the year 2000 and even then, we knew it was a game changer. We were also building a web application validation and hosting framework using ITIL principles.

            Then, the towers fell and so did our funding. Skip forward to 2003 and you find that that Microsoft has integrated EAS with reverse proxy RPC solutions into their portfolio. They also started to license EAS to Apple and other providers who EVENTUALLY integrated them into smartphone products. EAS opened the door for enterprise mobility.

            So, when you say that they weren’t innovating, I can’t help but wonder where you were when the foundational technology was being built in the late 90’s. Without hesitation, I can say that Apple didn’t start with a clean slate. They weren’t even trying anything that was particularly unique. They were building on foundational technology and excellent design.

            Looking back at it, we knew it was big. We knew it would change the way people worked everywhere in the world. The energy in the ASP market was palpable and incredible. It easily could have catapulted us through the web bubble. 9/11 changed everything. It took another five years for the industry to pick up where we left off.

            Still, I consider myself to be fortunate to have been there at the birth of the next generation of computing. And in case you were wondering, I literally have the t-shirt to prove it.

          34. Yes, that touches on many of the same points. There are many different forms of virtualization and cloud compute. There are many misconceptions about what a cloud is and isn’t.

            Many have assumed that a cloud can be nothing more than a single server or appliance that manages a service for endpoints. When you pick up a single NAS device that you use for storage, it is a NAS not a private cloud. It is useful but the service layer is explicably tied to the management layer and hardware.

            One example that fits the principles for a cloud but is rarely discussed as such is a P2P network. In that case, the service is content that is dynamically being distributed to other peers on a bit level. As a twist for that principle, bitcoin mining operations that use clustered endpoint compute through malware are another example.

            Where is this all going? That’s hard to say but it is a departure from the client / server model when any computing endpoint can be a part of a cloud. The suitability for using endpoints in this manner is relative to the load but the combined computational power allows for a compelling argument.

            Cloud services are normally tied to the data center for any number of reasons but when you consider the possibilities, crowd sourcing a cloud is well within the realm of possibility. For now and into the foreseeable future, cloud services will be managed in the datacenter but it is always possible that every endpoint and server will be a part of a cloud infrastructure.

            Comparatively speaking, when you consider thin clients, it is still using the client / server model. You are just moving the plot point one way or the other depending upon suitability for computational load. That still qualifies as a pivot but it isn’t a revolutionary shift.

            Despite that, there are still some interesting implementations for the cloud that seem to fly under the radar for some reason. One of those is the Xbox One and the Live infrastructure. It is using some ground breaking principles that go far beyond that of streaming, virtualization and storage. They are using Azure to offload compute from the endpoint so that local resources can be devoted to video rendering. This is a departure from the traditional client / server model because the endpoint is actively engaged as a part of a clustered computing model. And that is pretty cool when you think about it.

          35. All those ways to mold the PC had little to do with one PC being different from another. They were different ways of using the same PC.

            Joe

          36. Joe, Exactly! Just adding cards to a standard PC does not magically transform that PC in to something new. It just adds a bit of custom functionality for the task that needs to be done.

          37. klahanas – “Iteration is building upon an existing product. Innovation is creating a product that serves a previously unrecognized need.” – Kirk

            I agree 100%

          38. Okay. I can accept that. Using the PC as a basis has fostered tremendous innovation.

          39. In the early days the best video PC solution was on the Amiga platform. Atari was giving Mac a tight race for midi solutions. Protools is still best served on a Mac. QLab is still Mac only and runs almost all audio in theatre and related playback needs. Catalyst is one of the leading media server solutions around and is Mac only. Any LED imaging you see in performances and sports is likely being served by Catalyst. Are these closed systems enough? Or are you talking more embedded systems? At that point you aren’t really talking PCs though still PC parts.

            Trivia: the first space shuttles ran on less tha 2 megs of ram.

            Joe

          40. Joe, Exactly right about the Amiga platform. It is where N=WT=K’s Video Toaster got its start. All thanks to the advanced 3D graphics that where years ahead of anything that was offered on Windows PC. You are correct about the rest of the points you make as well. In the end they where PCs with PC parts.

          41. Both the Amiga and Mac are PC’s. Fortunately for us IBM was too short sighted to lock it up, and gave an ecosystem that fostered innovation.

  3. I think you tend to overlook or minimize the ways that Nadella has to deal with “facts on the ground” that limit what he can do and how far he can shift things at one go. He inherited a long list of poor decisions made by Ballmer that were designed to enforce Ballmer’s “desktop and windows and office first and forever” strategy. But he can’t undo those decisions or eliminate their corrosive effects anymore than he can decree that all MS employees shall use Dvorak keyboards from this point forward.

    Actually, military metaphors like “facts on the ground” are misleading here because Nadella isn’t a general commanding troops, he’s just the CEO and has to please the board of directors and the shareholders or he’s out of a job… and he has to keep the employees and the managers who run MS’s mutually distrustful divisions happy or he’ll get zero cooperation.

    (Yes divisions, because Ballmer’s last minute reorganizaiton into a functionally organized Apple imitation can only exist on paper unless you a) fire absolutely everyone and rebuild the company from scratch, or b) take years to patiently retrain everyone to stop being mutually distrustful and start acting like a companywide team)

    Long ago, Microsoft’s strategy was: operating systems and software, in a mutually beneficial symbiosis. Computers mainly existed to a) be advanced typewriters, b) run visicalc/lotus, c) run other (often in-house) software, so MS sold DOS, Word, Excel, and Basic. Which evolved into Windows, Office, and a variety of MS-made programming tools.

    Thanks to Ballmer’s decade devoted to building fortifications and defenses and moats around MS’s existing business model (designed just as much to keep MS’s customers from escaping as to keep competitors from attacking) while systematically destroying all attempts by MS divisions to expand or evolve that business model, MS is still today nearly all about enabling you to type and crunch numbers on a machine running MS’s OS, and if you want to do anything else they’ll sell you your choice of programming language and compiler. Mobile? You mean kids these days with their touch screens? Just a fad.

    Nadella is trying to evolve MS beyond “desktop first, foremost, and forever,” but he has to start with what he inherited from his predecessor, and he has to cast it in terms that will keep those divisions that prospered under Ballmer, and those board members who can’t see the point of kids these days with their touch screen devices, happy. And he has to do it without impacting MS’s profits. Which is of course an impossible set of demands.

    The growth areas of the future are mobile and the cloud, and all Nadella has in those columns are a few add-ons and doo-dads which only exist now because they were seen as supplements to the office ecosystem (MS’s enterprise services) or as ammunition for those moats and fortifications (metro, windows phone, surface, Nokia, more dross than gold in this area).

    I think the corporate-speak and wordiness of Nadella’s memo are there for a reason — to keep various people who will be made very unhappy with the direction he’s trying to take the company from pulling out their guns (cf above linked cartoon) and aiming at him. And I think he’s chosen “productivity” as the new MS guide star because on the one hand, Office and its ecosystem is what he has to work with (note that Windows gets nearly zero mention in the memo; office is at the very least cross-platform, so it’s his starting point). On the other hand, productivity is a word that means “office” to the old guard who he has to placate, while to the new guard who have created those underdeveloped infant add-ons which he wants to grow and cultivate, it means “what you guys have built.”

    1. If all that you say is near the truth, it is a pitiful situation indeed. Under your scenario, how would he ever be strong, clear, demanding, and decisive? Assuming that significant changes in how Microsoft goes forward are needed it seems that more delays are necessary. Pity and not very promising

      Mark

      1. “Under your scenario, how would he ever be strong, clear, demanding, and decisive”

        Right now, he *is* doing stuff, but it’s all political, lots of horse trading. The surface needed to be axed. He couldn’t kill it outright, but he got the surface Mini axed. Next year, there probably won’t be a surface 4. Some of his opponents will get the sack with the upcoming layoffs. Others will be bought or promoted to positions where they can no longer oppose him. As he gets more of a track record, he’ll gain more freedom. Especially if he can start to point to things he’s done that were successful.

        Basically my point is that MS is such a vast herd of cats that turning the company around is going to be a an even slower process than most people realize.

        1. And they don’t have years…
          Also, it is a lot easier to herd cats, if you break them into smaller herds.
          Microsoft needs to be broken up. ASAP.
          (it is hard to let go of power though – and especially the idea of power)

          1. Following up and adding to Recision’s comment, above, Ben Thompson is advocating the breakup of Microsoft because Microsoft’s divisions are at war with one another and all are suffering as a result. Two separate (which is never happening) companies would be free to pursue their own unique strengths without being held back by the other.

    2. “I think you tend to overlook or minimize the ways that Nadella has to deal with ‘facts on the ground'”

      I actually wrote a small section on how Nadella was a company man and how his hands were probably tied by corporate politics. But it didn’t fit into the flow of the article.

      Rest assured, I think Nadella is on the right track. My criticism is that he’s not moving fast enough to dump the old and move to the new. He may have no choice. And if that’s the case, it’s a real shame because I think this half-way approaching of getting where they need to go is really going to cost them.

      1. Microsoft is going to be around for the forseeable future. The only question is whether they are going to be like IBM (relevant in the fixed-size market of the business world, but not a growth company anymore) or like Google/Apple (relevant in the mobile market and relevant to the next couple billion computer users). For the past decade they have proudly been following the IBM path while denying that they were doing so. They are now so huge, and have gone so far in the wrong direction, that it will take time to turn themselves onto a new course.

        The only question is how much time it will take and whether it will be too late once they have done so. My guess is it’s going to take at least a full year or two for them to finish changing direction. You and a lot of other tech commentators, think that yesterday is almost too late. Naturally, Nadella thinks he has enough time, because he *has* to think that, or quit..

  4. “They competed with other operating systems and boy, did they ever compete.” Nope. In 1981, they were gifted a monopoly by IBM and the very nature of a monopoly is that there is no competition to compete against.

    Actually, one of Microsoft’s biggest problems is they never learned how to compete in a market place that confronts them with real competitors. They do not know how to make a product that customers will choose to buy rather than have no other choice but to buy. If you live your enter life in a dark cave, your vision atrophies. If you live your entire life as a monopoly, your ability to appeal to customers atrophies.

    1. So true! It was a massive strategic mistake by IBM not to see the market opportunities that the PC would open up so they let Microsoft own the PC space for the next two decades all because I am sure to them a PC looked like a toy. The funny thing is that I have heard the same thing said about Smartphones and Tablets from IT people who should know better. Some people seem to never learn

      In the early days of the 1980’s there was real competition as we did have Atari, Amiga, Apple and many others who where making Command Line Interface (DOS) systems it was the success of Windows that sealed the deal for Microsoft. Once that happened they became a monopoly. Once that happened they where able to shut out other competitors to the market and the quality of the products dropped. Microsoft was able to write in to their OEM contracts conditions that made them get a cut of every system they sold as a condition of lower prices for their software. These anti competitive deals could only happen once Microsoft became a monopoly.

      These deals also showed us who Microsofts real customers where. Their OEMs and not the end user. So Microsoft only had to worry about making the small set of OEMs happy and not the larger pool of end users. They where shielded off from having to deal with the mess that was created when their products did not work correctly. This let them become lazy and not push innovation.

      We are seeing the same thing happen now with Google and Android/Chrome. How this relates to Microsoft is that Google has used the same monopoly contract deals that Microsoft used back in the 1990’s with Microsoft’s OEMs on the Android OEM’s today. This is why Microsoft felt that they had to purchase Nokia as Microsoft knew that if Nokia was to ship an Android phone that Google would have locked Windows Phone out of the market for every major OEM.

      Microsoft’s problem is that they still think that Windows needs to run everywhere when in fact those days are long gone. The sooner they understand that the better they will be.

      1. Is that what they think? They seem to be one of the only cross platform providers out there these days. They are even developing Skype for the Fire phone.

        1. Yes. That is what part of Microsoft thinks. For them Windows is everything and being cross platform in the application space is great but not as important as getting as many people as they can to run “Windows”. This is obvious as you could see that in the case of Windows Phone or Windows RT they should have come up with a different name for the OS otherwise it is confusing to consumers as their expectations are not going to live up with what the product can actually do.

          Sure, they are doing Office, Skype and OneDrive for other platforms and that is a good thing that they need to continue to do. They also need to make sure that they their cross platform offerings are native to the platform that they run on and not a bad port of code they used on Windows.

      2. While true IBM missed an opportunity there was already a heavy barrage of calls for an Antitrust suit that would have been much more certain if they had actually succeeded if MS had followed through with the strategy you are suggesting.

        For all of that IBM is extraordinary it its ability to adapt to a changing landscape. They are already many companies that are effectively siloed into different businesses. They are an integrator, a software developer, a research and patent firm, and a slowly dying hardware maker. There are few companies who would or have ever been able to effectively change their business model so completely as IBM and it is extraordinary that they have done so IMHO.

  5. John,

    Satya Nadella’s capabilities and track record speak volumes. Unfortunately, his memo aligned with the same theme. But in all fairness, there are a few factors to consider:

    1. He is an Indian / American.

    2. He is still warming up to the role.

    Cut him some slack on composition until he has some more seat time. It is tough to hit all the apexes when the rubber is cold.

    1. I am with you that actions speak louder than words. I also am willing to give him some slack but I am not willing to give him a pass as being bad at communicating a clear vision and message as that is a requirement for being a good leader and CEO.

      1. This was a memo for Microsoft employees. I don’t believe that this should be a gauge for Microsoft’s strategy or for Nadella’s efficacy as a communicator and leader. Clearly, the message was crafted around the structural changes.

        1. Even if it was only meant for Microsoft employees effective communications is still key for being a good CEO. Of course I understand that like in politics we do not get everything we want with one election or one candidate so change does take time we will have to see what actual changes he puts in to place. Assuming they are able to downsize and re-focus they could end up doing just fine. Of course the longer they put it off the harder it will be to do so in the future because there are no guarantees that Windows and Office are going to be the cash cows that they once where.

          In fact I can tell they are on the decline already. This is obvious if you watch how restrictive Microsoft has become about installing copies of their software. This is the end goal of Windows Genuine Advantage as Microsoft is desperate to make sure that every copy of Windows and Office is paid for and in some cases multiple times over. A perfect example of this is of you have a hard disk crash or wish to upgrade to an SSD from an HDD in many cases you do not have the install media to start over so users are forced to either purchase restore disks from their OEM that should have been included with their system or purchase them again at retail or online.

          1. “Even if it was only meant for Microsoft employees” – Brian

            I know that you are not supporting that view, Brian, but no one should be. Everyone well knows that a memo like that is going to be read by every Microsoft observer in the world. Pretending that it was an internal memo is disingenuous, at best. It may have been addressed to employees, but it aimed at investors, analysts and interested observers as well.

          2. Kirk this is true. I hope that no one would think that in 2014 that any memo sent out by any CEO would be able to be only read by internal employees. We see how hard it is for Apple to keep secrets about their plans. Also we can tell that it was a public memo as they hosted it on their own public website. We did not need to go to some 3rd party bloggers site like mini Microsoft to find out about what it said.

          3. brian, you’re a worry ‘every copy?’
            less than 9.1″devices are free WP is free,
            office for ipad free you only pay if you actually create content.
            So its fair to say you’re just a bit out of touch with whats actually going on.

          4. Yes. I am totally aware of what Microsoft is doing in the tablet space but you are missing the point of what i was saying. They have overreached in their desire to lock down Windows and Office installs.

            In the case of Office for iPad your only option is a subscription one. While I will give them credit for selling the Office 365 subscription that includes Office for iPad in the app store and giving Apple their %30 cut. There is option to purchase it as a stand alone install. There are plenty of users who have no desire to pay an annual fee just to have edit ability on Office for iPad. Many people will and have already chosen other alternatives that are less expensive and have been on the market for a lot longer.

            So I would respectfully say that both Microsoft and you are out of touch with the current state of consumer software.

          5. Really I think your are out of touch and tad confused but remember you are a apple-centric user. Most people I know who need 365 editing features have 365. what does this do? well they get to add their ipad for free. Also it makes your licencing cloud based and device independent. Use it how you will. Repurchasing licenses for software is a ancient way of thinking. Many households have a mixed bag of devices that change on a fairly constant pace and not always the same eco-system.

            30% cut ? look again…..

        2. “I don’t believe that this should be a gauge for Microsoft’s strategy” – Scott Humble

          I respectfully disagree. I think it was an attempt — a failed attempt — to espouse Microsoft’s strategy.

          1. For all of that the one point Ben Thompson made somewhere was that the letter was written for Microsoft employees and has to be read through that filter of understanding Microsoft culture and modesnof communication.

            I only trust Ben Thompson because he has actually worked for Microsoft and has experience interpreting the internal dialogue of the company.

            Now it may be a cultural failure of Microsoft that their internal communications are diluted by such history. But, every company or organization I’ve worked with or at has had a particular idiom. If message is to be effective in challenging some basic cultural aspect of a company I would argue that it would be less effective if it discards that idiom for a different way of speaking.

            Ben is highlighting the parts of the memo that mean something to a Microsoft employee and translating that for a ln outside audience. Perhaps that is a major failure of corporate culture but change must be gradual and communication is always tainted by who you are talking to.

            The quote I would use is “know your audience”.

          2. It is naive to pretend that the memo was only intended for Microsoft employees. Just look at the coverage of it by the press and others. The memo was intended for anyone interested in where Microsoft was headed.

          3. And its delivered in a way easily further clarified by managers. its the fact that this is leaked that keeps it from being more specific.

    2. “Cut him some slack on composition” – Scott Humble

      Nadella has access to the best speech writers in the world. And, personally, when I’m not sure what to say, I say less, not more.

  6. One ménage à trois joke. Three pictures of Russian dolls. “Troika” might have been a more apt title.

    Also, including the YouTube clip really didn’t add to the article.

    1. “including the YouTube clip really didn’t add to the article.” – qka

      I’m sorry you feel that way but I don’t regret adding it, not one tiny bit. The video clip was one of my favorite touches and it still makes me laugh every time I watch it.

  7. I find the complaint about Ballmer and Nadella’s wordiness amusing considering this long piece can basically be boiled down to: Microsoft should get out of the hardware business.

    1. Yes. It is a bit of a long piece but John did need to lay out his points about Microsoft having three masters and the reasons why that is a bad thing along with deconstructing Nadella’s corporate speak letter. Yes, Microsoft should get of of the hardware business. But they also need to work on beefing up their software offerings on other platforms as well. Not just give it lip service. Anyone who has used Microsoft Office Professional on OS X would know that Microsoft could do a lot better. The same is true for Hotmail/Outlook.com and Hosted Exchange that fails badly with dealing with SPAM and server side rules. Most of this has to do with their focus on the desktop and the mistaken thought that the PC was the center of the universe so you would do your processing of your email there. That is not true anymore. Lots of people have more than one device so it is critical that the server they use has to have a much better control on the emails that they are getting. Not only the emails but the alerts that come along with them that can become an issue as any SPAM that gets through is given the same alert as an email from a friend or someone you are doing business with.

      1. In order for Microsoft to beef up it services on other platforms it needs to be out of the Windows business. Windows platform will always be favored so long as it’s a huge cash cow for Microsoft.

        1. So true! For most companies this is true. Apple is an exception to that rule as they where doing quite well with their iPod business but they where willing to put the iPod on the back burner to build the much lager iPhone and iPad business. It is really hard to ignore your main money maker in favor of the unknown. However history has shown that the companies that last are able to make that transition and not be one the equivalent of the one hit pop stars.

          1. Oh like the iphone and apple ? This is their only truely successful product… everything else they eek’ed out a meager existence. even apple has much to prove.

          2. iPod was a truly successful product for its time. How quickly people forget and try to rewrite history.

          3. Mark, Yep. the iPod was really successful for its time. Not just the iPod but Apple has had many hits. Unless whatsa2 is defining success by marketshare and that case they have almost never done well there but for Apple and their shareholders proftshare is what is important and really the mark of success. It is the ability to be around for the long haul that is important.

          4. So then IBM is a success by that logic?
            I think far too many people see apple through the rose-coloured glasses of the iphone4s+ devices. I think apple have made some good products that have pushed the industry along, But their inability to embrace the “market” will always be their downfall. Not in a financial sense. Its always “a” rigid product and its rapid demise
            MS- can be accused of the opposite -:)

          5. Yep. I would count IBM as a success. They are not misguided in to thinking that they can be all things to all people. Again, Apple is doing what is best for Apple. For them to make the products that they make and serve the kinds of customers that they do there are limits as to how low of a price point they can sell their products. It is not a downfall at all. It is a strength. Knowing what you are good at doing it and executing it.

            It would be like telling BMW that they have to make cars for everyone. Not going to happen as I am sure they have the same floor on pricing that they can sell at and still make the quality of product that they do. This is why there are other companies such as Honda and Toyota that do make cars that work just fine but are for a different price point.

            Yes. Microsoft wants to win the popularity (marketshare) crown. Great! But they do that at a cost. It has worked well for them until now but they are going to be forced to change.

          6. It bugs me that people don’t get this. Apple is a luxury brand and they have no intention to dilute their products by selling something inferior. They have the most valuable users that provide app makers 4x the revenue of Android AMD just like the 90s they have no intention to be anything but anpremiumaker of devices.

          7. E0rr, I also bothers me as well. There are plenty of people who do not seem to understand that Apple sells affordable luxary. Steve Jobs did say many times that there are products that they could not make as they would not be good enough. He was 100% right as if you want quality it is going to cost. You just can not have cheep and good. It does not work.

            Also, as you have correctly stated, by catering to the premium buyers they are able to create an ecosystem where app makers make a lot of money and by making easy to write apps by limiting the models that they create they also keep buyers from having buyers remorse. That also helps the 3rd party accessory market by letting them keep their SKUs to a minimum to support a large number of potential buyers. This lowers their go to market risk and also they know that the most desirable buyers are there so they will also be able to sell their products with good margins as well.

          8. No Cheap and good?
            sounds like a apple mantra…lmao
            Hmmm just thinking about the US car industry…. now why exactly did it fail they were well made?
            Markets evolve and get commoditized. this is not different.
            Brand orientated cars buyers fall into the same trap.
            and its the reason apples stuff always goes into decline hopefully they can find a new Niche.

          9. Thats right. When something is cheep it is never the best product in it’s class. Maybe I should have said you can not have cheep and best but in either case it is a judgement call by the buyer. For some people they just do not have a lot of money or they are bargain hunters so they value buying things for less over other things.

            The reason the US car industry failed was because UAW (Unions) where not flexible enough to change their wages and the US car industry was not putting out cars of the quality that people where looking for. You also had the whole gas/oil crisis of the late 1970’s that forced consumers to consider getting cars that where more fuel efficient. Something that Japan had down and was decades ahead of what the US car industry was offering.

            So Japan was lucky as they have a small land mass compared to the USA so they had been making small and efficient cars good cars for a while. So it was the perfect storm.

            Yes. There are some people who buy cars more for the badge than anything else. Thats fine and if that is what makes them happy, great.

            As for Apple being in decline, I do not know what metric you are using to say that. They have lots of money in the bank. The best customer satisfaction. The only place where you could have a point is in marketshare but you need to understand that is NOT what Apple cares about and for good reason as they could not make the kinds of products with the high customer satisfaction if they did.

          10. I really don’t think MS think that … being all things to all people.( not literally) The cloud strategies are paying off. And really this is what I feel will redefine MS in the end. Threshold may be a ideal point in time to CHANGE the product names.

            “For them to make the products that they make and serve the kinds of
            customers that they do there are limits as to how low of a price point
            they can sell their products.” maybe thats a debatable point they could easily do mid-tier and up.
            But they are a Niche company and a couple of years they will be sub-9% in market share. But they have always been about the max return for the minimum effort. But thats their ongoing problem since they started…

          11. I think all companies aim to get the “max return for the minimum effort.” It’s where they draw the line on spending any effort that differs.

            Rather than spend resources to broaden their product line to reach lower income tiers, Apple prefers to spend resources on paradigm-changing products and in the intervening years, on enhancements. Apple has clearly changed the market at least three times – Mac, iPod/iTunes, and iPhone. Arguably for Mac and iPhone, Apple hasn’t reaped the full financial benefit of its paradigm-change because it didn’t create products for every income tier. (That said, today, Apple sells more products, and more variants within each product line than at any time since Jobs cut everything back in 1998.)

            Why won’t it? EOrr mentions one. Another reason is that at least for devices, the employees one hires to work on broadening a product line are different from those one hires to work on paradigm-change. Another reason is that Apple has structured itself to operate like a small company — much more integrated, from beginning to end, across all functions, across all products. (Even the Apple Retail Store is getting more integrated.) This structure isn’t well suited to creating lots and lots of products and variants. And another reason is financial — Apple creates margin by going for volume production, which offsets its costs in providing users with the intangibles expected of its premium brand.

          12. Microsoft at least used to think that a computer running DOS and then Windows on every desk and in every home was their goal. As to what they think now we will have to see how things shake out over the next year with their new CEO.

            Yes, The cloud strategies are paying off for them and I really do hope that is where they end up going as it is where they belong. They really have no desire or expertise in dealing with consumers, running retail stores or building hardware that the masses want.

            I also hope that they look at changing up their product names and reducing their SKUs. This would be a great place to start as it would be a sign that they get that simple is better than complex and be a lot more customer friendly.

            In regards to Apple being a Niche company as far as marketshare is concerned. That is fine and that is EXACTLY what they need to do. As long as they are getting the right buyers it does not matter what the rest of the market does as not every customer is of the same value. They are an affordable luxury brand and they are going to stay that way.

            There are plenty of other vendors and solutions for people who are looking for less expensive hardware, software and services. So it really is not a problem at all. If anything, it is an opportunity for other companies to come in and make their mark on the industry.

          13. Yes i guess we differ on a persons value…or what they each can add.

            Affordable? that is a developed nation misnomer and one that is only sustainable with subsidies by carriers. ( and the US is moving away from this) Honestly, as all this settles down I doubt smartphones will be much more than a dumb-phone was in its time.you may pay a few more dollars for a brand but the vast majority will not pay 10 x times the amount. People move on and so does their disposable income. I do hope they all get a sustainable share as its a good thing. But Apples history is not good in this area so its more about them adjusting to a mature market if they can or want too?

            I think Nadella is moving things along but much of the stuff we are seeing started in the ballmer era, so how much is Nadella is unknown. thou given his cloud background I dont think there’s a better candidate to drive this.

            SKU’s yeah that need to be less
            free, consumer and enterprise would be enough imho
            But the free under 9.1″ is good and will slowly move MS out of the HW.
            I think there is still value in them producing things like surface pro3 and Lumias though. If you are US based then you dont get Nokia D&S or its value on a global scale. (and why MS are working on using the name longer)

            Though for corp culture issues… if nothing changes nothing changes.
            but the re-org and lay-offs are all great drivers for change. Plus Nadellas hammering persistent stance and message lol.Next year we will see stuff purely Nadella.

            .

          14. “Honestly, as all this settles down I doubt smartphones will be much more than a dumb-phone was in its time.you may pay a few more dollars for a brand but the vast majority will not pay 10 x times the amount.”

            Apple devices do not cost ten times as much when you shop for comparable products. There’s a premium, but for good reasons, and there’s a segment of the market that will always derive value from the experience Apple delivers. That’s never going to go away. We need only look at the Mac, which is thriving. Or look to the success of the iPhone in China (something many analysts and naysayers said was impossible).

            “I do hope they all get a sustainable share as its a good thing.”

            The error you make here is talking about the share of an entire market. It is the absolute number, the user base, that matters, and Apple is already large enough to be sustainable.

            “But Apples history is not good in this area so its more about them adjusting to a mature market”

            Once again, the Mac is doing just fine, so I’m not sure what history you’re talking about. The last couple of decades have taught us (well, some of us) that a value-added user experience focused on the best customer segment of the market is sustainable.

          15. Yes well the MAC native apps are just so huge you would never think to use PC software.
            ( and why so many of my friends that use one have a PC too)

          16. Your sarcasm betrays you. Yes, the Mac is a small community, but it is robust and thriving, that’s the point! You don’t need majority market share to thrive, the Mac is proof of that. What you need is a good customer base. Of course your base has to be large enough in absolute numbers, but it would seem the Mac is at or past whatever that threshold is, since it is doing very well.

            There’s tons of great software for the Mac, I’ve never run into a situation where I couldn’t find a great app for what I needed. The software is excellent and the developer community is strong.

            At some point it comes down to whether or not you believe observable reality. We can see clearly the Mac is doing just fine, despite its small share. That has to teach us something (if we believe observable reality).

            Your friends probably have a dedicated PC for gaming. They wouldn’t need an extra PC for apps since you can run Windows natively on a Mac. Surely you know this?

          17. Then by your logic nearly every platform is fine?

            Its funny how pro-applites bag w8 for it desktop/modern usage as jarring.
            Yet bouncing between OSX / win and it is not?

            And thats really the problem here… the blind cult following.
            I dont care that they do, I have used one that way ( not 100% success but most basic programs). And yet adding Modern is not.

            The point here is you use your tiny market share and analogies (if it works for you great) and use an entirely different yardstick for others..
            some might say this is a bigoted attitude,

          18. “Then by your logic nearly every platform is fine?”

            Well, depends on what you mean by fine. Platforms have different advantages and disadvantages. But the point here is that a small market share is not necessarily a disadvantage. The argument that the Mac, or iOS, is doomed because of minority market share is a flawed and very poor argument.

            “Its funny how pro-applites bag w8 for it desktop/modern usage as jarring. Yet bouncing between OSX / win and it is not?”

            I’ve never liked using Windows, it’s poorly designed, not well thought out, there’s a lot to dislike. I think most people who do like Windows are getting value from the functionality, the jobs-to-be-done, because Windows has never been well-designed.

            I like the new Metro look, I wish Microsoft had the balls to really commit to it, but they didn’t, they did a kind of half-assed compromise that has not gone over well with many users.

            I wouldn’t recommend bouncing between OSX and Windows, the point is the capability is there if you need it. But you can get a PC so cheap these days, it might be safer to just run Windows on a separate box.

            “The point here is you use your tiny market share and analogies (if it works for you great) and use an entirely different yardstick for others.. some might say this is a bigoted attitude”

            I don’t recall using a different yardstick for other companies or platforms. Got any examples? What is objectively true is objectively true, observable reality is what it is, this isn’t rocket science.

            You are the one spouting flawed arguments that deny observable reality. It seems Apple’s continued success really does upset you.

          19. No I Am happy they have their Niche as they have always added something different.
            Apples overly narrow / MS overly broad and they then see how each other falls short.
            Committing to metro/modern?
            I think the unified win coming in threshold releases will help with that and hopefully is distinctive enough ( and dumb’ed down enough) for consumptive only uses.

            “I’ve never liked using Windows, it’s poorly designed, not well thought
            out, there’s a lot to dislike. I think most people who do like Windows
            are getting value from the functionality, the jobs-to-be-done, because
            Windows has never been well-designed.”
            So to paraphrase you’re saying windows is well designed for people need “functionality, the jobs-to-be-done”?

            Sorry if I come off wrong, but the comparision between them will always be plagued with bad examples( including some of my own lol) as they are philosophically different in market and scope.

            MS service agreements are a decade+ so when you say commit to one how can they possibly do that? This will run for years so unifying consumer(modern) /cloud across all platforms is really their only way forward.

            .

          20. “No I Am happy they have their Niche as they have always added something different. Apples overly narrow / MS overly broad and they then see how each other falls short.”

            Apple is no longer niche, Apple now sells as many computing devices as Windows PCs are sold. If the iPad alone were spun out as its own business and counted as a PC (which is what it is), it would take over the top PC seller spot from Lenovo.

            “So to paraphrase you’re saying windows is well designed for people need “functionality, the jobs-to-be-done”?”

            No, Windows is not well-designed, it never has been since design has never been a priority for Microsoft. All humans have jobs-to-be-done and we all need functionality from our devices. Windows is/was simply good enough and cheap, but now that consumers have other/better options, they are fleeing from Windows.

          21. Yes people have other options – better is really a personal application of any tech.
            And a lot of people dont use technology in a creative way but 99% consumptive and thats OK. I would agree a PC or Mac is not for them.

            Niche? I meant that they have a minor % of the mature markets they play in.
            It will be interesting over the next 4years to see how the market segments play out.

            But comparing sales numbers across markets is erroneous Their life-cycle is very different. Tablet sales are down but that does not equate to less users. Phones are a 2 yr replacement, Tablets/PCs are about double that. So the raw sales numbers may be important if you’re the CEO/CFO. For everyone else its really market share.

          22. “And a lot of people dont use technology in a creative way but 99% consumptive and thats OK. I would agree a PC or Mac is not for them.”

            This is a myth, lots of real work is being done on iPads, or even a device like a Surface. My iPad 2 in a ZAGG keyboard case has replaced my MacBook Pro, for business use. All four of my kids use their iPads as their primary PC, and they do tons of creative and productive work on them.

            If you want to understand what is really happening you must look past the clickbait headlines and the memes. As I said before, if you spin the iPad out as its own business, it would take the top spot among PC sellers, beating the current #1 Lenovo. In the last year Lenovo sold 55 million PCs, which Lenovo called outstanding and a record year. In 2013 the iPad topped 70 million. Context is important when we talk about iPad sales being down. Down from what exactly? Down from the initial insanely crazy growth of the iPad, which beat the iPhone to every sales milestone. So now we’re seeing a slow down, for a lot of reasons, but there’s no doom and gloom for the iPad. Far from it.

            “Niche? I meant that they have a minor % of the mature markets they play in.”

            Apple dominates the market segments they operate in. But yes, Apple will always have a minority share of an entire market, but if you understand segmentation then you know that this isn’t relevant. Market share (of a whole market) is one of the dumbest ways to analyze a market.

          23. Yes as you say you can use a ipad for a few things but anybody who does serious work does not use them Apple or MS, its just not their go to device its just a poor substitute. Yes I can use a push lawnmower in a pinch but its still not the best.
            Please don’t confuse this, if productive use is 5-10% of your usage is not productive but consumptive.

            I found it too limiting for my use and its was not a best fit “for me”. I went back to a surface pro as its a hybrid.
            Surface Rt I dont care for either… its just a tad larger than my phone and functionally not much different.Iphones with a larger screen may negate the ipad need for many so that will be interesting to see how it pans out. I suspect they will end up gathering dust as they do for many friends as their “go to device” is 95% their phone (5-6″).

            but I am glad you found stuff that fits your needs… Nice to have choices.

          24. “Please don’t confuse this, if productive use is 5-10% of your usage is not productive but consumptive.”

            Of course it depends what you do with the device, but you seem to be making the assumption that the iPad is limited and is therefore more of a consumption device than creative/productive. That is nonsense, simply put. Don’t blame the tool.

            The iPad is different, and is limited in some ways, but in other ways it is a more capable and flexible device. There are also many accessories for the iPad that make it a hybrid. Not running Windows is a plus for me (and many others).

            “you can use a ipad for a few things but anybody who does serious work does not use them Apple or MS, its just not their go to device its just a poor substitute”

            It may be a poor substitute for you, but in many ways the iPad is better. My kids have no trouble at all doing very complex things with their iPads, because they’re used to it. The touch UI is natural for them. Again, don’t blame the tool if you couldn’t use it to do anything ‘serious’.

            It seems obvious Apple will expand the capabilities of the iPad even more, and release a larger screen iPad. Sales of the iPad will be fine, you need not worry about that.

          25. As I said if it works for you then be happy. People have very different use cases

            Any way it was a interesting discussion and thank you for your comments…
            ( pre-order the iphone6 finally a good sized phone- a little cheeky)

          26. “If you dont understand that some tools are better than others for particular uses then ,,, I will leave it at that.”

            Of course this is obvious, but you are clearly making assumptions about the iPad that are ridiculous. The iPad is a powerful tool. Certainly there are jobs it is not well suited for (that is true of any tool), but you seem to believe the myth that it is only good for consumption and not good for ‘serious’ work. This is false.

          27. Well, obviously in the minds of the anti-Apple crowd consumption is whatever those darn kids are doing with those iPads. Get off my lawn!

            It is the breadth of accessories available for the iPad which makes me think Apple isn’t going to do a hybrid device. There’s no need, the iPad is already many kinds of hybrids, many kinds of devices. Oh, your Surface has a keyboard and a stylus or mouse? That’s all? How limited.

          28. See that your problem…. everyone with an ounce of sense says this about any platform. The fact that you cannot accept it is because It is directed at Apple shows your bias is impacting your capacity for rational thought.
            you say you use a MAC as its easier for you that a PC and makes you more productive. But if I say a tablet is less productive for serious work than a full OS/. you take offense. Sorry but your obvious bias makes the conversation pointless.

            Anyway…. Enjoy you product of choice.

          29. I’ll repeat myself in simpler terms. A traditional PC is better for some tasks, and the iPad is better for other tasks. Both can handle many different kinds of work.

            You’re making a lot of faulty assumptions, when you say things like “a full OS” or “serious work”, that’s nonsense. Can an operating system be half an OS? What about two-thirds? Is Windows the only full OS? Is serious work done without a smile? If you didn’t use a spreadsheet can it be serious work? You are making these faulty assumptions in order to create a line of reasoning that ends with the iPad not being good for serious work. You may be experiencing cognitive dissonance.

          30. So we agree that you are experiencing cognitive dissonance? Seems like a strange thing to be agreeable about, but okay.

            On a more serious note, I get what you’re saying, you think I’ve changed what I said. I can assure you I have not. You made some ridiculous statements and I corrected you. That is all that has happened here.

          31. The problem is is you cannot accept that some devices are not good at certain things and it rankles you that I say it about apple in particular.. Its unfortunate that you bigotry blinds you so… you seem to be a intelligent person.
            Anyway I will leave it at that as we just differ and thats OK.

          32. “The problem is is you cannot accept that some devices are not good at certain things and it rankles you that I say it about apple in particular”

            What a strange thing to say, since I’ve said many times that different devices are better suited for different tasks.

            You are attempting to spread the myth that iPads are not for “serious work”, and that is simply false. iPads are great for many kinds of work, and not great for other kinds of work. Depends on the task, and it depends on the user as well as the available accessories.

            We don’t “differ”, you’re spouting nonsense and I’ve corrected you. I’m getting pretty tired of it actually. I grant you the last word 🙂

          33. Yes. I am sure we do differer on what we both value and what we see as what others value in the marketplace.

            Yes. Affordable as the US carriers are still offering contracts and in the case of T-Mobile they offer payment plans. Your next point about what the smartphone market will be like when it settles down I mostly agree with. For most people they will end up with some form of Android phone. However this still does not mean that Apple will not continue to do well with their iPhone and the rest of their product lines. The sales numbers back this up that even in China as their middle and upper class expands consumers are purchasing the iPhone in record numbers.

            You are correct that in the 1990’s Apple’s history was not good as they had lost touch with the consumer and where not keeping up with the times. Their OS was slow, bloated, crashed a lot and their computers where overpriced for what you where getting. This is not the case today. Most people who has purchased an Apple product in the last decade feels that they are getting a good product.

            While Nadella is moving things along his actions will speak louder than his words. There is no question that he has inherited a lot of baggage from the Bill Gates and then Steve Balmer era. So I as well as many others are watching Microsoft to see what sort of company they become in the next year or so. I am with you on the fact that having Nadella as a cloud guy makes a lot of sense for Microsoft in the same way as having Tim Cook as a supply chain guy is what is smart for Apple. In both cases that is where the future lies. The question has to be if Microsoft can become the cloud company that they need to become.

            I am glad we agree on the SKU’s and more importantly that they need to do more to give away their software while they look for other ways to fund the development of that software. I still do not think that Microsoft should be in the hardware business if they are selling software to OEMs as it is a clear conflict of interest and will not work out in the long run. They need to pick one and live with it.

            I am well aware of what Nokia means to the rest of the world. I get why Microsoft felt that they needed to purchase them as they did not want to loose out on Nokia as a Windows Phone OEM to Android. However the smartphone wars are over and Google won against Microsoft for the OEM market. The thing is that Microsoft still is able to make money there anyways from the patents that they hold to the tune of 1Billion dollars. So all is not lost other than Microsoft’s ego.

            Regarding Microsoft’s corporate culture it needs to massively change. Have a read of Mini Microsoft blog and you will see what I am talking about. Not only that but the toxic stack ranking environment that Steve Balmer loved has caused lots of problems internally and externally for Microsoft.

            I sure hope so we do see changes with Nadella but like I said above time will tell on his actions and what he is able to do. It may end up being the Microsoft board that really does need the change and hopefully the shareholders will see that.

          34. Yes… you make some good points, I think far too many are caught up in past MS issues ( and it emotional content) to really see things as they are. Nadella is moving that elephant but getting an organisation to change direction is not the same as a change in speed. Look at how long its taken Apple to add a larger screen size, the whole organisation for years has blatantly resisted it and it was a simplest change you could make for maximum impact.

            Its funny the people who complain about MS trying to be everything to everyone and then bitch and complain that MS have not delivered a product or service in enough iterations for their specific need. whether pricing or licensing.
            Stack ranking? I would rather not… ooh look at the butterfly…lol

            Universal Apps will be another big driver… most people dont get the benefits that this has for the Niche MS devices. Its a more virtual market rather than a specific one.

            But yes Nadella has some work ahead of him
            killing asha and X lines is a good move as WP are basically at those prices now.
            And the new WP OEMs will fill that gap easily.

            Yes Google has won the OEM’s but most likely they will be the ones who fragment its monopoly not MS or Apple.

          35. So in your definition, does “successful” require significant revenues from all income classes? If that is your logic, then Mercedes, BMW, Tiffany, Cartier, Hermes, Gucci, and Louis Vuitton, are not successful, correct? All of which are sub-9% market share in their broad-market category.

            And has the Mac, created in 1984, had its rapid demise yet?

          36. No its about getting a significant market share.
            The premium companies you reference(which apple have no real claim too other than markup for now).

            Nearly all of these companies can effectively operate in a bubble and almost completely disjointed from their market place. why is apple panicking about ipad sales and enterprise? BYOD is failing as users now are learning why IT said no for so many years. It just cripples the users personal device in many cases.

            The fact is that every move one makes the other feels…so maintaining a sizable share of the market secures many things ….developers included.
            its why many say 15% minimum is what WP needs to be viable and ongoing … i agree with that. And Apple is no exception.

          37. Well, except that the Mac is under 15 percent, always has been, and is thriving. I think you underestimate how important segmentation is.

          38. Apple II, Macintosh, PowerBook, iPod, iPhone, iPad. How many other companies have revolutionized their field even twice?

      2. Brian, as others have pointed out google does google for ios and android and that seems to be justification for not supporting other platforms.
        OSX is a tiny portion of the PC market… If anything MS support smaller platforms far better than any of its competitors. Honestly you should be thankful they do as nobody else seems to bother to reciprocate.

    2. “I find the complaint about Ballmer and Nadella’s wordiness amusing” – rogifan

      I did consider adding a Post Script that pointed out the irony or writing a 3,100 word article about a 3,100 word memo.

      However, all in all I disagree with you. No on would have read a sentence that said “Microsoft should get out of the hardware business.” But thousands read this article and, hopefully, it gave them something worthily to think about. Based on the comments received so far, I’m satisfied that it did.

  8. But the funny thing is … is that Google is in the same boat.
    If google had not done android you would have seen native google apps on every platform.
    The HW point is a poor one… MS make (not including Lumia) an assortment of niche devices for the W8 market and they are a portion of the 12% of W8 installed base. Windows is free under 9.1″.
    MS devices are really no different than googles’ reference devices in smartphones.

    As much as Nadella can be accused of vague generalizations, I think this analysis suffers similarly.

    So innovation is a fracturing process but a fractured business in the process is not good?
    We all know how shyt the Mac was and Apple always fractures and deserts its platforms devs and users.
    If you have a point about the direction that you think will be unsuccessful; OK. The fact that this is happening, is… well, pretty normal.

    1. “Google is in the same boat” – whatsa2

      I don’t think Google is in the same boat at all. Google makes its money from search. Android served its purpose in that it subverted Microsoft’s licensed business model by giving away the operating system for free.

      “If google had not done android you would have seen native google apps on every platform.” – whatsa2

      Goog apps are on iOS and Android which are the only two platforms that matter.

      “The HW point is a poor one.” – whatsa2

      The Zune was a multi-billion dollar failure. Windows Phone 7 & 8 are sinkholes and Microsoft just poured another 7.2 billion down the drain when they purchased Nokia. The Surface has cost Microsoft 1.2 billion dollars and counting. I’m not arguing that hardware is a bad idea. The facts are.

      “So innovation is a fracturing process but a fractured business in the process is not good?” – whatsa2

      Yup. Look at Apple. The iPhone cannabalized the iPod. The iPad cannabalized the Mac. The business model never changed, never wavered.

      “We all know how shyt the Mac was and Apple always fractures and deserts its platforms devs and users.” – whatsa2

      Nobody knows that and stating is as a fact doesn’t make it one.

      1. “Goog apps are on iOS and Android which are the only two platforms that matter.”

        Thats a nice opinion ….

        but the article points out the fractured approach perceived in MS,

        The same is evident in google….

        Google services are slowly becoming fragmented because of their mobile interests.
        Hell… Android is wandering off who knows where and the only distishuishable bit will be java.
        “Nobody knows that and stating is as a fact doesn’t make it one.”
        Really… I do and without citing others its obvious how bigoted you are.
        you deny the existence of my opinion. ( how apple-ish).

        On the HW Nadella has repeatedly said they will make niche products and have no intention to put themselves in direct competition with OEMs. This is similar to Googles reference devices and I sure they make nothing there either. That statement confirms they understand limited manufacturing/model runs will most likely not make a quid.
        Yes and Nokia D&S most likely will reduce output as all the new OEMs come online.

        MS is a software company but there is nothing wrong with or counter-productive doing limited production of HW even if for one platform.

        Oh the 7.2 B on Nokia … you need to read up on what that included… Licensing was a huge proportion. 10yr agreement. Apple stand still agreement coming to an end so I would expect billions from apple paid to Nokia in future too.

        I you followed the industry rather than devices you would know this.

  9. Great and clever review as always, John. However, half way through I was bored, very, very bored. The article is precise, well written, and the next goes without saying but I’ll say it anyways, enlightening. What got to me was bald faced boredom because Microsoft plain bores me. I am tired of Microsoft. Ballmer was at least interesting to watch as the clown playing the fool. And when MS was big and necessary, though not necessarily for me, I cared, out of curiosity, or maybe because it seemed so important. But now I just don’t care.
    I know this is a meaningless comment, (sorry) so many good ones have been written. But what it means is that I can toss the time it takes to bother to look at a MicroSoft article, just as I have done with Samsung, but this time it is just out of sheer disinterest.
    But maybe it is telling. I wonder how many now find MS, to irrelevant to care?

    1. I fully sympathize. I almost didn’t write this article because I’ve written so much on Microsoft lately. This article started with a joke about beating the dead horse that was Microsoft but took it out in my final revision.

      Microsoft has been done to death, but I felt there was something worth saying so I said it. Unless Microsoft does something exciting, I don’t expect to write about them again for quite a while.

  10. ** “Microsoft is in danger of making chicken soup out of their healthy business divisions in order to sustain their ailing businesses. If they’re not very, very careful, they’ll end up with a bunch of dead chickens and egg all over their face. ”

    At this point, the question isn’t about seeing if they will do this – it is about seeing what they do to stop from doing this.
    So far I am not seeing anything that prevents dead chickens and broken eggs.

    1. I agree. I do not see things changing until they get out of the hardware business and on the software side they have all devisions working together to make the best software that they can on every platform and have it all work together.

      1. I think you missed the point. It isn’t just the dead weight that needs to go but the healthy businesses that will probably decline. Thompson is talking about Windows and how it dominates the culture of Microsoft. I’ll take the word of a guy who worked at both Microsoft and Apple that he understands what is happening.

        Microsoft is extraordinarily profitable still and a lot of that is Windows. As long as Windows drives the bottom line of the company things like Azure, Office, and Bing will struggle to make the necessary decisions that will possibly hurt Windows even though everyone know it is dying.

        1. Thompson is correct and I agree that I can see how it would be hard for Microsoft to turn their back on Windows but that is exactly what they must do. I know that it will cost some profits in the short term but the long term health of the company is way more important.

          The thing that they do not see that many of us on the outside do is that the future is not in making money on operating systems but apps, services and support. That is where Microsoft needs to be going. Services has the potential to be really big as many businesses look to have more of their IT hosted online they are going to need a lot of handholding and customization. These are where Microsoft or any smart company can make a lot of money.

          This is why I think that Apple’s move to partner with IBM is brilliant as Apple can sell their hardware to IBM and then IBM can add their software and services on top along with service contracts. Apple can still make their margins and IBM can do the same. It is a smart move by both.

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