Microsoft is at a Fork in the Road

Many of us have caught the news that Microsoft’s CEO Steve Ballmer’s tenure is up. Over the next 12 month’s Ballmer will work to transition a replacement. This replacement will be faced with extremely hard decisions about Microsoft’s future. Whoever he or she is, I hope they are ready.

In my opinion the crux of Microsoft’s fade into irrelevance is their complete ineptitude to understand consumers. I believe Bill Gates, Steve Ballmer, and the rest of the crew at Microsoft understood a business user but I don’t believe for a second that they had any genuine understanding of consumers and consumer markets. On the flip side Steve Jobs had an amazing understanding of consumers. This was who Steve Jobs built products for and unfortunately in the early days it almost killed the company. The reason for this was because there was no true consumer market for PCs there was only a business/enterprise market. Bill Gates and Steve Ballmer and crew, built solutions that they understood–business and enterprise focused solutions. And during this time it was exactly what the market needed to grow. However in the early 2000s things changed. A pure consumer market emerged for computers and Microsoft was not prepared to compete against a company whose focus and passion were consumers.

The Fork in the Road

So Microsoft finds itself at a fork in the road. I find it very hard to believe in todays global marketplace that a single company can compete effectively in both consumer and enterprise markets at the same time. I believe Microsoft must choose to focus on business/enterprise customers OR consumer customers. They cannot do both.

Not much need change in the way of Microsoft’s outlook and strategic direction should they choose the enterprise focus. However, I don’t believe this is the path they will choose. RIM was in a similar position and chose to go after consumers and it killed them. But I believe the allure of a giant, yet not always profitable, consumer market will entice Microsoft to go this route. If this is the case, a lot must change at Microsoft.

The new CEO must change the culture first and foremost. Microsoft needs an agile and forward thinking group of executives with a vision of the 20 year future and Microsoft’s role in that future. Microsoft needs to focus more consumer oriented RND and innovation efforts. But perhaps most importantly, Microsoft needs to bring executives to the forefront who actually understand consumer markets. Things like the whats and why regular consumers buy things. This is not easy and only a few companies even remotely do this well.

The other expertise Microsoft needs to acquire if they choose the consumer path is regional expertise. Consumer markets in each region outside of the US like Asia, India, etc., will all behave differently. Gaining consumer intelligence is key but so is gaining that insight for the nuances of each region.

Without question Microsoft’s new CEO will be faced with a gamut of challenges. Even a new CEO does not guarantee Microsoft’s future security.

Microsoft to Apple: “Not On Our Watch”

“Declaring that Microsoft and its partners had in the past “ceded some of the boundary between hardware and software innovation” to Apple, Microsoft CEO Steve Ballmer told CRN on Monday that the company’s Surface tablet marks a new era in which the computer software giant will leave no “stone unturned” in its innovation battle against Apple.

“We are trying to make absolutely clear we are not going to leave any space uncovered to Apple,” said an exuberant Ballmer in a 30-minute interview after addressing some 16,000 partners at the company’s annual Worldwide Partner Conference in Toronto. “We are not. No space uncovered that is Apple’s.

“But we are not going to let any piece of this [go uncontested to Apple],” shouted Ballmer. “Not the consumer cloud. Not hardware software innovation. We are not leaving any of that to Apple by itself. Not going to happen. Not on our watch.”

Photo of Steve BallmerWho’s On Watch and Exactly What are They Watching?

Now if one were a cynic, one might well ask Ballmer: “If Microsoft is not ceding anything to Apple on your watch, then who exactly has been on watch for the past dozen years?” But let’s not go there.

Instead, let’s focus on the rest of Ballmer’s statement because, in my opinion, it epitomizes exactly why Microsoft has been struggling of late.

Eyes Not On The Prize

Do you think, for even one-second, that the executives at Apple ever sit around and talk about not leaving “any space uncovered to Microsoft?” Of course not. That would be counter-productive. Apple spends its time implementing its strategy and doing what it does best, not “covering” what its competitors do best.

Chasing, Not Leading

Trying to “cover” what Apple is doing is not new behavior for Microsoft. Over the past ten years, Microsoft has followed the same strategy of not leaving anything Apple does uncovered by attacking the iPod with the Zune, attacking the iPhone with Windows Phone 7 and now, attacking the iPad with the Surface. The results, so far, have not been encouraging. The Zune was officially discontinued this year. Come to think of it, Windows Phone 7 was officially discontinued this year too. That only leaves the Surface and, while it may hit the ground running in October, it’s already ceded a two and a half year lead to Apple’s iPad. And that’s too long.

Play to Your Strengths, Not to the Strengths of Your Competitors

The problem, as I see it, is that while Apple is forging ahead on the path that they’ve mapped out for themselves, Microsoft is following Apple around and playing catch up. Instead of acting on their strengths, they’re reacting to their weaknesses.

Further, instead of creating new and innovative devices of their own, Microsoft is playing a game of one-up. They see what Apple has done, they study it, they come up with a differentiated product – perhaps even an arguably better product, and then–two years later–they bring their one-up product to market and declare themselves the victor. Only thing is, by the time they bring their product to market, Apple and the market have already moved on.

Microsoft needs to stop trying to one-up the competition. Apple didn’t one-up the competition with the iPod–they re-invented the MP3 market. Apple didn’t one-up the competition with the iPhone–they re-invented pocketable computing. Apple didn’t one-up the competition with the iPad–they created a whole new category of computing.

A Word of Advice

Microsoft, a word of advice: If you’re so insistent on doing Apple one better, maybe Apple’s attitude toward their competition is just the kind of strategic advantage that you should be adopting and improving upon. Stop worrying about what Apple is doing on your watch. In fact, stop watching Apple altogether. It seems to me that you’ve been watching Apple far too long and far too much already.

Instead…

  • Stop focusing on doing the competition one better and focus, instead, on doing what you do best.
  • Stop focusing on not leaving anything uncontested and focus, instead, on only entering those contests that you’re best suited for.
  • Stop focusing on what you’re going to do TO the competition and start focusing, instead, on what you’re going to do FOR us, your customers.
  • Stop chasing the competition and, instead, start chasing your dreams.