Microsoft Surface is the Only Apple Competitor in the PC Market

A bold statement to make, right? Especially when you look at the latest PC market share numbers, and Microsoft Surface is nowhere to be seen. Yet, the Microsoft Surface brand’s mindshare has been growing among Millennials and Early Tech Adopters.

In October 2017 we, at Creative Strategies, asked a panel of 1300 US consumers about their personal and work preferences in both PC brand and workflow habits. We were eager to understand how users feel about specific PCs they are given at work as well as what tools and apps they value.

First things first, the industry has been talking about the death of the PC for years. Yet, especially for productivity, we are still very much bound to our notebooks. So it is no surprise that when it comes to working on a report, presentation or other projects, 81% of Americans we interviewed said they use a notebook/desktop as their primary device. Millennials too prefer a notebook or a desktop (74%), but they are the group most open (14%) to using whatever device they have at the time and often using their smartphones (or tablet) and their notebook/desktop together. This reflects how Millennials (37%) have embraced the cloud, which is a core enabler of multi-device workflows. Along with Early Tech Adopters (44%) and Early Mainstream (39%), Millennials see the benefit of the cloud precisely in the ability to access content from any device they choose.

2in1s or hybrid computers are certainly growing in popularity. Twenty-one percent of American consumers have already replaced their laptop with a Surface Pro or an iPad Pro. Another 17% is interested in making the switch to a Surface Pro and 14% to an iPad Pro. While both these families of devices support pen/pencil input, this input tool does not play a role in the purchasing decision process for 31% of consumers.

Dear Employer, the Tools You Provide Reflect on Your Company

“Bring your own device” is a trend that impacted enterprises across many countries, but while the direct impact might have remained mostly contained to the mobile space, the indirect effect on employees’ expectations when it comes to technology has been more extensive.

Early Tech Adopters looking for a job would pass on an opportunity if the position did not offer flexible hours (60%) and if they could not choose the type of computer they would use (32%). For users of Apple products in the enterprise, the need to pick their own PC climbs to 40%.

When asked to pick their PC of choice Early Tech Adopters have a strong preference for Microsoft Surface (52%) over everybody else, including Apple (38%) while Millennials and mainstream consumers see these two brands being equal.

People firmly believe that the technology employers provide you with shows how much they care about the work their employees produce (29%) as well as how much they actually care about their employees themselves (28%). Millennials feel even more strongly about it with 13% going as far as saying that it shows “how cheap they are when it comes to anything to do with employees.”

Microsoft Surface winning over Early Tech Adopters

Despite the fact that most of Microsoft Surface’s sales are in the enterprise market, consumers are very familiar with the brand with only 10% of consumers not being familiar at all with the devices. Consumers who are very familiar with the name think that Microsoft Surface products are the best products with Windows software on them (21%) and this is precisely because hardware and software are optimized for each other (18%). Another 16% of consumers feel that although they are good products they are too expensive.

The main differentiation against other Windows 10 devices rests in the hardware quality (36%). For some consumers (18%), the fact that Microsoft makes Surface products is a key differentiator, and for current Apple owners (36%) Surface products run the best implementation of Windows 10.

When it comes to comparing Microsoft Surface to Apple products the key differentiator rests in the operating system Surface products run (43%). Current Surface users, in both personal and work, see the key differentiator being the touch and pen support (27%).

Microsoft has been talking a lot lately about creativity being the new productivity, and the good news for Surface is that early adopters see Microsoft Surface as the brand that empowers them to be both productive (49%) and creative (48%). Interestingly, Millennials continue to see Apple as the brand that empowers them to be creative (45%). I am sure that such belief comes partly from the strong integration with the iPhone and the range of apps that seamlessly work across iOS and MacOS. Apps availability is something that Microsoft needs to continue to address, especially for devices like the Surface Laptop that ships with Windows 10 S as the default OS.

Apple remains the Market Leader in Consumers’ Minds

When we asked consumers who they see as the leading notebook/laptop brand in the market, the answer came across loud and clear: Apple. Forty-six percent of American consumers chose Apple as the leading brand in notebooks, although interestingly Mainstream and Millennials were stronger segments than Early Tech Adopters and Early Mainstream, categories that I am sure Apple is hoping to excite again with the upcoming iMac Pro.

When we asked consumers why they picked Apple, it was mostly because “everybody seems to have one of their notebooks” (21%) and because “they have always been the most aspirational brand” (20%). Another 21% were split between an OS preference and that their products “just work.” Interestingly, to my earlier point of strong ties with the iPhone, 17% of people of picked Apple mention that as a driving reason.

There is also no doubt that in consumers’ minds the only brand able to compete with Apple is Microsoft Surface, especially among Early Tech Adopters (32%) and Millennials (28%). When we asked who chose the Microsoft Surface brand why they did, 22% said it was because it is the only brand able to compete with Apple and another 21% simply said they are leaders because they are their preferred brand. Nineteen percent also believes that Microsoft Surface products offer the best implementation of Office on Windows 10.

So, the moral of the study is that while overall sales might not ring any alarm bells for other PC manufacturers, Microsoft Surface quietly established itself as the most aspirational brand in the Windows ecosystem as well as the only brand able to compete with Apple. This might not translate straight away in an impact on sales, but it is likely to impact positioning and pricing on the higher end of the market where all PC vendors have been focusing more as of late.


NOTE: In this article, Millennials refer to the age group between 18 and 35 years old. The Label of Early Tech Adopters relates to panelists who self-selected the following description: “I’m pretty tech savvy. Friends and family usually come to me for tech related questions/issues” and “I tend to be the first person in my peer group to buy new tech/gadgets. I consider myself an early adopter.”



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


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


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.

Microsoft: Failing By Design

Microsoft Achieved Its Goal

Microsoft had one of the greatest corporate mission statements of all time:

“A computer on every desk and in every home, running Microsoft software.”

And guess what? Incredibly, THEY ACHIEVED THEIR GOAL! ((For a wonderful take on this, I highly recommend Ben Thompson’s article entitled: “Skating Towards The Goal“)) There IS a computer on nearly every desk and in nearly every home, and nearly all of them run Microsoft software…

…but then what?

For Over A Decade, Microsoft Has Been Playing Not To Lose

Ben Thompson compared Microsoft to the great ice hockey legend, Gordie Howe, and I heartily agree with the analogy. Like Howe, Microsoft has great strength, durability, and a willingness to mix it up. There is also great virtue in Microsoft’s single-minded pursuit of a goal, and its absolute refusal to be deterred from that goal. However…

Those who know how to win are more numerous than those who know how to make proper use of their victories. ~ Polybius

Microsoft’s dominant traits worked magnificently when they were striving to become the king of the hill; when they were aggressively pursuing a clearly defined goal. Those very same traits became counter-productive when they became king of the hill and there was nothing left to achieve; when they stopped playing to win — because they had already won all they had set out to accomplish — and started playing not to lose, instead.

“Ultimately it was Bill’s decision. When you’re king of the hill, you are driven to play defense and protect.” ~ a former Microsoft executive

In truth, I very much like the “king of the hill” metaphor as a way of describing Microsoft, because Microsoft was not just great at climbing the hill, but they were masterful at pulling down, and climbing over, the bodies of the corporations that were ahead of them. But again, what good are those skills once one has reached the pinnacle?

Without a clear goal to head towards, Microsoft lost their focus. With nothing to look up toward; they turned their gaze downward, onto their competitors, instead.

Our friends up north [at Microsoft] spend over five billion dollars on research and development and all they seem to do is copy Google and Apple. ~ Steve Jobs

After a competitor had achieved a product breakthrough, Microsoft belatedly attacked. They were the slow follower — not so much going where the metaphorical puck had been, more like chasing opponents all over the ice, throwing vicious body checks, missing, then crashing into the boards just after their opponents had gracefully skated by.

After a decade of exhausting themselves by skating all over the ice for no apparent reason, all that Microsoft was left with was a warehouse full of unsold Zunes, Kins, and Surfaces, a server full of unused Bing searches, and a wistful memory of fifty billions in lost expenditures.

I spent a lot of my money on booze, women, and fast cars. The rest I just squandered. ~ George Best

The Ballmer Era Is Over

Any jerk can have short-term earnings. You squeeze, squeeze, squeeze, and the company sinks five years later. ~ Jack Welch

Microsoft’s revenues tripled during Ballmer’s tenure to almost $78 billion in the year ended this June, and profit grew 132% to nearly $22 billion. But while profit rolled in from Microsoft’s traditional markets, it missed epic changes, including Web-search advertising and the consumer shift to mobile devices and social media.

“Steve was a phenomenal leader who racked up profits and market share in the commercial business, but the new CEO must innovate in areas Steve missed—phone, tablet, Internet services, even wearables.”

I disagree that Steve Ballmer was a phenomenal leader. He fell into the classic trap of protecting his cash cows and chasing short-term profits. In my opinion, during the Ballmer era, Microsoft looked as silly (and as ineffective) as a one-legged man in a butt kicking contest.

What Ballmer Is Leaving In His Wake, Ain’t Pretty

The time to repair the roof is when the sun is shining. ((John F. Kennedy)) Once it starts to rain, it’s too late.

A quick overview of some of Microsoft’s current woes:

1) Microsoft is LOSING money on phones. And that’s not counting the purchase of Nokia.


2) Tablets are decimating the Notebook and Desktop markets.

All you need to know about tablets is that they will drive more innovation in personal computing the next 10 yrs than the PC ever did. ~ Ben Bajarin (@BenBajarin)


3) PC shipments fell 8.6% in the third quarter, the sixth consecutive quarterly decline.


Microsoft’s software was on 17% of all personal computing platforms sold last quarter. Apple’s was 13%. (Tablets, smartphones, PCs) ~ Ben Bajarin (@BenBajarin)

Having a “monopoly” on notebooks and desktops will soon be equivalent to having a “monopoly” on non-colored soda products — a distant third of three.

4) Windows lock-in is becoming irrelevant. ((Even the Windows lock-in is becoming irrelevant and losing power quickly. ~ Matthew Johnson (@anandabits)

You used to buy a Windows PC because everyone had Windows PCs. All the major programs were written for Windows and it became the de facto standard for almost every office and home on the planet. Windows ran the world and because of its wide reach, we all grew accustomed to the Office suite of applications. Writing a report? You used Word. Needed to do a presentation on plant life in the rainforest? PowerPoint and its atrocious sound effects were there to add glass-shattering emphasis to that clip art on slide two. Your email was stored in Outlook and your numbers were crunched in Excel and there was nothing you could do about it because nothing else came close to the power and reach of Microsoft Office.))

5) Long-Time Windows Users Are Fleeing The Platform. ((Why I’ve all but given up on Windows.))

6) Almost all of Microsoft’s Revenue is all sourced from software and software pricing is dropping to $0. ((The contrast couldn’t be more stark: 75% of MS’s revenue and 95% of its gross profit come from licensing. Apple now charges $0 for most software.))

7) Microsoft’s hardware offerings are not competitive. ((Apple’s Software revenues are more than double Microsoft’s Surface revenues. ~ Horace Dediu (@asymco)

So iPad Air weighs half as much as Surface Pro 2, has longer battery life, and costs $200 less. But hey – look at that kickstand! ~ Ian Betteridge (@ianbetteridge)))

8) Throwing advertising dollars at the problem isn’t helping. ((Apple spent $1.1 billion on advertising in the last 12 months. 0.64% of sales. (Microsoft spent $2.6b or 3.3% of sales yr. ended June). ~ Horace Dediu (@asymco)))

9) Hardware manufacturing partners are fleeing Windows.

If you don’t make a total commitment to whatever you’re doing, then you start looking to bail out the first time the boat starts leaking. It’s tough enough getting that boat to shore with everybody rowing, let alone when a guy stands up and starts putting his jacket on. ~ Lou Holtz

10) Microsoft’s consumer satisfaction rating fell to its lowest level since 2007.

11) Business model transitions are terribly dangerous.

Why Has Microsoft Tied The Hands Of Its New CEO?

Over the past several months, Microsoft has:

1) Committed To A New, Functional Organizational Business Structure;
2) Purchased Nokia for 7.2 Billion Dollars;
3) Ended Stack-Ranking; and
4) Committed to becoming a “Devices & Services” Company

We are watching Microsoft abandon nearly all the strategies that made them successful and embracing new ones in the hope of a future ~ Ben Bajarin

Well, yes and no. But mostly no. Because Wait! There’re MORE!

Microsoft has also committed to their old strategies of:

a) X-Box;
b) Turning Bing into a platform;
c) Maintaing both Windows RT and Windows 8; and
d) Manufacturing their own, Surface, Tablets.

Microsoft is like a sailor who has one foot on the departing boat but refuses to take his other foot off the dock.

Microsoft hasn’t just tied their incoming CEO’s hands — they’ve trussed him up like a turkey. Now ask yourself: “Why would Microsoft do that?” To my mind, there can be only one answer.

After finding no qualified candidates for the position of Microsoft CEO, the Board is extremely pleased to announce the appointment of…

The Microsoft Board Has Taken Charge Of Microsoft And Is Charting Microsoft’s Course

I do not subscribe to the idea that a Bill Gates return would be a good outcome for Microsoft. Indeed, much of what troubles Microsoft today is directly attributable to Gates, particularly the Vista disaster/distraction and the Windows obsession. ~ Ben Thompson

[pullquote]The Microsoft Board is going to TELL the new CEO what to think[/pullquote]

Too late. Gates, via the Board, is already back. He’s the reason Ballmer “volunteered” to walk the gang plank, he’s the reason Microsoft has been forging ahead so quickly with the functional business reorganization, the purchase of Nokia, the ending of stack ranking, the commitment to new policies and the recommitment to old. Microsoft doesn’t need to wait to see and hear what the new CEO thinks, because the Board is going to TELL him what to think.

Doubling-Down On The Wrong Strategy

It is better to run back than run the wrong way. ~ Proverbs

Prior to pushing him out the door, The Board’s mandate to Ballmer was to move faster.

Motivation alone is not enough. If you have an idiot and you motivate him, now you have a motivated idiot. ~ Jim Rohn

It’s clear to me that the Microsoft Board didn’t “get” why Microsoft has been falling behind over the past decade and, based on their recent actions, it’s just as clear that they still don’t get it.

The human body has two ends on it: one to create with and one to sit on. Sometimes people get their ends reversed. When this happens they need a kick in the seat of the pants. ~ Theodore Roosevelt

Microsoft isn’t failing because it’s not going fast enough — it’s failing because it’s going in the wrong direction.

If someone is going down the wrong road, he doesn’t need motivation to speed him up. What he needs is education to turn him around. ~ Jim Rohn

If the Microsoft Board could kick the person in the pants responsible for most of their troubles, they wouldn’t sit for a month. ((Inspired by Theodore Roosevelt))

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

True enough.

Surface Thoughts

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As I reflected on Microsoft’s Surface event earlier in the week, I was reminded again that in its current form at least, Microsoft is still not yet making a tablet. They are making a PC that kind of looks like a tablet. Unfortunately, for them tablets are successful for reasons PCs have not been. By applying a PC centric philosophy to Surface, the device in it’s current form is still likely to fare poorly in the market place.

Steve Jobs articulated what Microsoft doesn’t seem to understand.

“The iPad is more intimate than a notebook and more capable than a smartphone”

In the article I wrote last year Why I’m Convinced Tablets are the Future I made a point that I think is key from a behavioral standpoint to the above quote.

Devices like the notebook are kept at arms length. Yet a device like the iPad is held, touched, and used in a much more intimate way. Tablets to a degree are significant because things we hold we love.

Microsoft used terms like ‘lap-ability’ and the Surface has a kickstand, implying it will be set down more than held, while the iPad and Apple’s focus on the experience is more around ‘hold-ability.’ From our observational research on how mass market consumers use tablets, ‘hold-ability’ is more important than ‘lap-ability’.

We are seeing a legacy PC mentality being applied to computing by Microsoft with Surface. This is the root of the problem.

I have no doubt there are small niche segments of the business market that are interested in products like Surface but my conviction remains. Surface is not a mass market product. Perhaps that is not the point. But I still struggle to find the point of Microsoft making the Surface.

One may argue that no vendor has done a better job with this form factor than Microsoft. Therefore the Surface is the best of its kind. That will soon no longer be true and Microsoft’s partners will do a better job with these products. Which again will cause us to scratch our heads and ponder why Microsoft is in this business.

Why is RT Still Alive?

The last question that is still perplexing is why is RT still alive. Microsoft is now in sole possession of the Windows RT market. Their partners have all for the most part abandoned it. We can debate the reason for this all day but my belief is that Microsoft understands they need an ARM solution. If not for this version of Windows but perhaps the next one.

We know almost nothing about the next version of Windows. But we do know that Steve Ballmer has implemented a cadence of RAPID RELEASE FOR WINDOWS. So I expect we will see the next version of Windows sooner perhaps than people think.

My intuition regarding the next version of Windows is that Microsoft will seek to truly unify the Windows code base for PCs, tablets, and phones. To do this Microsoft has to assume that the world will not be dominated by x86 in all those segments and therefore to participate in the upside of both tablets and smartphones, Windows, the development tool kits, and the developers all need to be on board with developing for ARM as well.

RT is still alive simply because Microsoft needs the experience with regards to Windows on ARM and needs to continue to make strides for making it as easy as possible for developers to create cross screen and cross silicon software. Surface RT may seem like a lame duck now but it is the bigger picture we need to look at with regard to Windows on ARM.

Ten Things I prefer to do on Microsoft Surface versus my Apple iPad

My primary tablet of choice for years has been Apple’s iPad. The iPad, iPad 2, and the New (now old) iPad (3). This is after trying at least 20 other tablets with Android phone, Android tablet, Kindle Android, Windows 7, webOS, and QNX operating systems. Before Surface, I used my iPad 2 primarily in productivity mode with a Logitech keyboard in “fridge toaster mode” and used my iPad 3 as my primary entertainment device when paired with the HumanToolz stand. I find that combination suited my distinct needs.

After all of the contextual “research”, I have finally found a device that could make me leave the iPad at home, that is, after some improvements. After using Microsoft’s Surface for about a week, there are some usage models that I prefer to do on the Surface over the iPad. Before you decide to go directly to the comments section and flame me without reading the article, my next column will be on where I still prefer the iPad in specific usage models, which are many.


I have been critical of Windows 8 email earlier versions, but in the final throes of pre-launch, Microsoft redeemed themselves with a very solid Mail update. The email client is fast enough, is threaded, pulls in avatars from other services that personalizes the experience and easily handles attachments in a way that I am familiar with Windows. Emails are very quick with Surface’s keyboard, too. It’s not perfect as I want a unified inbox, in-message web links, and shortcuts like “add to calendar”, but given this is only version 1.0, I am certain Microsoft could enable it if they wanted to. Question is, how good will they make it until it pulls business from Outlook?

Random, Unplanned Web Browsing

Internet Explorer on Surface is a full, PC-grade browser, unlike Safari on my iPad, but it feels as fast as a tablet browser. While I run into sites that are just ugly on the iPad, Internet Explorer just works as it doesn’t need to cut corners. I never get a down-featured mobile site either, which I routinely get on iPad Safari. Like Mail, it’s not perfect either as it doesn’t even have synced bookmarks. For planned browsing where I go down my favorites list I still prefer the iPad, but I have to think Microsoft will add this or lose many customers to Google Chrome, which works very well on X86-based Windows 8 tablets. In fact, on my Intel Clover Trail-based tablet, I’ve already shifted to Chrome because of the lack of IE bookmarks.

The other thing that is, quite frankly, emancipating is being able to interact fully with a web site or service. I am very disappointed with the lack of Metro-based social media apps, but overjoyed that I can do EVERYTHING on my tablet with a social media site I can do with my full PC. Literally, upload, download, post, reply to every and any site without worrying about if that app has connected with that API or not. IE supports every Twitter, Facebook, Google+, LinkedIn and Pinterest feature. Why? It’s simple, because it is full-featured PC browser with access to the system’s file system and peripherals. That, paired with Nvidia’s quad core Tegra 3 that accelerates HTML 5 drives a complete web experience.

Does this mean I don’t want apps? No way. I want apps for speed too, but want the web when I want the whole experience. I want it all.

Writing Research and Blogs

On my iPad, my blog workflow today moves from iPad Evernote to WordPress on the iPad and then final edit on a PC. If you have ever worked with iOS WordPress and photos, you understand why. With Surface, I start with Word then publish inside the app to WordPress. One app, one device; what could be simpler? And it is so, so much easier with the type cover with a trackpad to pound out a 1,000 word piece of work. For research papers, there is no substitute for Word. It’s just the gold standard of productivity. Enough said.

Wireless Printing

While not that sexy, I have appreciated the consistency of Surface’s wireless printing. Like web browsing, it just works. When printing from my iPad, half the time it prints garbage or ten pages when I really only wanted the first page. This has come in handy for my kid’s school projects and when printing out contracts to sign and scan. For the record, no, Surface doesn’t support my HP or Neat scanner and I do that on a full PC.

Task Switching

It seemed for the longest time, Apple was “holding out” for easy task switching. Then came the very much appreciated two finger gesture for the iPad. I thanked Apple profusely for this. Microsoft and the Surface take this a few steps forward with the simple left thumb flick, which allows the user to keep both hands on the device and task switch. When I am showing friends and family the Surface, they are all “gee whiz” on this very simple feature. I liked webOS and QNX task switching better than Windows 8, but must say, I have warmed up to Windows RT and 8 task switching, and certainly prefer over my iPad.

Instant Access to Information without Opening Apps

If you want to get an Apple fan boy riled up, just start a discussion about Live Tiles or Android panes. You can just see the blood pressure rising and the next hour of conversation is around ease of use and what normal consumers want. Well, I like Live Tiles because it saves me time and some don’t because they are “confusing”. Without even touching the Surface display I can see emails, calendar, and weather, stocks, Tweets, breaking news, updated podcasts and about 100 other pieces of information. I think other consumers will prefer, too, after some time as icons are so 1980’s. I believe Microsoft jumped ahead of the curve on this tile concept and Apple will follow at some point.

As the industry moves to large surface usage models and environments for full rooms, kitchens, bathrooms, etc., live tiles will be commonplace. And, yes, I had PointCast and Yahoo widgets and stopped using them because they became a hindrance over time, but these tiles are different, as they are the experience, not an add-on.

Rental Videos

I watch a lot of rental movies and TV from the Apple Store on my iPad. I do this a lot while crashing on the couch or in bed. I use the HumanToolz stand to prop up the iPad 3 on my chest so I didn’t have to hold it. When Amazon Prime came to iPad, I still used the iPad, but switched to Prime. It wasn’t about the deals, it was that Prime enables streaming and the Apple Store does not on the iPad. I sometimes had to wait over an hour for an Apple Store video to download. I get the QOS challenges with streaming, but somehow Amazon and Netflix deals with those. Plus, Apple deals with streaming on my Apple TV just fine, so it’s just frustrating. With Surface, I use the Xbox movie store where I can stream or download and play. This is a lot more convenient than the iPad.

One broadcast channel app that was quite good was the ABC Player. My wife and I watched “Revenge” together and Surface provided a better quality and stable video experience than the iPad. I haven’t had the chance to test every service, but I also thought the Netflix and Hulu+ experiences were also very solid.

Anything that Really Requires a Mouse

As I use my iPad for productivity in addition to entertainment, I attempted presentations with Keynote and spreadsheets with Numbers. I tried for years to love these on the iPad but ended up abandoning them after each new release. Pages was fine but spreadsheets and presentations were nightmares even for editing files I created first on a PC. The lack of a mouse was the biggest issue for me as I had to learn a bunch of new gestures on a small 9.7” screen. With Surface, I have a keyboard, trackpad, optional mouse, Excel and PowerPoint. If you’ve done spreadsheets and presentations, you know how much easier this is and can relate. As in web browsing, this is an area where the four Nvidia Tegra 3 cores are making an impact.

Group Music Listening

I still prefer personal listening of music on the iPad as it’s faster and simpler, but in a group environment, Surface is just all that better. Microsoft essentially took the Xbox music experience and put it on Surface. If you’ve never experienced it, you should, as it’s as much about the video as it is the music. As you play a song, you are fed some incredible transitions that go way above cover art.

Sharing Anything

With my iPad, it’s up to Apple to determine what app or service I can directly share to. Like rental movies, this is Apple simplifying for the consumer and ensuring QOS. Also, if all apps had access to all Apple APIs, Apple couldn’t fully monetize its connections. Microsoft has chosen a different another route, one that is more partner-friendly and inclusive. This isn’t Microsoft jut being the good citizen, it’s part of their business model of monetizing the OS and they are years behind in the tablet war.

In Metro, I literally click on the “Share” charm and any, and I mean, any app that has a “contract” to share, I can share with. Let me use sharing pictures as an example. On my iPad from the Camera Roll, I can share a picture to 2 non-Apple apps, Facebook and Twitter. On Surface, I can share that same picture to 6 different non-Microsoft services and apps and that’s only two weeks in before many social media apps even surface.

Hate my iPads?

I love my iPad and it has been the “chosen one” for many years, for basic productivity and for fun. I cannot tell you just now many times I received flak years ago, before the iPad, for forecasting three years ago that the tablet would be the primary content consumption device for the home by 2015. I think there are many more believers now. I am here to say that the iPad finally has some authentic competition, stiff competition, and that’s from Microsoft Surface and from other Windows RT and 8 devices. Holistically, the iPad has it more together, but then again, it doesn’t do as much, either, and has a multi-year head start. Surface is far from perfect, has its flaws, but also delivers a much better experience than expected, and selectively delivers a preferred experience in certain usage models.

Next week, I will outline usage scenarios where I still prefer my iPad.