What Bill Gates’ Mea Culpa Says About Microsoft

This week, in an interview at venture firm Village Global, Bill Gates admitted that his biggest mistake was not to empower Windows to become what Android is today. More specifically, he said:

“In the software world, particularly for platforms, these are winner-take-all markets. So, the greatest mistake ever is whatever mismanagement I engaged in that caused Microsoft not to be what Android is. That is, Android is the standard non-Apple phone platform. That was a natural thing for Microsoft to win. It really is winner take all. If you’re there with half as many apps or 90 percent as many apps, you’re on your way to complete doom. There’s room for exactly one non-Apple operating system, and what’s that worth? $400 billion that would be transferred from company G to company M.”

This is the first time Gates takes responsibility for not doing what was needed to be where Android is today. Over the years, the misstep was always associated with CEO Steve Ballmer and his dismissal of the impact that Apple’s iPhone will have on mobile computing. Hence why the most common commentary on this topic has always been that Microsoft missed mobile. They misjudged the importance that mobile phones will have in taking time away from PCs.

What transpires from this week’s comments is both a sharing of responsibility by Bill Gates, but most importantly, in my view, an admission to missing the opportunity to monetize from consumers not missing mobile.

Missing the Forest for the Trees

Back in 2008, Microsoft’s revenue was still highly dependent on software license sales, as a letter to shareholders clearly outlines.

“Fiscal 2008 was a successful year for Microsoft that saw the company deliver outstanding financial results, introduce significant innovations across the breadth of our product portfolio, and make key investments that position the company for strong future growth.
Thanks to the continued success of our core Windows and Office businesses, and double-digit growth in all of our business groups, revenue jumped to $60.4 billion in fiscal 2008, an increase of 18 percent compared with the previous fiscal year.
Throughout fiscal 2008 we saw strong adoption of Windows Vista, which has sold more than 180 million licenses, and the 2007 Microsoft Office system, which has sold more than 120 million licenses. Microsoft Office SharePoint Server 2007 passed the 100 million mark for licenses sold and recorded more than $1 billion in revenue.”

Microsoft’s performance was linked primarily to the enterprise market and only indirectly to the consumer market. What I mean by this is that PC buyers were buying hardware that was running Windows they were not buying Windows. As a result, Microsoft saw consumers only as a dotted line to a license fee rather than a clear target audience.

It wasn’t Natural

With the rise of the iPhone and Android, Microsoft did not look at mobile in a conceptually different way from PCs. Mobile was just another “channel” for its license and software business. It certainly did not represent a new opportunity to rethink engagement with consumers so that “Windows was not just something they used, but something they loved” as Nadella said many years later. So, being where Android is today was not as natural as Bill Gates makes it sound because the battle strategy was fundamentally flawed.

Google had the foresight to appreciate the real impact that mobile will have on its core business and had the advantage of having a core business that was already centered on consumers. Going from Android as a vehicle for search and advertising to Android as a platform for all services was a natural progression for Google. If you look back at the initial priorities Google had with Android, it was clear that the goal was different than what Apple was doing with Apps. An app store was needed to compete with iOS, but it was not seen as a serious source of future revenue. Google services on phones provided that source through the engagement they drove. Engagement that in turn, benefitted the core business of search and advertising.

Restarting the Race

These reflections on past pivotal moments are very timely. In Cloud and AI, Google and Microsoft were let loose again after the safety car moved out of the way in the race. Both companies are addressing the enterprise with Cloud and AI, and Google is clearly keeping its investment in the consumer market albeit trying to distance the two so that it is clear the business models in these two areas are different.

What we have not seen with enough clarity is how Microsoft will use Cloud and AI to focus on consumers. Of course, there is Office 365, Surface and Xbox that are all relevant to consumers as well as enterprise. But I believe there is a much broader role Microsoft could play as the boundaries between work and home become more blurred. For more and more users, the devices, software, and services they use at work are also those they turn to in their private life. This means that there is a significant opportunity to use cloud and AI to make my overall experience better, use my data across the board to drive more value to me without indirectly monetizing from me. I would actually argue that done right, this value of added intelligence and data protection and privacy could provide a source of direct revenue in itself. Apple certainly believes that and as their core business is hardware and services that is where they aim to monetize.

Pondering on the whats and ifs of winning mobile seem somewhat irrelevant at a time when there are so many more technology touchpoints in our life. It also misses the point that the real target was winning consumers. Leveraging existing mobile platforms today to create synergies with the parts of the ecosystem, Microsoft controls could be beneficial enough to the business in itself. But to harvest such an opportunity, Microsoft must do something that seems to be more natural to them now than it ever was in the past: taking a human-centric approach whether that human is at the office or home.

Published by

Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

714 thoughts on “What Bill Gates’ Mea Culpa Says About Microsoft”

  1. Забота о домашнем пространстве – это забота о вашем комфорте. Теплоизоляция стен – это не только изысканный облик, но и обеспечение теплового комфорта в вашем уголке уюта. Наш коллектив, коллектив экспертов, предлагаем вам превратить ваш дом в прекрасное место для жизни.
    Наши творческие решения – это не просто утепление, это творческое воплощение с каждым шагом. Мы предпочитаем идеальному балансу между внешним видом и практической ценностью, чтобы ваш дом стал не только уютным и стильным, но и прекрасным.
    И самое существенное – разумная цена! Мы верим, что профессиональные услуги не должны быть дорогим удовольствием. [url=https://ppu-prof.ru/]Утепление дома сколько стоит работа[/url] начинается всего от 1250 руб/м².
    Современные технологии и высококачественные материалы позволяют нам создавать теплоизоляцию, долговечную и надежную. Позабудьте о проблемах с холодом стен и избежите дополнительных расходов на отопление – наше утепление станет вашим надежным экраном от холода.
    Подробнее на [url=https://ppu-prof.ru/]https://ppu-prof.ru[/url]
    Не откладывайте на потом заботу о удобстве в вашем жилище. Обращайтесь к квалифицированным специалистам, и ваше жилище превратится настоящим архитектурным искусством, которое принесет вам не только тепло. Вместе мы создадим дом, в котором вам будет по-настоящему комфортно!

  2. You’re so awesome! I don’t believe I have read a single thing like that before. So great to find someone with some original thoughts on this topic. Really.. thank you for starting this up. This website is something that is needed on the internet, someone with a little originality!

  3. Sugar Defender transcends symptom-focused interventions, delving into the root causes of glucose imbalance. It stands as a dynamic formula that seamlessly aligns with the body’s intrinsic mechanisms, presenting a distinctive and holistic approach to enhancing overall well-being. Beyond a mere supplement, Sugar Defender emerges as a strategic ally in the pursuit of balanced health.