Reshuffling the Microsoft Deck

 Posted by on Jul 25, 2013  Add comments
Jul 252013
 

Back in March 2012, I wrote that Microsoft leadership, knowing that the company was in danger of being left behind by Apple and the Android-based product vendors when it came to the mobile market — especially tablets — had staked its future on its upcoming Windows 8 OS (then still in development). Basically, I said it would come down to Microsoft getting Windows 8 right, so the long, drawn-out development period was understandable. Once Windows 8 was released, and if it proved as impressive as initial reports suggested, I said then that I thought that companies would embrace Windows 8 for mobile development.

The logic I employed at the time was based on the fact that companies have a lot of Windows developers and, if Microsoft did it right, many Windows applications would be able to move to mobile platforms. I added that Microsoft would certainly tie its mobile capabilities to Office and its other business software. Moreover, in addition to all its developer clout, Microsoft could throw all its marketing muscle at enterprise mobility. I tempered my remarks, however, by saying that Microsoft faced a brutal uphill battle when it came to the mobile consumer market, because Apple and Android devices (and mindshare) were simply too entrenched, noting that we would just have to wait and see.

As we now know, Microsoft had problems with Windows 8. Moreover, with its new OS, Microsoft confirmed that it takes more than just innovative technology to succeed — it takes well thought out business and marketing strategy, too. The company seems to have missed the mark on both of these counts. A general refrain is that, with Windows 8, Microsoft tried to do too many things by aiming to support both mobile and the desktop with a touch-enabled OS — hence the problems.

Windows 8, although quite innovative, turned out to be confusing in more ways than one. First, when it came to PCs, its UI lacked functionality that long-time Windows users were heavily dependent on. Moreover, when it came to mobile — specifically Windows 8 on its new Surface tablets — Microsoft confused the market by offering two different products with different OSs: Surface running Windows RT (for ARM processors), targeted at consumers; and Surface with Windows 8 Professional (for Intel processors), intended for businesses.

Consumers largely balked at Surface RT tablets — unsure as to what they were good for. This was understandable, because RT had a paltry number of apps designed to run on it, yet it couldn’t run most regular Windows programs users were familiar with, while Windows 8 Pro tablets, which could run standard Microsoft applications, weren’t available until some months after the introduction of the RT-based tablets. The Surface tablets were also expensive compared to the market-leading Apple iPad and the various Android tablet vendors’ products.

Microsoft’s primary ace-in-the-hole when it came to appealing to prospective tablet customers was Office. Yet somehow the company’s strategy for offering its popular business productivity program on Surface was not very well thought out. Office was available for Surface under a licensing scheme in which students and the like could use it for noncommercial purposes, but others had to get business licenses and/or tie it to the cloud versions (Office 365).

The bottom line was that, when it came to entering the tablet market, Microsoft found itself in a strange position: it had very few apps available for its tablets except for the one that almost everyone wanted (and still wants): Office. Yet it could not come up with a way to take advantage of this. As a result, Microsoft was not able to benefit much from the BYOD craze.

Fast-forward to this week, when we saw Microsoft announce a new reorganization plan in which it plans to consolidate its product divisions and to centralize key business decisions. The goal is to get rid of the current product fiefdoms seen as slowing innovation and collaboration and muddling business execution, thus enabling the company to take a more “holistic approach” to product engineering, development, and marketing. In short, Microsoft seeks to make itself more competitive with Apple, Google, Samsung, and other leading mobile players by making itself more like Apple.

If you read the memo outlining the reorganization and the email CEO Steve Ballmer sent to Microsoft employees, one thing that leaps out is the repeated referral to the notion that Microsoft will create “a family of devices and services” targeted at consumers and businesses. This is a key development because it suggests that Microsoft will become much more aggressive when it comes to building and selling its own hardware.

But the most significant point I take away from the reorganization plan — because it’s what I see as crucial to Microsoft turning itself around — is that, in order to improve the company’s performance, leadership aims to get the “whole company” focusing on a single strategy – instead of on a collection of individual (i.e., divisional) strategies, as tends to be the current practice. Ballmer refers to this approach as “one strategy, one Microsoft.”

According to Ballmer, the aim is to improve capabilities in all disciplines and engineering/technology areas. In particular, Ballmer cites getting the different groups to work together with more collaboration and agility around common goals. In his company email, he further emphasizes the point by saying that, “collaborative doesn’t just mean easy to get along with … it means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value.”

Another significant change — and one that is long overdue, in my opinion — is that all OSs, ranging from those for consoles and mobile devices to PCs, notebooks, and back-end systems, will be brought under one roof for engineering and development. This is important if Microsoft ever hopes to whittle its OS code bases (e.g., Windows 8, Windows Phone 8, Windows RT) down to a more manageable level. And, as is covered in the reorganization plan, this is a move designed to enable developers to be able to target all of Microsoft’s devices using a common programming model that makes it easy to target more than one device.

In hindsight, and considering Microsoft’ reorganization plans, one can understand how Microsoft could have run into difficulties trying to plan and execute its initial tablet strategy. Maybe the different divisions and groups involved with Surface and Office and marketing were too isolated and couldn’t come together to effect a strategy that could take advantage of Office and Microsoft’s marketing clout. No one outside of Microsoft probably knows what actually happened. Of course, there were other issues that contributed to Microsoft making less than a big splash into the tablet market besides Office, and maybe I’m making too big a deal out of it.

The bottom line, though, is that it was strategically important for Microsoft to enter and establish a firm beach head in the mobile/tablet market with Windows 8/Surface. Consequently, all considerations should have gone to making this a reality. Had Microsoft had in place some of the “one strategy, one Microsoft” approaches it hopes to implement under its reorganization efforts back when it was mapping out its initial tablet launch, one can’t help but wonder if the company would not find itself in a much better position than it is in now.

With its planned reorganization, Microsoft leaders seem to have mapped out what it’s going to take for the company to better challenge Apple, Google, Samsung, and others in the mobile social world that is contributing to declining PC sales. Microsoft has an extensive stable of technology — including most of the key pieces it needs to really upset the consumer and enterprise mobile markets. And, as I’ve said before, it’s dangerous to ever count Microsoft out of any market. But again, only time will tell if Microsoft’s reshuffling of the deck proves successful and eventually leads the company to the promised land.

Discussion

  2 Responses to “Reshuffling the Microsoft Deck”

  1. Thank you for the analysis on Microsoft’s strategy, but I am confused by a number of points, and by the strategy.

    Microsoft has never been a technology innovator, but a marketing and business engine leveraging it’s lock-in business model. Having Microsoft lay an egg on an OS release is nothing new, in fact, it’s rather expected (Vista, ME, Zune, … and if we go back far enough, Windows 1, 2, and 3). What Microsoft lacks it seems is the lock-in preference it once enjoyed. No amount of “marketing” can compensate.

    Is the unification of OS platforms an attempt to consolidate? To create the “one OS to rule them all?” That seems fatal, as well. With 50+ million lines of security threat riddled, architecturally flawed code in the base platform, how is this even possible? They are now paying for the sins of the past lock-in business model (remember the “browser is part of the operating system” defense?).

    So, is the strategy to suddenly become a technology innovator when for 30+ years it has not been one? That is surely risky.

    For decades, Microsoft fandom has come away from annual conferences announcing great new things with the cry “Bill is betting the company…” (“staking the future”) on the pivot du jeur. In actuality, these “pivots” were all about catching up with the marketplace. For a business that has executesd the let-others-innovate-we’ll-use-our-muscle-to-take-the-new-market strategy as well as anyone, there has never really been any risk in that bet.

    Until now, perhaps.

  2. Hi Lawrence,

    Thanks for your insight.

    I agree with you that it’s not uncommon for Microsoft to blow it upon introducing a new OS; however, they do usually make a successful leap into a new market. For example, I remember when a lot of analysts were giving MS a hard time about “missing the Web”–saying that the company had fallen behind Netscape and the other browser-based companies. We all now know that MS introduced IE and never really looked back. Of course, the company had a lock on the desktop OS monopoly, which they were able to play to their advantage–big time.

    But, like you say, MS doesn’t have that advantage with the mobile market: iOS and Android dominate. That’s why I think it was so weird that they didn’t try and take better advantage of their one real leverage point: Office. It was imperative for MS to enter and establish itself as a viable player in the mobile market. Thus, they definitely should and could have marketed Surface tablets–both RT and Win8–better.

    Maybe they could have offered tablet customers a free 6 or 12 month license for the full-blown Office Suite on Surface–at least tried something more innovative than what they did. It appears that this is what MS is now trying in Japan. But instead, their Surface marketing efforts just seemed to fall flat. I remember watching the ads on TV and in the papers. They just seemed to fail to inspire. The only decent article I saw covering the Surface was in the NYT. But in the San Jose Mercury News, the article was lousy. I don’t mean it gave lousy marks to Surface, it was just a ho hum article. Of course, this could of had to do with Apple being the Silicon Valley darling (and sometimes I wonder if the SJMN hasn’t become basically a cheering section for Apple). Here in Berkeley, where I live, I have never seen anyone using a Surface tablet–and I live right by the University where you would expect to see at least some student using them in the coffee shops and libraries, etc.

    Regarding unifying OSs, I’m not sure how successful MS will be. Different platforms require much different capabilities in regard to features, functionality and performance. I think the idea of a single, all encompassing OS for all platforms–desktop, phone, tablet–is a dream, and I don’t see it happening for some time. Especially in MS’s case. What they will probably do is try to come up with some commonality among OSs.

    It’s certainly risky for MS to try and remake the company into Apple; however, it could certainly become more innovative in responding to changes in the market. Let’s face it, it can’t continue to plod along like it has been doing the past few years.

    Thanks again for you feedback.

    -Curt

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