The Story behind the Microsoft Headlines
By Roger Entner on July 14, 2015
They say a picture is worth a thousand words. If that’s the case, then the Twitter header image for Microsoft CEO Satya Nadella demonstrates that perfectly. Just look at Nadella’s tortured smile then try to make sense of the picture in the header. It resembles some kind of hellish, hopelessly complex landscape that maybe someone at Microsoft understands and loves. But, for a company that wants to solve problems, it’s the wrong way to start. Nonetheless, it does provide the perfect illustration of what is and isn’t happening at Microsoft.
The decimation of its handset business is just the latest symptom of the fundamental lack of clarity when it comes to Microsoft’s role in the world. For a company that says it’s “mobile first” the 7,800 layoffs are a striking admission of the utter failure of its mobile strategy. This moves essentially shuts the door on all but a few remaining Microsoft employees in Finland.
It is a classical “the emperor has no clothes” moment.
Nokia’s fate was sealed when mobile devices started doing more than “connect people.” With its life on the line, the organization could not find a new reason to exist in the significantly changed—and still changing—world. Microsoft’s fate will be similarly sealed if it cannot provide a clear vision and an elegant implementation of its vision of how consumers will use technology—from “mobile first” over nomadic laptops and stationary desktops.
As the consumer reemerges as the focal point of technological innovation, Microsoft seems to be hopelessly stuck in an antiquated, we-do-it-this-way-so-like-it-or-lump-it, corporate-centric approach.
During briefings, when I asked Microsoft how it plans to differentiate its products and services from Apple’s and those of the Android ecosphere, company representatives consistently replied unflinchingly with, “We make consumers more productive.” I was taken aback. “No, seriously, how will you differentiate?” I followed up. The reply? “Seriously, we’ll lead with making the consumer more productive.” I remain flabbergasted by the wide disconnect between how consumers think, what they want, and what Microsoft plans to force for them—especially from a company that surveys the living daylight out of consumers. How many consumers have ever woken up in the morning and declared they want to be 2.3% more productive today through the use of Microsoft products and services. You might sell a CIO on that, but definitely not a consumer. The lack of vision and understanding of what “mobile first” actually means beyond the tag line that an 8-year old could recite at a school play will turn off CIOs even more so.
Looking at it in hindsight, the handset group never had a chance as a full portfolio device manufacturer. The lack of a clear and concise vision at Nokia was replaced with an empty shell around the “mobile first” term. Mobile devices produced by the handset group have been very good devices—competitive with or even superior to devices that have significantly outsold them.
The lack of success for Microsoft in mobile is not because the division didn’t know how to make excellent devices. Rather, it comes from the lack of a compelling, holistic value proposition. Why would someone buy into the Microsoft ecosphere when they have so many choices? The company’s lack of a value proposition is glaringly apparent in the most competitive and newest segment (which, of course, cares the least about incumbency power): Mobile. The retrenchment into a core device team that creates fewer phones, but is hampered by a lack of corporate focus, will merely reduce the mobile price tag of a poorly defined overall corporate strategy.
Microsoft needs to realize that this “mobile first” world requires that its pace of innovation and attention to detail accelerate to mobile speeds company-wide.
That means it must produce new releases annually. Poor product releases like Windows 8—the equivalent of panicky software jambalaya, packed with reactionary knee-jerk features and devoid of attention to detail—cause a staggering amount of damage.
It would be okay for Microsoft to have a conceptual and executional meltdown once a decade. But Microsoft manages to do this with every other release of Microsoft Windows. Windows 10 looks like a good release. But let’s have a look back: Windows 8 was just plain bad, Windows 7 was good, Vista was abominable, Windows XP was good, and consumers responded to Windows ME with a resounding “not me!”
History repeats itself if you look further back. To add insult to injury, the average upgrade cycle is 30 months, which means that unless you are forced to use a bad OS because it’s the only one that comes with your new computer, or if you just can’t take it anymore and switch, you have to wait 5 years for an innovative step forward. Why not just save a lot of money and aggravation and just skip over other release and pour the resources into the successful update? No wonder Apple has taken so much market share from Microsoft with this two steps forward one step back product release cycle. The only saving grace for Microsoft is its huge imbedded base and the lack of a serious competitor in the business market.
But if the only reason why people purchase your product is that they have always purchased it and there is no viable alternative, one shouldn’t be surprised if there a competitor emerges. An initial stream businesses are already migrating toward Apple and if Apple shows some love and care, the stream will turn into a raging torrent. As Apple is on its path to integrate the user experience across hardware platforms, its success in mobile is expanding its beachhead in laptops and desktops, where it is continuously increasing market share, despite offering only computers $899 and above.
The most pertinent lesson is close to home: It took only a few years for Nokia to go from 50% global market share to 2%. Now Microsoft’s handset group faces the unenviable task of explaining to other handset manufacturers why they should build more Windows Phone devices, even as Microsoft pulls back in spectacular fashion.
Microsoft will fail if it continues to be a confused conglomeration of businesses units with terrible track records getting their products to work together. It would be a good start if all of their products and services would come together and work seamlessly across hardware platforms. That very fact would make the lives of their custome
Roger Entner and his analysts are known around the globe as some of the most respected telecom experts.Full bio →
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