Microsoft's Cracked Windows: How The World's Technology Juggernaut Lost Its Buzz And Became The 'Underdog'
The Found Decade?
Whatever happens next, at the dawn of a new decade, Microsoft appears set for a significant makeover. In recent years, as its many of its core businesses have suffered, the company has come to be seen as a predominantly business-focused enterprise, the supplier of software and services to major American companies. Many consumers have disdained Microsoft as an unsexy brand encountered primarily at work, while giving their leisure time over to the sleek realm of Apple, Google, and Facebook.
Now, Microsoft aims to change that, regaining the engagement of the American consumer even as it attempts to build on its strong legacy in the enterprise.
Microsoft chief research and strategy officer Craig Mundie says he believes the firm's way forward is to speak directly to the consumer, a strategy no doubt informed by Apple's success in getting parents, students, designers, and others to crave its white and silver devices.
"Apple has shown that if you don't focus on the consumer in this market, there's enormous risk," Yoffie says.
But many experts are dubious that Microsoft can pull off such a transition.
"Apple builds fanatics," says MIT's Anderson. "Microsoft builds people who are sullen, but not mutinous. Their DNA is large organizations, operating systems, and applications. Their DNA doesn't understand design and the consumer mind."
Microsoft's failure to see the opportunities that Apple handily seized upon hardly means it is doomed in the consumer space. HP, Sony, Nokia, and Research in Motion are just a few of the titans that missed what the Cupertino company anticipated and developed, from the rise of apps to the demand for a digital storefront for music. Some would even have bet on Apple's demise, a sign of just how much a technology company is capable of changing course--Dell founder and CEO Michael Dell said of Apple in 1997 that his advice to the then-ailing firm would be to "shut [...] down and give the money back to shareholders."
In its strange new incarnation as the underdog, Microsoft is adopting a different set of habits than those embraced by Microsoft, the overlord of yore--a cultural shift that may lead to greater innovation.
"The lost decade of Microsoft is propelling them forward now to be more daring," says Colony.
Zuckerberg, the famously youthful chief of Facebook, said he enjoyed partnering with the Microsoft because--in contrast to its days as an entrenched monopolist--the company is "just trying to rapidly gain share by doing awesome stuff that no one has talked about doing before."
In mobile, for instance, Microsoft has demonstrated a willingness to start from scratch. Microsoft's new Windows Phone 7 mobile operating system, with its trademark homescreen made up of colorful square tiles looks little like the competition and has drawn critical praise as fresh and unique. Its latest versions of Internet Explorer and Windows, and its search engine, Bing, all stand as major improvements over their predecessors.
By some accounts, Microsoft's efforts at refashioning itself have already reaped dividends. Its new mobile phone software is the product of a previously unmanageable cross-company collaboration in which the Zune, Xbox and browser teams all worked together to create an operating system that felt unified and consistent for the user. Microsoft has also scored points with Kinect, its new controller-free gaming peripheral that allows users to play games just by moving their body, which has been praised as the "future of gaming" and sold faster than the iPad during its first month on the market.
But the positive reviews mean nothing unless the customer buys in. The mobile phone now stands as the single most important venue for Microsoft in the consumer space, the place that will determine whether the company goes down as an atrophied giant or can rise anew.
The Pew Research Center's 2010 Mobile Access survey found that 40% of adults in the U.S. now use their mobile phone to go online, compose email, or instant message--a number that will almost certainly swell.
"Phones are do or die for Microsoft," says Foley.
Microsoft's deep pockets make it impossible to dismiss Windows Phone 7's prospects. The company is trying to woo developers with free phones and cash--they offered game-maker PopCap $100,000 to create marquee apps--and are investing a reported half-a-billion dollars in a blowout marketing campaign.
As the iPad solidifies its place in the technology landscape, and as other tablet computers proliferate, Microsoft will need to catch up in that sphere as well--a painful reality for a company that launched its first tablet computer almost a decade ago.
According to research from Strategy Analytics, Apple controlled 95% of the tablet market in the third quarter of 2010. There's also Google to contend with, as a host of new tablets and laptops running its Android and Chrome operating systems will be coming to the market over the next several months. While the last decade witnessed the browser wars, the coming decade will see Microsoft battle to be the operating system of choice across the slew of new devices that have come into play: phones, tablets, and TVs.
Some argue that Microsoft's aim for the consumer's affection is bound to fail, while distracting the company from its only viable mission: building on its already dominant position in the American workplace.
"If I were Steve Ballmer, I'd be doubling down on enterprise," says Foley. "That's where they're strongest and that's where they make their money."
Microsoft is hardly turning its back on the corporations that have been so good to it for so many years. It has been refining a range of offerings intended to tempt corporate IT departments, such as Azure, a cloud computing service that launched earlier this year and has attracted clients like eBay and the Department of Agriculture, and SharePoint, a line of business software products that has been Microsoft's fastest-growing ever.
But the giant is clearly gearing up for a major run to recapture the masses--this time, not by dint of its monopolistic grip on the desktop, but by the force and appeal of its innovations, another phrase not frequently uttered in connection with the company back in its halcyon days.
The only certainty is this: Microsoft will be around in a major way if for no other reason than the dollars at play.
"They have more money than God," says MIT's Anderson.