In the latest issue of Vanity Fair, journalist Kurt Eichenwald chronicles the twelve-year decline of Microsoft. Over the same period, Apple prospered, but America floundered. Analyzing Microsoft's failure and Apple's success helps us understand what the US needs to do to get back on track.
In December of 2000, Microsoft shares (MSFT) were worth $119.94; it was the most valuable corporation in the world with a market capitalization of $510 billion. Then the slide began; now Microsoft's stock is worth $30.63 per share and it's market capitalization is $257B. During the same period Apple's stock (AAPL) increased in value from $8.19 to $614.32 and its market cap rose from $4.8B to $574B. Now Apple is the world's most valuable company.
Why did Microsoft decline while Apple prospered? Eichenwald focuses on management and strategy. But purpose is as important.
Eichenwald details a series of bad decisions made by Microsoft management, particularly CEO Steve Ballmer and founder and chief software architect Bill Gates. Microsoft has three product lines: personal computer (PC) operating systems - Windows, PC productivity software - Office (Word, Excel, Powerpoint...), and Server products (intended for businesses rather than individuals). For thirty years it's been the dominant software provider.
In the nineties, Microsoft was the number one US technology company. Brilliant techies flocked to its Redmond, Washington, campus and many suggested products outside operating systems and Office. For example, Eichenwald reports that in 1998 a Microsoft group developed a workable e-book - a digital reading device. Bill Gates killed the product because, "He didn't like the user interface, because it didn't look like Windows." Ten years later, in November of 2007, Amazon introduced the Kindle e-book and it became a sensation - selling millions of units.
Eichenwald attributes Microsoft's decline to the shortsightedness of Gates and Ballmer, their unwillingness to look beyond Windows, Office, and Server. It's more accurate to say that Microsoft had a strategy that worked very well until 2000 and then strayed off course - but the company was making so much money Gates and Ballmer didn't notice. In 1980 Microsoft executives laughed at IBM executives because the Armonk crowd had been so enamored with their success, as a main-frame computer provider, they hadn't noticed when the technical paradigm shifted and the personal computer supplanted the mainframe. In 2000 the paradigm shifted again - from the personal computer to the personal digital device - and Microsoft didn't notice.
Apple did recognize the paradigm shift. In October of 2001, Apple introduced the IPod -- a digital music player. Steve Jobs saw a sea change in consumer preferences. Smart handheld devices, such as cameras, camcorders, and organizers had become very popular. As a consequence, Jobs moved Apple into the personal digital device marketplace. (Eichenwald writes that Microsoft initially laughed at the Ipod. By the time they realized the importance of the paradigm shift, it was too late - Microsoft introduced Zune, a digital music player, in November of 2006; the product was discontinued last October.)
Apple followed the overwhelming success of the IPod with the June 2007 release of the IPhone. Thought by many to be the technical product of the decade, the IPhone was not the first smart phone, but it was the first to provide a effective touch screen. Building upon this success, in April of 2010 Apple introduced the IPad - a tablet computer. (Last month, Microsoft announced it's own tablet computer, Surface, availability to be defined.)
Eichenwald quotes Steve Jobs saying Bill Gates was the basic Microsoft problem: "Bill likes to portray himself as a man of the product, but he's really not. He's a businessperson. Winning business was more important than making great products."
This difference between the two companies can be seen in their corporate statement of purpose. Microsoft's is "Your potential. Our passion." Apple's is "Think different." Over the past twelve years, Apple thought different, developed a long-term plan based upon strong products, and prevailed. Microsoft got hung up making money and stagnated.
Since 2000, the United States has floundered. We've suffered from the same malaise that plagued Microsoft. We've had poor management and weak strategy. Our leaders have been hypnotized by wealth.
Microsoft laughed at IBM for getting stuck in the age of dinosaurs and then joined them. Unfortunately the US has followed suit. The social paradigm has shifted but, as a nation, we haven't recognized this.
The official US motto is "In God We Trust," but it should be "Big is Beautiful." Our leaders are overly enamored with big: big military, big business, and big money. Some would argue that Microsoft stalled because it got too big. Today, some argue that the US has gotten too big. But Apple is big and it has prospered because it had the wherewithal to capitalize on a paradigm shift. It had the guts to think different.
The problem with the US is not that we're too big to govern or that government is too big. Our problem is vision: we're stuck in the age of dinosaurs and we don't get it. Americans need to shake it up: emphasize growth rather than profits. Americans need to think different.
But this should not surprise. In the 1800's prior to emancipation, the American South dominated the cotton trade, and was also very profitable. In 1860, a healthy young male slave was worth about $1500, and a female slave was worth about $1000 dollars. If we assume $700 was the average cost, $700.00 from 1865 is worth:
$9,191.86 using the Consumer Price Index
$7,902.86 using the GDP deflator
using the value of consumer bundle *
$78,931.03 using the unskilled wage *
$114,217.13 using the nominal GDP per capita
$980,541.92 using the relative share of GDP
1. http://thenextweb.com/apple/2011/10/18/apple-q4-2011-28-27-revenue-7-05-eps-17-1m-iphones-11-1m-ipads/
2. http://www.cnn.com/2012/02/06/world/asia/foxconn-worker-difficulties/index.html
Saying Apple got it right with the ipod because they know when to build consumer devices is wrong on face.
First, everyone hated buying CDs because you could never easily preview songs to know if the whole collection is worth the purchase. Consumers who bought music - virtually any genre - represented a massive amount of pent-up demand for a different paradigm for getting music.
Apple's brilliance here had NOTHING to do with 'hey, let's build gadgets!' as the article implies. It was ALL about bringing a new way to buy music.
Second, Apple's first personal gadget was 1993 when they introduced the Newton. It was a great little tool and failed miserably, squandering $100 million in investment. The market didn't exist for a tough-to-connect small, low-powered computer as expensive as the Newton. They blew it and the imitators that followed also failed.
And before someone says that the Newton is proof that Apple was the purist innovator here, those of us who have messed around with a Compaq iPaq (introduced in 1998) know where the silly concept of the little "i" in front of all of Apple's small products came from. If you're that innovative, can't you come up with your own small vowel name prefix?!?
I am biased towards Microsoft, I prefer their ecosystem, but they seriously need an overhaul.
Kind of wonder what you were talking about because it make no sense in defining how to make America great again.
Btw what has IP laws got to do with making America great again. It is innovation and invention.
Yes people get off their fat a** and work not depending on handouts.
There is million and one thing wrong but who am I to teach people how to suck eggs the simple way.
Apple hasn't innovated since Woz left. What have they innovated? Other companies created the MP3 player. iTunes is a rip-off of Napster. iPhone is a rip-off of Handspring's smart phone AND the Blackberry (BB "innovated" the smartphone from Handspring, obviously). iPad is a rip-off of Windows Tablet PCs. And of course, their PCs are a rip-off of... PCs. They're even using the same manufacturers as the PC makers now, which makes sense because it's all on the same hardware platform.
Wow I missed this little gem.
When you're asking what IP laws have to do anything, you're outright stating in big bold letters that you don't know what you're talking about on this issue.
Do a little research, learn what's going on, then maybe you'll be allowed to talk with the adults.
Yes that is something Apple can teach America. : 3 That whacky supposedly soon to be first Trillion dollar company certainly doesn't care about profits and needs to teach us that.
The reason why Apple may become the first Trillion dollar company is that they are focused on making the best products at the right time. The company is not afraid to be its own competitor. The iPhone is eating into iPod sales, and the iPad is eating into Mac sales, but over all the company is advancing because they don't rest on their old product lines.
Microsoft, on the other hand, is living in the past instead of changing with the times. Microsoft doesn't understand that mobile computers (smartphones and tablets) are to PCs, as PCs were to mainframes 20 years ago.
Microsoft still believes that tablets should be PCs with PC operating systems. With the SUrface, they are still trying to sell the Tablet PC to a public that never wanted it since it was introduced 10 years ago.
Living in the past, and being blind to the future is the cause of Microsoft's current downfall.