Is it really over for Microsoft?

It was with great interest - though not that much surprise - that I noted the news this morning that Apple has finally overtaken Microsoft in market cap. The market, clearly, thinks the future fortunes of the former are rather more steady than those of the latter.

Personally, I have to agree with the market. Not because I like all the Apple stuff I have, and not because I think Apple have better people or leadership than Microsoft. I am not one of those people who think  Steve Jobs is the lone force that drives the success of Apple, and in fact, I don't see how one man could ever have such influence over every detail in a company that large.

The problem for Microsoft is that it does not yet have its back against the wall, and in fact, has never done. It is not staring death in the face, not even nearly so. It has never even had a near death experience. And, consequently, it is not in a position where is has to do anything very much other than what it has always done: crank out new versions of its old hits.

If there is one thing that I've learned about the innovation process and in particular, radical innovation, it is that there must be a burning platform which forces senior leaders to do something different. Because of Office and Windows, Microsoft has no burning platform, and consequently won't do anything different no matter how hard it tries.

In fact, as we've seen from insiders accounts of life trying to be innovative at Microsoft, such efforts to be different will be killed off by political infighting and blatant defense of empires.

I always hate it, by the way, when everyone holds up Apple as an innovative company, and explains that it is innovation which has driven its present success. Same for Google. Neither organisation is especially innovative, at least when you take the conventional definition of the word. They come with interesting new ideas, of course, but their mastery is in seeking adjacent spaces for stuff that is largely working well and wrapping it in a way that disrupts whoever is there presently.

I don't need to bother with all the typical examples of this since they've all been written about countless times before.

My point is that Microsoft doesn't do this. Their strategy is to innovate in the truest sense of the word. They want to create brand new ideas that turn into hit products. When that doesn't work, they always seek to copy the way someone else has created a hit product, and win the war by attrition.

Microsoft think the product is important, not the business. Apple and Google start from the business and then come to the product. Consequently, they're always going into spaces which aren't always obvious but where they can leverage their capabilities from established hits. Microsoft, in contrast, goes to places where it has neither capabilities or hits.

I wasn't surprised to see one commenter on Mini-Microsoft exclaiming that Microsoft's main problem is its "terrible" marketing, and if it could just get better at that, all its new products would succeed. When you think product, as in "lets build the greatest product", it is tempting to imagine that success comes if you can just get the message out.

That has obviously not worked in the past for Microsoft, and is not the centerpiece of the success of Apple or Google now.

The real problems are twofold though. The first is that Microsoft has no culture of failure, because every failure it has ever had is overshadowed by the huge successes of its two main products. The second is those two main products are such successes that no-one in the company can believe that a product-centric strategy isn't the way forward.

So yes, I do think that Apple is more steady for the future. Its not too late for Microsoft to reverse its direction of travel, but I do have to wonder if that's going to be possible unless they have  a near-death experience.

The thing is, Windows and Office aren't going away, though they may be going into decline. That's a decline which will last years, and the incumbents in Microsoft will be able to dress it up as success for years. There's no burning platform at Microsoft, and there's not likely to be one.

The market has probably got its valuations right.

Comments

[Simon Dickson]

I worked at Microsoft's UK head office in Reading for a while. Depressingly, the memory which will stay with me longest is how similar it was to the civil service environments I'd worked in previously. (Actually, that's not quite true: the free Coke fridge on each floor, freshly stocked each morning, is the memory which will last longest.)

Fundamentally, you're right: Microsoft is in too comfortable a position to try too hard. But whilst I wouldn't say the catastrophic marketing isn't the sole reason for its (apparent, relative) demise, it's certainly a factor in it.

Microsoft's biggest problem right now, I'd say, is that it's become boring. Too many 'me too' products, or 'yet another sequel'. The recent Courier touchscreen concept was the first thing I've seen from them in years which got me at all excited. And look what happened to it this week.

[Colin Henderson]

I agree James. MS are not in decline so much as the consumer side of computing through laptops and mobile is growing. These represent net new markets in the world. 10-15 years ago few people bought personal laptops and that is commonplace now and since its a personal choice Apple is going to come up more often than it did in corporations (never) in the 90's. And phones had nothing whatsoever to do with computing in the 90's but now my iphone is a computer and MS are just not in this new space (for now).