Category: Business, Organization, and Management

ON MICROSOFT’S FUTURE : YES SURFACE LOOKS LIKE A FAILURE

(From something I posted on Dave Quick’s page)

OK. While I’m thinking about it:

1) everyone knows msft’s problem is a combination of their dependence on OEM’s paired with the threat of suits, especially from governments, if they try to alter this dependence. They must get into the hardware business. but they can’t without buying someone like Asus, Dell or HP.

2) The first concept of a desktop everywhere was a correct prediction. The second conceptual bet, of owning the living room was a failure. This again, is a hardware ownership problem, and a distribution network problem. The software is trivial.

3) Abandoning the pc as a gaming platform in favor of attempts at the living room was a failure. Especially in light of the fact that it was the gaming technology that caused advances in processor demand that fueled increasing creative destruction in the field.

4) Abandoning the application server market to Oracle and IBM is irreversible, and was driven by at least the following factors a) the failure of msft to create sufficiently advanced products for enterprises, b) because of the performance challenges of the architecture and the slow response to the internet c) losing the IQ during the revolution by killing ASP for example rather than improving windows architecture to tolerate transactions rather than processes (and failing to make PHP part of visual studio) and perhaps creating a compiler for it that would give windows an advantage in productivity d) as I have argued for years, because they underfunded their services organization, which did poor work using poor technology and threatened their cash cow of operating system revenue with top customers, and e) letting the sharepoint group kill off both Commerce Server and nCompass, which together, if funded, could have performed as well as the others f) not-in-redmond that ruined the potential for the Navision acquisition to expand beyond accounting.

4) The vast majority of microsoft employees have meaningless jobs with little to no impact where they are totally isolated from the pricing system and supported only by the network affect. Survival is as much political as anything else. The hardware business is much less tolerant of this extremely politicized environment. And the losses from hardware failures more substantial. These employees cannot transfer to that environment. ( I won’t go into the other cultural problems there.)

5) Any management that saw technology as joy has been forced out of the company along with most of the evangelists that actually connected the bureaucracy with the consumers. Much of this management has been forced out largely because there is no technical visionary in the company, and the senior execs are operators, not inventors, so they do not actually know what to do with the business. Furthermore, those that do have been forced out of the company as soon as enough analysts suggest that they would be better at replacing Ballmer. Esp Raikes.

6) Microsoft’s core technology (Windows) is architecturally unsuited for low cost, high performance computers. It was designed to be heavy, and it remains heavy. It should because underneath it’s conceptually still a product of digital equipment’s minicomputer architecture. If you understand this you will also understand that there is almost nothing that can be done about it without some extraordinary invention that alters the user interface (think talking to your box) the way that touch and hi res altered the interactive experience. It is this kind of innovation that makes substantial investment possible. Because it reduces the transaction cost of working with computers – and all information.

When I spoke with Stephen Elop about this over lunch a few years ago it seemed as if he simply couldn’t even grasp the idea. Of course, when he went to Nokia I understood the strategy. But I also understood that he was not intellectually capable of improving office nor or altering the course of Nokia. In few meetings I’ve had with Ballmer (I’m out of the industry so I feel safe talking about it) his only concerns were expressed in global terms and the company’s overall revenue potential in the middle term. But every time I think about it, I can’t get away from the famous email to Buffett that stated that in ten years anything could happen to MSFT. And it has.

Continuing on this thread, Touch eliminates the barrier to use for navigating. It reduces transaction costs. It does not require that the user comprehend abstractions. Gramma would never have had trouble with the ipad the way she had to learn the keyboard.

But touch does nothing for engineering, finance, science, writing contracts, or even making movies. It does very little for content creators.

THEREFORE

Microsoft owns the content creation business. It owns the complex interaction business. It has ceded the application business to the major firms. It has ceeded the consumer to Apple. So microsoft’s market has, like IBM before it, narrowed. It’s narrowed to the need for businesses to have an active directory service to manage security, and the administrative desktop tools (Office) needed for clerical work. IE: Microsoft owns the CLERICAL WORKER. That term includes people who use structured data in its loosest form (verbal arguments and persuasion) to those who use it in it’s common form (financial clerical work) it’s next broadest form (statistical information possible only with Excel or other tools), to it’s creative form (engineering and science). But this is all clerical. The inabilty for msft to control display quality (as does apple) prevents it from being in the visual business.

No one can or is willing to replace Excel, and the vast network of spreadsheets that most companies (foolishly) run on instead of ERP, PSA and other financial systems which are far more expensive to implement. But if someone creates a version of excel that replaces two dimensional functions with n-dimensional processing like sql, then that would be a significant invention that would make the value of the new product worth the transaction cost of changing it.

When Word came out, it’s fundamental improvement was the use of the paragraph marker to store formatting data, which allowed rapid redrawing of the screen. Wordperfect for example, used document level tagging, which stayed in effect until altered. This meant that wordperfect had to redraw or rather reprocess the document. It wasn’t just marketing. It wasn’t just that word was carrying the burden of it’s dos roots. It’s that architecturally it was a flawed model in the newer context. Even though the paragraph marker is the source of all the stuff we hate about word.

Now, If you follow writing it’s split between four camps: text fragments that we use for the majority of our work today (email, text, web pages, forms) , simple word processors (glorified wordpads, which is about all anyone needs), html word processors (formatted text processors), business word processor (word) and writers tool’s (Scrivener and Final Cut models). Fundamentally, the writer’s tool has taken over writing in all professional forms except business writing and contracts. This process will continue.

WHAT DOES THIS MEAN

So the point here is that it’s not worth it for anyone to get into microsoft’s office business YET. It is possible for microsoft to DEFEND that CLERICAL business. It is probably NOT possible for microsoft to expand into the CONTENT CONSUMPTION BUSINESS. It has no advantage there. And any attempts to do so (windows 8) will probably be a failure. computers are NOT general purpose devices any more. They’re appliances. THe operating system is not a competitive advantage, It’s a commodity. And in microsoft’s case, the windows architecture is a liability.

What I have suggested in the past, is that once a competitor has the ability and incentive to eradicate microsoft’s lead it’s actually quite easy to do it with software:

a) active directory replacement

b) an inexpensive desktop appliance with superior user interface for the majority of clerical workers, that provides increased protection from theft.

c) the ability to run a window for legacy windows applications until they are replaced with web based (that this is in process should be obvious) or at least iOS level apps.

d) a spreadsheet with all Excel functions PLUS a sql like or at least close to sql like langage. esp one that handled graphs (not pictures, data structures).

This will consume the administrative worker that accounts for the majority of desktop systems.

My prediction was that Apple would do this as soon as either the iphone/ipad revenue stream threatens to peak, and/or the television strategy that they are starting to roll out fails. It is just too easy for them to use brand preference for apple to displace all clerical systems and support for the simple reason that windows user interface and office features sets are too complex for all but a minority of jobs.

It might not be apple. It will be someone else (who cares abut this opportunity more than I do….)

So, for the above reasons both the environment at msft, it’s revenue stream, it’s product architecture, and the few points of advantage taht their technology possesses are all weaker than the network effect is powerful.

And only someone very visionary can change all that. And that person would have to be CEO.