Monday, January 10, 2011

If You Follow, You Will Never Lead: Microsoft's Business Non-Strategy

The title of this post comes from my years growing up as a sailor in Nantucket, Massachusetts, on the wall of the old sail room in the Nantucket Yacht Club. The idea was that you'll get the same wind as the boat ahead of you, and, unless you are a greatly better sailor or have a vastly better boat, you will never overtake the leading boat. If you were that great, you probably wouldn't be behind in the first place.

This is not completely true in business, despite the myth of "first mover advantage", which is only true for successful products (so, not true in the long-term for Palm, nor for Apple's Newton, nor Atari in video games, to name a few). If you can copy products but improve on them without getting sued for patent violation, that may be viable, albeit difficult, and, honestly, foolish.

But it is Microsoft's strategy. I'll have to point out ahead of time that although they are ahead in market share in terms of operating systems if you group all the different versions of Windows, they are not ahead in some equally valid areas of measurement, such as smart phones (iPhone versus Windows Phone -- and they're not phones, of course, they're minis, as in, mini computers), digital music devices (iPod versus Zune), and, another measure, market capitalization -- Apple closed at an all-time high on Monday ($342.45), for a market cap of $314 billion, second only to Exxon Mobile in American companies. (The most recent number I can get for Microsoft's market cap is $240.5 billion. Not bad, but less than $314 billion, clearly.)

I would include digital music sales, but I don't actually think Microsoft really does that in any workable manner (iTunes Music Store versus what?). I'll have to check. I guess I could mention PlaysForSure. Oh I guess it's Zune Marketplace, which seems like a copy of... the iTunes Music Store. Well that continues to back my point. (I'll place it in the table below.)

The point is, Microsoft loves to copy, or on occasion purchase outright, what others are doing. And they usually do it badly, in terms of design and usability, despite market success over the long term, so far. Let's look at some examples.

Copied Google (see note)
Licensed another form of DOS (86-DOS)
Bought Bungie, for the Xbox
Bought, not as good as Gmail
Copied Apple's Mac OS
Windows Phone
Copied Apple's iOS and iPhone for the most part
Copied Sony to challenge the PS platform
Copied Apple's iPod
Zune Marketplace
Copied Apple's iTunes Music Store

(I corrected/clarified the copying/licensing for DOS, I didn't like my initial explanation and it turned out not to be very accurate.)

The point is, Microsoft does not lead, it follows. I admit one interpretation is that I am saying that first-mover, which I just derided in a previous paragraph, is a strong effect, but that is not what I am saying. What I am saying is that Microsoft does not innovate, nor does it really micro-innovate, copying a product and then improving it as much as they can (incrementally). They buy products when they can't make a good competitor, and they copy products and they still can't make a good competitor (Apple's OSes have always been better, don't compare market share unproblematically since you have to deal with the hardware side of the equation, where Microsoft was not making the computers).

Apple tends to make products (and services) that make new markets (or, do so successfully). They are, to some extent, based on pre-existing forms, but not ones that are market successes.

CategoryApple's Move
Digital Music Downloads
iTunes Music Store (paid, not early free Napster)
Digital Music Player
iPod (a digital Sony Walkman)
GUI OS/Mouse
Original Mac OS (from work at Xerox PARC)
Smart Phone
iPhone (a mini computer, really)
OSX (based on NeXTSTEP, from Unix)

I'm avoiding the iPad as I think we need to wait another year to see how the "tablet" market pans out in the initial phase of the iPad era. Like NFL football before Thanksgiving, it's just too soon to tell. Apple's iPad has generated the most media coverage of recent tablets, which could be an honest indicator of quality, but I think there is some effect from journalists (not incorrectly) thinking they need to cover the iPad. There are probably some other items I could place in the list, but those are the most defensible and explainable that I can think of. (So, I'm avoiding USB and floppy disks.)

As I pointed out, it could be argued that none of these were new products either, but the thing is that, unlike with the Microsoft examples, none of these Apple products went up against anything similar that was successful in the market. (RIM's Blackberry series of phones, although cool, were still in the interface and paradigm of cool handheld phone devices, like Palm to some extent, the iPhone is a different device, it is not really a phone in the full sense, it is a computer that also has phone capability -- did you ever call your desktop computer a phone when it had a modem?) OSX didn't face a mass market Unix, Unix is mainly in labs, corporate back offices, and the homes of Linux geeks. (I've had... two? At least two, Linux boxes, so far.) There was an MP3 player before the iPod (I can't recall the name offhand), but it was not widely successful. Apple made a better interface (the wheel, which has now been replaced with touch screens for the most part).

This is also not to say that everything Apple does is gold (the Newton didn't succeed in the market, Apple's computer offerings were overpriced, underpowered, and muddled in the early 1990s, and there have been occasional but odd AppleTV offerings--usually a Mac with a TV tuner card--which seem to have worked themselves out finally), nor that Microsoft isn't a market success (despite, or perhaps because of, monopolistic practices, and who can resist taking a shot at Microsoft's Bob?).

Leading, and innovating, versus following. As others have pointed out, innovation is risky, but not innovating is moreso.

Update: One area I avoided, unintentionally, was web browsers. Sure, both Apple and Microsoft have web browsers, neither are original, and both are bundled with their OSes. I am pretty sure MSIE came before OSX's Safari, so it doesn't fit my pattern, but Safari wasn't establishing a new market. Not every product for both companies work as examples, but more than enough do that we can look at the overall pattern.

Note: When I said Bing was "copying" Google, I didn't mean literally copying the search results, I just meant the idea. Apparently, according to this report, Bing is indeed directly copying Google search results. Amazing.