How Many Microsofts?

Catching up on my RSS feeds today, I realized I’d missed Ben Thompson’s Two Microsofts piece a few days ago on stratēchery:

On the consumer side, Microsoft hopes to make money from devices and advertising: they sell Surfaces, Lumias, and Xboxes with differentiated OS’s, hardware, and services, and they have ad-supported services like Bing and Outlook. The enterprise side is the exact opposite: here the focus is 100% on services, especially Azure and Office 365 (to use the Office iPad apps for business still requires a subscription).

This actually makes all kinds of sense: enterprise and consumer markets not only require different business models, but by extension require very different companies with different priorities, different sales cycles, different marketing, so on and so forth. Everything that makes Office 365 a great idea for the enterprise didn’t necessarily make it the best idea for consumers, just as the model for selling Xbox’s hardly translates to big business. From this perspective, I love the idea of Office on iOS and Android being free for consumers: get people into the Microsoft ecosystem even as you keep them in the Office orbit.

I see things a little bit differently—maybe two Microsofts isn’t going far enough. It may well be insufficient for Microsoft to apply only a consumer/enterprise split broadly across so many existing product lines. Microsoft’s products serve such a diverse set of scenarios across such a broad range of markets that I find myself wondering whether a multi-faceted approach wouldn’t be more effective.

Take Xbox for example. Making Xbox work requires everything from media streaming to user identity to cloud storage to 3D rendering. User identity applies to any product that has a services component, and cuts across almost everything Microsoft is doing right now. On the other hand, media streaming is more specific to consumer scenarios, while 3D technologies cross multiple markets from business presentations, to CAD, to video games, albeit at the moment with a heavy emphasis on consumer scenarios.

It’s easy both from the perspective of outside analysis, and behind-the-curtain business management, to try to simplify the story and reduce it to a small number of core truths that indicate a single strategic approach to success across multiple markets.

But all of these markets are shifting more and more rapidly, in different ways, with different vectors, and huge differences in their respective competitive environments. To set one or two long term (or even medium term) strategies that will apply to all of them may be unlikely to result in success for more than one or two, and probably leads some efforts straight into the ditch.

In my (very humble) opinion, a more optimized approach would be to separate into three or more largely separate lines of business, and within each appoint captains of specific products, who would have a very large degree of autonomy. At least three of these groups would be:

  • Core technology (Developer tools, Windows, Azure, SQL, .NET, Visual Studio)
  • Enterprise (Office and Office 365, Sharepoint, Dynamics, cloud services, etc)
  • Consumer (Xbox, mobile, accessory devices)

The core technology group would function mostly autonomously as a provider of platform-level components that form the foundation of the other lines of business. These components would have documented interfaces that anyone can plug into, even outside of Microsoft. (Perhaps we’re seeing the beginning of this strategy in the recent announcement about .NET going open source.) Success here is twofold: Core technology enables multiple other lines of business as a platform, and by being open Microsoft can start to win back developers who have flocked to mobile and open source platforms.

The Enterprise group would focus on productivity and back-office scenarios, while driving requirements into the core tech group where appropriate, so that they can be leveraged across multiple products, and feed into consumer products. As in the past, revenue in enterprise is driven by software licensing, support contracts, and subscription services. Building on core tech also helps prove that the platform is robust and comprehensive enough for developers to bet on it, as they are today on iOS, Android, ruby, node.js, etc.

The Consumer group would focus on inexpensive or free software, with devices being the primary lever for market differentiation and driving revenue. The consumer group would drive common UX and UI frameworks into the core technology platform where they can be leveraged by 3rd parties as well as by Enterprise and developer tools. Make most or all of the software and services free (or as close to free as possible), and shoot for the best possible user experiences with the most functionality, with the value of software actually appearing as revenue via wider adoption of core technologies, and the improvements reaped by the Enterprise group.

Within each group, let the products stand or fail on their own merits. Give the owners of each product as much autonomy as they need in order to innovate and differentiate themselves in the market as a whole. Goals for product owners in priority order should be: Great products, wide adoption, cross-feeding into other groups, and finally revenue.

I’ve seen many great ideas from Microsoft turn into successful but short-lived products, only to be killed because they didn’t well fit into the grand strategy of the day, or sometimes they way that they did fit wasn’t recognized by leadership at some level. Sometimes even, nearly identical products were released over and over by different teams, with different names, and separate implementations—after all a good idea is a good idea is a good idea. But without the support of the Microsoft management machine, there was no way for these products to get the support they needed in order to continue to exist.

Many people who are smarter, more educated, and more experienced than I am have spent years thinking and working on this. And I’m sure I don’t have any answers that haven’t been thought of before, probably by many of those people.

But from my vantage point, Microsoft has a tendency to go “all-in” on very expensive but often only marginally successful grand-unified strategies, while at the same time ignoring or even eschewing potentially great but more narrowly-focuset products, when they don’t fit the vision de jour.

My hope is that Microsoft can continue to evolve in a direction that allows for the kind of innovation it wants to be creating for the world, even (or perhaps especially) when that innovation doesn’t quite fit the mold.


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