Staying on top is hard
July 27, 2012 2 Comments
Just really liked Yglesias‘ thoughts on Microsoft’s difficulties. Makes a lot of sense to me:
The basic issue facing Microsoft over the past ten years has been this—innovating is really hard.
The company reached a point where Office and Windows were so popular that wasn’t much you could do to increase their popularity by improving the product. They continued to work on improving the product, and kept these divisions very healthy and profitable, but there simply wasn’t an explosive growth opportunity left to be had because the previous successes had been so enormous. So you create a situation where the company as a whole is basically a venture capital firm. It has this huge stream of Office/Windows profits and needs to figure out how to invest those profits in exciting new products. But successful venture capitalists are really rare, and for all we know most of them are just getting lucky. The average financial returns from the venture capital sector as a whole are terrible. But Microsoft qua venture capitalist faces the additional burden that the top management of the company has to be good at running the giant existing Office/Windows businesses. It’s as if you were trying to hire a tax attorney who could also perform open heart surgery.
Computers, technology, internet, etc., are an incredibly dynamic field. Just because you came up with one amazingly successful idea is no guarantee at all you’ll be able to come up with more. And when you are at the top, there’s only one way to go.
About Steve Greene
Yes, innovating is hard, but he shouldn’t automatically attribute business success to the innovation behind the product.
For the record, I’ve been an Apple user for 20-plus years (so apparently I’m biased), but I also had to use MS at work for many years, and I hated every minute of it.
In my opinion, Microsoft remained dominant because of the high cost to the user of switching ecosystems, not because it had good products. (To be sure, there were several small innovations within larger, mediocre products.)
In the same way, Nokia, Motorola, etc., dominated the phone market with horrible, user-unfriendly interfaces until Apple and Android came along. It wasn’t that Nokia couldn’t continue to innovate. It’s that it fell into a dominant position without having to innovate in the first place.
(Oh, and, ironically, I think the Windows 8 interface looks amazing. It’s one of the most innovative things Windows has ever done. Unfortunately, they’re going to blow it by trying to shoehorn it into both PCs and mobile devices.)
For what it’s worth, I’ve been using Windows and Office for 20 years and generally have always really liked them. Never much of a Mac guy, obviously, but also a fan of the IOS.