For all these years, we scrupulously followed McKinsey’s “Not A Single Crack In The Wall” advice, we’ve managed to successfully Embrace and Extend each and every possible threat to the Windows + Office combo.
While we initially underestimated these new tablets, their threat soon became obvious and we started thinking of ways to protect our franchise.
That’s when I took the company in the wrong direction.
To prevent these tablets from penetrating the Office market, I followed our Embrace and Extend strategy and endorsed the creation of hybrid software and hardware: The dual-mode (Desktop and Touch UI) Windows 8 and Surface tablets.
The results are in. Windows 8 hasn’t taken the market by storm. The Windows 8 tablets manufactured by our hardware partners are sitting in warehouses. We just took a $900M write-off on our RT tablets, now on fire-sale.
It doesn’t matter who actually proposed or implemented the failed strategy, I endorsed it. What matters most — the only thing that matters — is what we’re going to do now.
And while we’re on this topic, Benedict Evans has a very perceptive post arguing that, with the benefit of hindsight, we can now see that Microsoft peaked in 1995. Excerpt:
Just as overnight success can take a lifetime, so overnight collapse can also take a long time. There are founders creating companies today who weren’t born when people were still actually scared of big bad Micro$oft. It stopped setting the agenda 18 years ago. Windows 95 was the moment of victory, but was also the peak: it came just at the moment that the Internet started taking off, and Microsoft was never a relevant force on the internet despite investing tens of billions of dollars.
But you needed a PC to use the internet, and for almost everyone that PC ran Windows, so Microsoft’s failure to create successful online services didn’t seem to matter. Microsoft survived and thrived in the PC internet era, despite appearing to be irrelevant, by milking its victory in the previous phase of the technology industry. PC sales were 59m units in 1995 and rose to over 350m in 2012. Of course, that’s now coming to an end.
Though it looks like we’ve passed the tipping point, this process isn’t going to be over quickly. PC sales aren’t going to zero this year. But the replacement cycle, already at 5 years, will lengthen further and further, more and more apps will move to mobile or the cloud, and for many people the PC will end up like the printer or fax – vestigial reminders of an older way of doing things. Microsoft may yet manage to turn Windows tablets and phones into products with meaningful market share, but it will never be dominant again.
LATER: Lovely piece in Slate which explains Microsoft’s decline in terms of the storylines of The Wire.