Microsoft’s Innovation Dilemma

Ubuntu phone and docking station

If you are in a business where sales are falling off a cliff or “turning in to a rout,” it would seem the need to innovate is a given. But what if your effort is counter-productive?

This is what happened to PC sales, which appear to be in a long-term decline and are down again 14% in the first quarter alone.

Then, along comes Microsoft with its disastrous Windows 8, which is now being blamed for suppressing sales even more.

A while ago, the innovation gurus at #innochat discussed Kodak’s demise. One wag coined the phrase, kodaked, or relying on high-margin revenue streams (film and print) while ignoring market developments around digital.

To add insult to that injury, Kodak actually invented the digital camera, and then filed over 1,000 patents on digital photography!

Is Microsoft making the same mistake?

Redmond probably thought it was being innovative with Windows 8, an OS designed for touch screen devices as well as the desktop. Now, not only is Microsoft failing to gain market share in the tab market, it is being blamed for hurting PC sales, too.

In early 2012, I downloaded the beta version and installed it on a PC in the office. Immediately after I booted it up, I knew it wouldn’t get within an ass’s roar of my workplace.

In the words of Podge and Rodge, two crude puppets on Irish TV, I would rather staple my micky to my eyelid than roll Windows 8 out in a corporate environment.

Some commentators say Microsoft is betting on the PC’s demise. Gartner, however, says Microsoft itself could be obsolete by 2017. A shift to tablet and phone computing, coupled with falling mobile device prices, spells trouble for traditional PC/laptop businesses.

But could they have done Windows 8 right?

Look at the direction Ubuntu is taking. Like Microsoft, they know computing power on phones rivals that of PCs, and they want a single OS that Ubuntu phone running as a PCworks across multiple devices.

Ubuntu’s solution is much more elegant: It draws on the laptop-docking-station paradigm. Pull your phone out of your pocket, dock it, and start working on a large monitor and keyboard. It puts a whole new spin on bring your own device (BYOD).

It also puts Microsoft’s Windows 8 effort in a bad light.

If I was the guy behind Windows 8 and I saw Ubuntu’s idea, I’d kick myself. Then I’d die of embarrassment. Then I’d stage a miraculous re-incarnation to get stuck in to Windows 9.

It also points to something wrong inside the behemoth in Redmond.

“It is not only the loony OS that’s the problem for Microsoft. It’s the decision-making prowess (or lack thereof) at the company itself that should concern investors,” said John Dvorak. “How many people greenlighted Windows 8 when it was apparent to everyone that it was not a good follow-on to the successful Windows 7?”

Kodaked?

Microsoft has long been accused of relying on revenue from Windows and Office software. Superficial parallels can be drawn between it and Kodak. Microsoft waited too long to get in to mobile. Then when it did try to break in to the market, there were already established players there with robust product offerings.

It’s hard to see obsolesnce in four years when Microsoft’s profits for fiscal year 2012, which ended June 30, were up $3.6 bn or 5.4 percent. But PC sales were already slacking (see chart), and that was before a disastrous Christmas and Q1 2013.

But Kodak didn’t provoke reactions to its new products like “slap in the face to established customers” or “guaranteed to disappoint nearly everyone.” They just rode the old film and print revenue stream.

On the positive side, Dvorak said, “There is still time to fix this. Microsoft needs to take action right away.”

Images from Ubuntu’s website.

2 thoughts on “Microsoft’s Innovation Dilemma

  1. There was a very interesting take on innovation on the radio last weekend – to do with Lego (the company). They had amazing compound growth for decades before suffering their first loss in 1998. They then suffered from 5 years of too MUCH innovation before getting themselves back on track. David Robertson has brought out a book on the topic – “how LEGO shook off a period of stagnation and became a model for innovation again.”
    Great talk, worth listening to online

  2. Ben,
    Yes, Lego seems to be used as a case study a lot when it comes to innovation. They also make a good case study in change management and stakeholder engagement – their customers are quite enthusiastic about the product!
    John

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