A recent post by Jean-Louis Gassée entitled “The rebirth of Windows Mobile” got me thinking about the state of technology and computers.
In the mid-80s, industry giants Microsoft and Intel got into a position of strength and leveraged that strength to make it impenetrable for competitors with new technologies and new approaches. For thirty years, they succeeded in relegating rivals to obscurity or ruin. Unless, of course, a rivals existence was necessary, like when Apple was rescued from near bankruptcy by Microsoft around the time of Microsoft’s anti-trust case.
Today, Apple is the largest company in the world and Microsoft and Intel are struggling as the mobile market has passed them by. They stopped innovating and the future continued without them.
Some people still predict big things for Windows Phone and we do build for it as a development company. However it’s being outdistanced by its rivals, including BlackBerry which has far less resources at its disposal than Microsoft.
But this is more about the dominance of mobile than it is about the demise of Microsoft or Intel. There is nothing the majority of people do on their computing devices that requires a PC. Casual games, email, Facebook, Twitter, surfing the internet – it can all be done with mobile devices. This is why tablet sales are set to outpace PC sales by the end of 2014.
One very compelling part of the post by Gassée was the internal memo allegedly written by Microsoft CEO Steve Ballmer talking about the future of Windows Phone and the need to turn the company around. I’ve listed it below in its entirety:
From: Steve Ballmer
To: Microsoft Leadership Team – Do not Distribute
Date: July 20, 2013, 6 a.m.
Subject: Windows Mobile 9
It’s time for me to confess a serious strategic mistake – and to ask for your commitment to change course and breathe new life into our legacy business.
This is about tablets.
Our own unsuccessful attempts to enter the tablet market (Widows for Pen Computing in 1991, and the Tablet PC in 2002) lured us into thinking there was “no there there”. Because of this, we downplayed the impact of a new wave of devices from Apple and Android licensees.
Neither our PR campaign to negate the advent of a Post-PC era nor Frank Shaw’s valiant efforts to position the new devices as “PC Companions” has had any effect on the market. We even leveraged our long and cosy relationship with IDC and Gartner and got these to firms to create a dismissive category label for these new machines: media-consumption tablets – with the clear implication that they were unsuitable for business uses. All these exertions were for naught. For five consecutive quarters, we’ve watched PC sales decrease and tablet shipments skyrocket.
This has become a significant threat to the very foundation of our business model.
For more than two decades, the Windows + Office tandem has been a source of incredible power and wealth, it has enhanced the life of more than a billion users and has allowed our company to expand into other high-margin Enterprise products and services.
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.
I have a plan. It’s conceptually simple but I won’t sugarcoat the situation. It will be extremely difficult to execute, particularly given the urgency.
First, I am tasking Terry Myerson, our EVP Operating Systems, with creating Windows Mobile 9, a tablet-capable version of Windows Phone 8 that will serveall of our mobile products. Until last week’s reorg, Terry was leading our Windows Phone group and is therefore ideally suited to the new task.
Qi Lu, EVP Applications and Services, will work with Tim to deliver a full, real Windows Mobile Office without the limitations imposed by RT. And, in keeping with our strategic need to spread Office everywhere and to provide the widest base for our on-line Office 365, Qi Lu will also produce Office versions for Android and iOS platforms.
Moving to hardware, we cannot rely on Nokia and other hardware partners to create enough momentum for this new platform, so I’ve asked our JLG (Julie Larson-Green) to develop first-party mobile devices — a Microsoft smartphone and a Microsoft tablet — that run Windows Mobile 9. The use of the somewhat damaged Surface name for these products will be evaluated as we go.
Everyone else in the company, from Operations to Evangelism, from HR to Finance is expected to give their full support to this most urgent, most vital initiative. In particular, our most recent hire, Mark Penn, EVP Advertising and Strategy, is tasked to come up with the right narrative for the strategic transition to Windows Mobile 9. Earned in unforgiving Washington politics, Mark’s long experience with complicated situations will help us navigate the troubled media waters ahead of us.
I know you love this company as much as I do. Thanks for pouring all your energy into this effort.
Steve
Regardless of whether it came from Steve Ballmer or was faked, it still represents a real issue that Microsoft faces. Microsoft is no longer dominant, and it’s unlikely it will ever regain that dominance. Like IBM does with mainframes, Microsoft may always dominate a corner of the computing market. But with mobile, Microsoft was playing the old game of deflecting threats rather than trying to embrace new technology. By missing the mobile trend Microsoft and Intel also missed the future.
The game has changed and it isn’t going back. Mobile is the future we are already living in.
