As an entrenched and dominant player in a handful of key markets, Microsoft has settled into a protectionist mode that prevents it from moving quickly into new markets. And its belated entry into multi-touch devices could be late enough to be fatal.
Related: "Windows 8 Sales: Hot or Not?"
This problem isn’t unique to Microsoft. In the tech industry, it has happened before—to firms like IBM—and there are fears that it’s happening to Apple, which now has hundreds of millions of its own users. But it’s somewhat ironic that Microsoft’s dominance of the PC market has made it particularly unsuitable to expand into new markets, even though it has the financial strength and resources to do so. It’s just too easy to protect what already works.
Microsoft has so thoroughly dominated the PC market, and related markets for office productivity software and servers, that it sees every new opportunity through this lens. And that has resulted in over a decade of mistakes in which it has overused the Windows brand and developed strategies for new markets that failed almost exclusively because they emulated the Windows partner model.
The firm was also hobbled considerably by its antitrust problems in the United States and Europe. Over a decade ago, Bill Gates lamented that Microsoft was then still acting like a brash young upstart despite its market dominance. But in the intervening years, Microsoft aged beyond its years and was often unable to move decisively out of fear of regulatory meddling. Competitors that once dropped product initiatives out of fear that Microsoft would enter that market now rarely need to worry about the firm’s plans. Microsoft became IBM.
Indeed, although Microsoft has done a good job of evolving its existing businesses, it has been a lot less successful with new businesses, especially those that follow in the footsteps of other consumer-oriented trailblazers. When Apple jumpstarted the market for MP3 players and then online music services with iPod and iTunes, Microsoft followed up years later with the ill-fated Zune platform, which never resonated with consumers and has since become the butt of jokes.
Microsoft’s efforts with smartphones (Windows Phone followed the iPhone by over three years) and tablets (Surface shipped over two years after iPad) have thus far mirrored Zune: They're well designed and beloved by a small handful of true believers, yes, but neither has resonated with consumers in a meaningful way.
The issue for Microsoft is that these products might have all simply arrived too late to catch up. And though Apple’s success can be tied in part to its ability to move quickly into new markets that it delineates for itself, Microsoft’s inability to mimic that success and instead slowly follow Apple’s lead could result in a new decade of calcification.
So, although Apple is tending to established products like the Mac, iPhone, iPad, and iPod, it’s also moving forward with presumed new initiatives in television and even smart watches. Microsoft would be better served by forging new leadership positions of its own rather than continuing to follow Apple down these increasingly less viable markets.
There are bright spots for the firm, of course. Its Azure online services are expected to be its next billion-dollar business, which makes sense because Azure is a natural evolution of Microsoft’s server efforts. Indeed, Microsoft has done quite well evolving its traditionally delivered software into online services, as evidenced most recently by Office 365. But if Microsoft is serious about being perceived as a leader in this industry, and not just a follower, it can’t only evolve successful products. It needs something new.
One potential bright spot is voice and motion control. Microsoft introduced its Kinect add-on for Xbox 360 in late 2010, and though the first version of this sensor was immature and was perceived as a follow-up to the motion-control capabilities in the rival Nintendo Wii system, Microsoft’s ability to push the technology beyond video games is unmatched. Voice and motion control are arguably more important to the future of computing than is multi-touch.
This is an area in which Microsoft could lead, if it could just get out of Apple’s taillights for a moment.