January 16, 2005
microsoft’s new big idea
Robert Scoble uses a recent Apple happening to prove that branding is still alive and well, despite what Doc and I say about “Branding is dead.”
Of course, brands are alive and well, as any Mac user will prove. But I really do believe the act of “branding”- something ill-defined, unpredictable, and expensive at best, will get less relevant to the success of your business by the day.
And yes, the same is true for advertising.
Since we’re on the subject of computers, and since Robert works for Microsoft, I have a question:
What is Microsoft actually going to do?
Microsoft’s three big historic salvos– software, the PC and the internet schtick– have already been fired. Now what?
What’s the big idea coming down the pike, Robert? OK, the Tablet PC is pretty cool, but in 20 years, will anybody be writing books about how the Tablet PC changed business forever, like they will be with the the blog, the PC, the internet etc etc?
I don’t think so.
If Microsoft wants to continue growing (of course, it may not), it needs a new “Big Idea”. I don’t know what it is. Does Robert? Does Bill Gates? Does anybody?
Just thought I’d ask.
[UPDATE:]
Hamish in the comments gives very compelling reasons why Microsoft shareholders should be very, very concerned. Well worth a read.
[MORE THOUGHTS HERE:] “An Open Letter to Bill Gates”.
I think that someone put it quite well, when they said that the problem for Microsoft is that what would be a huge new business for someone else, for them barely shows up on the radar. For the internal satisfaction of the Microsoft staff, it used to be enough that the share price was going up, so that the options were going to be worth good money. (I have also heard that Microsoft is actually a fascinating place to work, so I am sure that they as individuals have other motivations, but back to the point.) Now, if you are just beginning to capture the market with DOS and the early versions of Office, then the growth in terms of percentage is high. When you have a monopoly, illegal or otherwise, on the operating system and office software markets, with margins of 70+%, then you have a hell of a problem to get a business that will make an impact on that kind of bottom line and profitability. Xbox is a good business, I dunno, 100 mill a year or more. If that was another company, they would be ecstatic. In Microsoft terms they show this tiny additional increment to Wall Street, and nobody cares, stock does not move. Now this is a problem, because a static stock does not allow for non-cash compensation, and so many people are now sitting with options under water, and not making money like they did before. Basically all the IT guys are still at MS because they are one of the good companies still to work for, but if you are leaving college and looking at the hot areas, IT ain’t it any more. I work for one of the big ERP vendors, and I noticed when I joined that all of the guys in the canteeen were the same age as me. Interestingly enough, a decade later, they still are. This is a sign. It’s ex-growth, or at least the heady days of the nineties are over. For good.
So, MS then has a porblem that is well known, the discontinuous change problem. The old example was the mainframe being replaced by the PC for some IT stuff. MS cannot let the PC be displaced by the next generation stuff, so they are trying to wedge the PC into the home for games and so on. (Also because games now need animation capabilities that took a Cray about ten years ago. Steve Jobs showed a movie that they had spent months rendering on a Cray in the late eighties being rendered in real-time on a Mac, and that was two or three years ago.) Business machines don’t need this power, so they do not upgrade, and from MS point of view do not spend money. So who is going to eat MS’ lunch? Well, it would be Sony, if they would stop shooting themselves in the foot, and make the PS2 a genuinely open home media environment. In reality, it might have been Nokia, for business, but they have just killed the multimedia division, so it will actually be the USB key makers. Today you can get a USB key that holds a Gig, more than most people have in terms of personal data, for about 150 bucks, maybe less. So, why have a PC? You just start using these commodity machines that are lying around, with the basic functions. It goes to being a shared appliance. Would you pay a premium for that? No. Walmart machines with LINUX and Open Office are cheapest, so there you go. Volume disappers, likewise MS.
In having such a high margin business, they are trapped by their own success. No name Chinese USB data storage manufacturers will kill the PC, or at least the MS DeLuxe version. It’s not the manipulation stupid, it’s the storage.
Phew. Thanks for listening.
hamish, you have a good case with USB’s. I store most of my data on USB’s and on another USB I have special programs (open source ) tweaked for the nerdstick. E.g FireFox-Candidate1. This permited me to port all my cookies and fav’s into tabs and cookies onto the nerd stick. Thus I literally walk around and if I need to get net netting, I use my nerdstick. The stickiness is great. I am not locked down to a specific PC and OS.. !! Needless to say, the pc also does not have a ‘trail’ of visited sites and other Malaicious code just does not get downloaded on the nerdstick !! The paradigm is excellent.
All I want is a greater USB storage.. that will come in time. the PC will just be a docking module just like a minimac is right now !!! SO the degressive growth in PC is around the bend. No wonder they are seeking out growth imperatives for their MSEC and home usage alongside HDTV. PC leverage is moving into the Hombase. HOWEVER, note this; IBM & lovenu (hong kong lengend !!). The brand and licence to produce is out of this sphere of the globle. Nothing stops the new OEM, implement open source OS for the PC and ship at $100/- per box. Go figure now — buying a box, off the shelf of walmart. All Ready to go, just plug in your own keyboard and monitor. Whats left of MS and its brand ???? The revenue model is changing, so will MSFT .. now thinking back, does not the word ‘communist’ sound fimilar to you ?? and maybe the reasons on why these words were articulated ?????
Sometimes branding=luck.
Some people argue that branding is dead. Others think branding is very much alive. I think that branding still matters, and I come to this conclusion based on listening to my kids, who both own iPods and assorted Sony electronics,…
The first sign of stupidity or ignorance.
“Microsoft has an illegal monopoly”
I don’t understand what this statement says. Where does it say Microsoft has an illegal monopoly? What I do know is tha Microsoft is a monopoly and has been penalized for using that monopoly to promote another product and that’s it. There is no such thing as illegal monopoly. Monopolies are not illegal.
“The next big thing will replace the PC”
This is another sign of ignorance if not stupidity. Why? Because this has been said over 20 years. The next big thing was internet, browser, java, mobile phones, palm, Linux, open source, governments etc.… And every time someone says that it was more about making a stupid remark to get a Microsoft guy angry or make a Microsoft basher happy. Of course legimate discussions took place too, but they were just discussions and nothing has happened.
To understand why nothing will replace PC, think about the need for something central in your life where you manage your information. It won’t be google’s computers, because you can’t run your PC programs there. You can search internet and you can send email which you were able to do before google even existed. For some reason, everytime someone says Microsoft is doomed, they also forget that Microsoft IS THE BEST SOFTWARE COMPANY in THE WORLD. Period. Nobody can measure up with that. Sure if you read slashdot you believe a kid who started a new project on sourceforge is better than all the Microsoft employees combined, but then again we are not interested in that idea.
The only reasonable thing one can argue about Microsoft is whether it will be able to convince users to upgrade, and that’s an interesting question, because we don’t upgrade our PCs as we used to. But that’s something Bill Gates and Steve know and that’s why they always mention about innovation and providing value.
I don’t think the blog author is a Microsoft basher, or ignorant or stupid, his question is an honest question, so I hope he doesn’t misunderstand my reply as a an answer to his post.
An answer to Hamish:
Game consoles or dvd players etc.. will NOT replace PCs. First understand the world around a PC and Windows and then think about that claim again. Here is some keywords you may think about right now: Developing programs, visual studio .net, delphi, borland, visual fox pro, database applications, database solutions, photoshop, illustrator, games, flash, dreamweaver, moviemaker, windows media player, internet explorer, notepad, pda synchronization, phone synchronization on and on and on. Porting all these things to a home entertainment device means spending 20 – 30 years x thousands of companies x thousands of developers work + years of experience of millions of users. Who is going to do that? and why people should dump PCs for a game console to replace all that.
USB? Just because you use a USB to replace your local harddrive you stopped using Microsoft stuff? Are you kidding? Have you realized that people stopped using floppies because they can store their data on the net or transmit it over the network. Replace USB with a floppy or an external harddrive or whatever drive you choose. But concluding that, because you changed the way you store your data, you won’t use Microsoft software is, I am sorry, but the dumbest thing I have ever heard. It is like claiming that people will stop using Microsoft software because there is internet now, or people will stop using Microsoft software because there is XML.
It is also not clear what you say. Will people replace Windows with their new USB devices, or with Linux. Why don’t they replace Windows with Linux now? I have absolutely no idea what you are exactly talking about, nothing you say about USB devices makes sense. Sure USB devices are great, but I am not going to throw away my PC or my software.
Hi Jing
How’s life at Microsoft, hope you’re having a good day.
It is not a question of replacing the PC instantly. The PC will be used in some steady state capacity, as it is now, as indeed is the venerable and useful IBM mainframe. It even makes money. It is also relatively ex-growth.
However, what will the users interact with? What will they need? I agree, games consoles or media jukeboxes do not run Delphi/Oracle/MS Office. But then, most consumers couldn’t give a toss about any of those. Developers will need a platform for content creation, or to have as server for things like MMOGs, etc.
But what does the user want? Hugh wants a tricorder. (Nokia or Treo.) I would like a portable 30 Gig data set. (USB Stick come a time not too far from now.) Many people want games/films/on-line interaction. (PS/2) Some people need to do word processing and so on, number which is relatively static. These people will use, as they do today, a PC, which is getting cheaper and cheaper, and for which the OS and Productivity software is getting to be a very high percentage of the Bill of Materials. When I bought my first PC, I reckon that the OS was about 5 – 10% of the price. Now, I reckon it is getting to 50% or so, even with the huge discounts that the big OEMs must be generating. That is simply unsustainable.
The problem that I am pointing out, is that Microsoft has a hammer, and they do spend to much time trying to pretend every problem is a nail.
Ps — an illegal monopoly is a monopoly created using illegal means. As considered by the Department of Justice and the EU to be how Microsoft behaved. I think that this is a reasonable definition.
How many of those are a PC. Somewhere upstream there is a discussion about six interaction types with the world, i.e. watch, PDA, servers, etc. The PC is loosing its role because it is actually not well suited to many of those locations.
Centralized, network computing is a big risk to Microsoft’s current standing.
Sarbanes-Oxley for public companies creates a push towards centralized, network computing.
The use of personal analysis tools and personal data islands (via, perhaps, Excel) becomes a risk to the CxO when numbers are used that have not been blessed by the CFO. This is a big boon to the CIO and the internal IS departments in preparing blessed reports and fixed data sets.
Neutralizing Excel goes a long way in neutralizing Microsoft Office. Neutralizing Microsoft Office goes a long way in neutralizing the Microsoft bundle.
Jing, interesting take. Mind if I comment?
(1) You are quite right and accurate about Microsoft and monopolies. Well, almost. They were’nt convicted of running a monoply — they were convicted of antitrust violations. Beyond that though, you are completely right. Monopolies are not illegal. Infringing on competition is.
(2) Microsoft is “THE BEST SOFTWARE COMPANY in THE WORLD”? That is undoubtedly a subjective statement that you need to qualify. Best in what way? In quality? Innovativeness? Bug-free products? Number of products? Profits? IMO they are one of the top, but they are just as guilty of making buggy, stale, costly and/or unasked for features and failures as every single other company out there. Remember how spectacularly successful Bob was? Remember how bug-free Windows ME was?
(3) So people have been saying something will overtake the PC — and for 20 years you’ve noticed how wrong they’ve been. Good for you! Now tell me, were you around in the early 80s when IBM was saying that making PCs weren’t worth their time because no business would ever be run by them? It’s the blind spots that always kill them.
I’m not throwing out my PC and software at work either. But you know what? I did exactly that at home — where I’ve been running my media, finances, web surfing, and yes, even VB development side-projects — almost a year ago and intend to never look back.
I’m not throwing out my PC and software at work. But I wish I could. I installed XP SP2 a few weeks back (they finally approved it) and had to undo some of the things it did due to how I had my PC before that. MS installs like this never leave things as they find them. I only had Office 2000 and MY GOD how it screwed up Outlook. I wouldn’t receive emals for up to an hour after people sent them. They finally found a KP that pointed them to a patch though.
Hamish has claimed that I am working for Microsoft. That’s not true and it is a complete lie.
You can judge his rest of the arguments from that lie itself, but he is also incorrect when he claims tha most users do not care about Office/Delphi/ and other programs. They do care. Everybody uses Microsoft Money, Quicken, Quick Books, Turbo Tax and more programs to manage their finances which is a crucial part of our lives.
Hamish also got the illegal monopoly wrong again. Neither EU nor US considers Microsoft an illegal monopoly. What they found is that Microsoft used its monopoly in an illegal manner, but that’s possible only when you build the monopoly before the illegal act, not after. That’s very much different than building a monopoly illegally. It is clear that Hamish is very much clueless about these things.
Hi Dave,
I don’t know why you want to throw away your PCs and sofware and from your writing, I couldn’t understand anything about how you are going to replace that. So I don’t know what exactly you mean, you say you are going to dump PCs, but you don’t give us a clue what’s the point of doing that. Do you use your game console to file your taxes, manage your finances, write documents etc… Sure you can live without a PC, if that’s what you are trying to say, nobody cares about that fact, because there are people who live without a PC, but what we are interested in is a thing that shows that people are better without PCs, so that people will start to dump PCs like you did, and you fail on showing that.
As you pointed out even IBM didn’t get how PCs are important.
Oh, “Microsoft is the best software company” is not a subjective statement at all. Its quality is the best without a doubt. It is innovative. It is more bug free than most others with that huge scale. High number of products and big profits of course. Best does NOT mean perfect, best means best among all software companies out there when scale and volume is considered.
You should always think about scale and volume when you compare products and companies. When you have millions of customers, you will find thousands of people who complain. If you have thousands of customers, you will have few people who complain about your software. You have to be somewhat smart to compare these two software companies. Check out development methods, check out the tools they use, the training their programmers have etc… Without a doubt Microsoft is always the best. I haven’t seen anything that says otherwise and almost everybody who says otherwise is someone similar to Hamish.
Hmm. Well, there is a whole Microsoft vs. everyone else bashing session that is going on here, but frankly I think you’re all wrong and Hugh’s Tricorder will never appear.
Microsoft is the best software company in the world? No it’s not. Nobody really can say who is “the best” because the criteria by which to judge it are too personal. If it was the case, everyone would love to use Microsoft products and they don’t. They may be the most successful financially, sure, that’s easily measurable, but best doesn’t really work.
Personally I think Microsoft continually waste their resources, largely for the reasons that Hamish mentioned, but also because they have a culture of work, not play and don’t understand people’s personal relationships with their machines. They do, however, understand business. It’s just that it is, well, boring. Before you bleat about that, take a look at how Mac users opine about every new Mac thing. That’s a really heartfelt relationship. Most Windows users mod their machines (and that’s one of it’s upsides) to make them less Microsoft. Microsoft may have innovation but they lack taste.
The real reason the Tricorder will never happen is because it involves several hundred enormous businesses agreeing on standards and open interoperability and it’s not worth anyone’s investment in that unless they can scoop all the profit. And if they want to scoop all the profit they need a monopoly, and if they have a monopoly, the first part doesn’t work. There will always be many brands of Tricorder.
The only thing that is likely to happen is that the raw data (all your personal files, mp3s, etc.) are easier to move around. So the USB stick idea is on the right track, except I suspect that your USB stick will become a bit smarter and more like terminals than just storage. Wireless too.
I suspect you will in fact keep your data on a central server and you can run applications online anyway. It makes a lot of sense to combine the best of both worlds. Local, portable, smart storage and online applications. Why wouldn’t you? Who wants to keep syncing their damn data across more and more devices? Keep it in one place, safely backed-up and managed. That’ll be .mac then.
The personal media space is the first to start changing. Look at the whole TiVo/PVR/Media Centre/BitTorrent thing that’s going on. Storage is cheap as chips, bandwidth is getting there and you can do most of it very cheaply. Sure, open source isn’t everything, but why buy Office (when it’s pretty bloated) when you can get a free version that does what you need?
The problem that all software companies have is how to keep revenue streams coming in. How do you improve on Word? My answer would be to start taking things out, not putting them in. But people don’t pay for less normally. On the other hand, feature creep ends up making it too tedious to use, so people use Open Office instead. That’s where Microsoft have a problem and don’t have a lot of innovation — that’s the part they don’t get.
Empowering people isn’t about giving them more, it’s about making it easier for them to do what they currently do. I’d argue that Apple have a better grasp of that idea and so does the open source community.
Before you write off the kid on Sourceforge and Slashdot, just remember Linux was once such a thing, Now it’s probably running the server that is allowing you to see this web page.
“Nobody really can say who is “the best” because the criteria by which to judge it are too personal.”
Nothing is personal when it comes to number of people using your software. Number of bugs, number of features, complexity of your sofware, capability of it, support for it etc… These things are not personal when you compare Windows with any other operating system.
“If it was the case, everyone would love to use Microsoft products and they don’t.”
Best doesn’t mean everybody has to use that software, best is determined based on comparison. Not everybody uses it, but more than 90% of people do use Windows. Microsoft can compete on so many number of platforms and software sections. The fact that almost everybody uses Microsoft software means something. There are people who will not use the best software, because it is the best, because they are anti-establishment or they are cool by being different. Again, best doesn’t mean perfection.
I haven’t seen anything Hamish said that suggests even remotely why or how Microsoft wastes its resources. I think that’s nonesense. Also the claim that Microsoft doesn’t understand how to play but only business is one of the claims to bash Microsoft and it is nothing new. There are thousands of similar nonesense claims all the time about Microsoft. Microsoft does produce moviemaker, it has windows media player, its Windows is fun and easy to use, it is colorful, its user interface is great for many other programs and it does understand how to play. Being a zealot, fanatic has nothing to do with reasonable way of looking at things.
Typically Mac users like Andy bash Microsoft and Windows user community, but just because you have thousands of Mac zealots and fanatics talking about their macs all day long doesn’t mean Windows user community don’t enjoy their own computers. You have no idea how much people enjoy Windows. The fact that Mac zealots want to show that all the time is just a reflection of their stupidity, not anything done right by Apple. Look at Linux zealots, look at Atari zealots. Look at yourself Andy, you assume Windows users don’t enjoy because they don’t shout at your face how much they enjoy their systems. Let me shout at your face for them then, WE DO ENJOY OUR WINDOWS SYSTEMS. There are millions of them all around the world and try to replace their windows with an apple or something else and see how they are react. You will not survive for sure.
First of all you have no idea what open source or open source community is. Open source has never been about the number one and will never be about that. Open source is doing something you want to do and just use it. Whether it will become something serious or not depends and only time will tell, not you. The community you are talking about is also not something open source developers care about. KDE people work on KDE, not Gnome and they don’t care about gnome. Gnome people do their own thing. There is no such thing as open source community that work for a common cause, everybody has their own thing and developers do not care about what you think they should do. This is a huge misconception about open source and only slashdot kids think it that way.
Because slashdot kids and Apple doesn’t get it, they always will be the distant second player in this game. But similar to open source developers, Apple is also not worried about being number 1, because they know that they lost the competition.
The fact that people use Unix on their web servers have nothing to do with sourceforge or slashdot, it has everything to do with Berkeley, AT&T, Sun, IBM and HP. Linux is an implementation of Unix, it is not a new operating system and Linux is not implemented by slashdot kids or sourceforge kids.
How to create a new Microsoft product — first, choose a name…
Goggle not Google
Some free consultancy for Microsoft, which adds to Hugh’s question, and something for Scoble to take upstairs. Forget fighting Google, the key is Goggle! If Microsoft want to take a really big innovative step, then it’s the computer interface which