Lessons from Microsoft: Innovation and Competition
While I was at Microsoft, they had programs like “Sun Down” and “Beat Oracle” that took direct aim at competitors Sun Microsystems and Oracle. They provided the sales teams with talking points and when it came to larger deals, everyone was available from devs to PMs or even Steve Ballmer, if it meant killing the competition — even at a loss.
Microsoft plays to win. Yes, to a fault.
Killing the Competition
I’ve been paying attention to the software business for the last twenty years or so, and in that time I’ve watched Microsoft nearly wipe out WordPerfect, Lotus, Stac, Apple, Novell, Netscape, AOL and Sun just to name a few. They’ve had their market success, not by innovation, but rather with the strongest showing of competitiveness, and a willingness to do whatever it takes to win.
So, if winning meant OEM deals that bound hardware vendors to not install other OSes on any machines they sold, so be it. If winning meant making deals with ISPs that disallowed the distribution of Netscape, while including IE as an “inseparable” component of the OS, so be it. If winning meant copying every innovative aspect of Java (like virtual machine, byte code, garbage collection, etc. almost to the letter) with the introduction of C#, so be it. Who can argue the success Microsoft has realized by placing competitors into the middle of their crosshairs and firing.
They do an incredible job when they focus on beating a competitor. It has been a main driving force of the company since its earliest days.
When your main driving force is beating the competition, what do you do when you’ve actually beat them? That’s what happened to Microsoft by the late 90s. They had beaten virtually all of their competitors. They had beaten Apple so bad that they were willing to give them $150 million cash to help breathe back some life. Netscape was all but destroyed.
By 2000, Microsoft’s market share of Operating Systems and web browsers were both in the high 90% range. In 2001, Microsoft put out Windows XP, it’s best version of Windows to date and Internet Explorer V6, the best browser at the time.
Then, Microsoft seems to have had no idea what to do next. There were no more serious competitors to pummel in these areas, so it shifted its focus on to Java and Oracle (which happened to be during my time at the company). In 2001, everywhere you went (inside of Microsoft), you’d hear Sun, Oracle, AOL and LAMP (the collection of Linux, Apache, MySQL and PHP). By this time Google was well on its way, but no attention was being given to Internet search. Microsoft believed that AOL’s strategy of locking in Internet Users and shoving content down their throat (as AOL had done with its acquisition of Time Warner) was a good strategy that needed to be copied and a competitive threat that needed to be beaten. So the focus was on AOL rather than Google or Yahoo.
Ballmer is famous for looking for billion-dollar market opportunities and in 2001, Google wasn’t a billion-dollar competitor. In order for a market to be worth a billion dollars, it has to already have some major competing players. That’s where Ballmer is short-sighted. If the year was 1979 again, Ballmer wouldn’t bother with the OS business, because it would have been to be worth only a few million.
Vista and IE 7
After the release of Windows XP, it took Microsoft another 5 years in a scrambled effort to put out another version of its Windows operating system. 5 years of work on a world-class OS wouldn’t be so bad if Microsoft had nailed it with Vista, but it was obvious that Vista missed the mark in a big way. First, some major compelling features were dropped in the final year to get Vista out the door. Second, it was plagued with all kinds of bugs from device drivers to missing features. Third, there were definite signs of “borrowing” from Apple’s now resurging OS X.
Internet Explorer had a similar 5-year absence. It wasn’t until Firefox started to make headlines capturing 10% of the browser market that Microsoft started to take note. Again, it was a quick push to fight off the competition. So after 5 years of intensive development on IE 7, Microsoft gave us tabbed browsing. As Microsoft had predicted, the “WOWs” started coming in 2007. Except, it wasn’t what Microsoft had hoped. Instead of “Wow, I can’t believe how awesome Vista [or IE 7] is,” it was “Wow, I can’t believe how lame Microsoft has been all these years and I’m just starting to realize it now!”
Microsoft’s focus on competition has made them one of the most successful and profitable companies in the world. It’s hard to argue with that. There is no other company in our industry that comes even close to adding $16 billion in profits with the passing of each year. In 2008, Microsoft will make another $16 billion or more in profits — more than Apple, Google, Sun and Oracle combined. But 2008 will also mark a turning point for Microsoft. It will feel the heat from the innovation machines at Apple and Google more than ever before.
Years of being competitive-driven, rather than innovation-driven have caught up with Microsoft. A negative, anti-Microsoft sentiment was planted in the tech world about 10 years ago and it’s coming into maturity. The tech elite have a beef with Microsoft and rightfully so. It’s not always about profits.
Focus on Competition and You’ll Kill Innovation
The lesson here is not to ignore your competition. On the contrary. Microsoft has shown us that at the very least, it’s important to know your competition. You can’t ignore competition. But like everything else in life, there needs to be balance. Microsoft has been historically overly focused on competitors and therefore, it has been plagued with an image that lacks innovation. It’s not just an image, it’s true. That’s why no matter how much they spend on PR, it’s a lost cause.
Their lack of innovation has been proven with 5 years of nothingness from the OS and IE teams during a time when there was virtually no competition. When the competition started to innovate, Microsoft’s OS and IE teams woke up, not with innovative new features of their own, but simply playing catch up and copying the innovation that was coming from competitors.
Now Microsoft is paying the price. OS X is making huge gains in market share and Firefox’s momentum continues. 2008 will be the year of Apple. Before the year is over, Apple will have double-digit market share and the sea of switchers from a Windows-only PC to a Macintosh will seem unstoppable.
Microsoft, Apple and Google are clearly the giants of our industry. Most of our projects pale in size comparisons, but there are clear lessons to be learned by watching the giants dance. If you find your project’s requirements read awfully close to the feature set of a competing product, your project is lacking innovation - it’s a Microsoft-like project. If you spend more of your day worrying about what your competitors are doing vs. thinking of new ways to solve your customer’s problems, you’re spending too much time on the wrong stuff.
Companies that release mega-hit products generally share one thing in common: a different approach. Put another way, they share the drive to innovate. They focus little on having another checkbox next to a feature to make their product look as good or better than a competitor. They let the marketing department worry about the checkboxes. Instead, they spend their time building a solution in a way that has never been built before. That, in itself is the best possible way to market the product. Innovation creates dedicated, loyal and sometimes evangelical customers who go out there and sell your product.
Don’t worry about your competitors. Innovate.
there is obviously something you dont understand, and it’s called business, and it’s aim is to maximize value. its aim is NOT to drive innovation, indeed it can maximize value through innovation / competition, but its first priority is always to maximize value. why SHOULD ms innovate when its owners(shareholders) are happy that its maximiszing its value by generating profits of 16b+ year????
Comment by stranger — January 8, 2008 @ 7:52 am
But there must be a balance between current profits and future investment. If all you do is focus on short-term profits, you’ll never invest in the future b/c it would reduce profit. Pretty soon, you’re out of business! GM and Ford stock owners were probably happy 30 yrs ago when Detroit was handing out fat contracts to the union and not investing in quality to keep the line running, costs down and profits rolling in. I don’t know that they’re all that happy now…
Comment by Matt — January 8, 2008 @ 12:21 pm
[...] When an organization focuses on its competition good or bad from an innovation perspective? Hamid Shojaee has an interesting post that details this issue in the context of Microsoft. The post took me back [...]
Pingback by Competition and Innovation — January 8, 2008 @ 1:23 pm
Hi Hamid,
Thought provoking post. I agree with you, but only partially. What gets killed by an overfocus on competition is radical innovation, but as our intelligence-oriented framework on innovation shows, innovation is both radical and incremental (see http://www.vivekingroup.com). Many times, it is in the organization’s best interests to copy and replicate with much greater impact an innovation that was not created within the organization. Consider the case of the Internet browser. Although Netscape was the innovator, Microsoft was the winner. I elaborate in my post at http://www.innovationalsmarts.com.
Comment by Baba Prasad — January 8, 2008 @ 1:29 pm
2008 will not be the year of the Apple. Leapord was such a disaster that I’ve seen a number of people that have turned off the firewall on their laptops just to get their software to work (see Adobe and Skype). Also, even though they have made a public play at having security, the Leapord OS not only reintroduced security holes that were plugged in the earlier OS, but the features they added were only partially implemented. Do I blame either Microsoft or Apple for putting out what they could on time? No, that is a reality of the software business.
Apple is a computer company with a consumer focus, not a business focus, and will have to do a lot of catch up to get businesses to make any serious investment outside of the desktop publishing arena. There is a really good reason there is no such thing as an Apple server, it just isn’t what they do.
If you really want to see Windows competition, keep your eyes on Linux.
Comment by John Bailey — January 9, 2008 @ 10:09 am
Hamid, Great post, context, and perspective. Perhaps the large firm and the entrepreneurial can set their sites on innovation. For the vast majority of small to medium sized ongoing firms, their ambition is evolution not revolution. They are happy to achieve constant improvement and growth. They compete directly and they try to hit singles and doubles - they are not swinging for homeruns or nothing. Perhaps the largest need a combination of the two - constant growth and special projects for innovation.
Comment by Patrick Moloney — January 9, 2008 @ 10:12 am
John Bailey Said:
“If you really want to see Windows competition, keep your eyes on Linux.”
I really have high hopes for Linux. I have been using Linux for about ten years now; but if Linux is going to make any meaningful penetration onto the desktop and especially onto the business desktop, the guys who are “in charge” of Linux will have to make some drastic changes in the user friendliness of the OS.
Forcing a user to type cryptic commands into the command-line in order to unpack, compile and install software is a HUGE barrier to the desktop market. Most Linux guys seem to like it that way as it keeps out the “riff raff”, but if Linux is really going to make inroads into the desktop, it has to be at least as easy for my mother to use as Windows or Mac OS is. That means…
- No cryptic command need ever be typed into a console window.
- Software needs to come in downloadable packages with a “Click to Install” executable.
- Software packages should NEVER need to be compiled.
Sure, the ability to download the source code, make tweaks and compile your own version is great and should always be available for the sophisticated; but until 80 to 90 percent of the users can just click to download and install software without having to worry about library dependencies, compiler dependencies and kernel patches, Linux will continue to be an enthusiasts platform.
The enthusiasts continue to talk out of both sides of their mouth about how much they want Linux to displace Microsoft, while at the same time stressing how the OS should remain “Pure” and “Free” and scoffing at the idea that Linux is hard to use.
Hint: Linux is DAMNED hard to use:
I have been using it for years on a part-time basis for about ten years, and it is still DAMNED HARD TO USE! Anybody who continues to use Linux does so out of some religious reasons - like me (I don’t like Hollywood and the Recording industry holding sway over my machine via their willing accomplices at Microsoft, who can never be trusted to think of the customer’s freedom); but until there is a real, business reason to switch, Linux will continue to be a toy for the fat, bearded ones.
Business client’s don’t give a rip about “freedom”. They want a platform that is easy for their secretatries to use and cost effective for the IT department to deploy and maintain. Linux is NOT that.
However, Linux has some good things going for it:
There are far more quality, capable software packages available for Linux than there are Macintosh. Linux is second only to Microsoft with regard to the availability of high-quality, business class software.
There are groups like Ubuntu that are taking usability seriously. The stumbling block is still the fact that most software developers are lazy when it comes to deployment and installers, and are content to make the user unpack, compile, make, and install the products. Leaving the user to figure out version dependencies and other problems on their own.
Even big companies like VMWare deploy their Linux products this way. It is truly shameful. Folks this is just software! These installation problems can be overcome! Someone is just going to have to give a damn!
Comment by Phillip Blanton — January 9, 2008 @ 1:16 pm
I just wanted to wrap up by saying that Apple and Linux are elite clubs.
Admission to the Apple club costs about $2500, but once you’re in, life is lived in opulent, brushed stainless steel environs with un-naturally colored leather furnishings and ‘concierge’ service.
Linux is also an elite club of computer professionals. Admission is free (If you already have a PC), but the dues are extracted from your time, toil and tears. While the Apple club is swank and sophisticated, Linux is more like an Indiana Jones quest. It is fraught with perils and pitfalls and could quite possibly kill you; but for those who persevere to the end, the rewards are legendary.
On the other hand, Windows users have regular lives and just need to get some work done. They don’t partcularly care about their computer beyond its primary function as a tool that helps them get stuff done. Until Apple or Linux can be less of a mission statement and more of a tool to help regular people get stuff done, they will continue to be boutique’esque, geek lifestyle accoutrements.
Comment by Phillip Blanton — January 9, 2008 @ 1:59 pm
Just a quick extension of Phillip’s comment on the need for Linux as a community to overcome the installation problem. Excellent point. My experience with Linux mirrors his. And it is a major pain. But suddenly I found myself wondering, why hasn’t the open source community focused on THAT particular problem. Maybe one group (or more) could become a service to all the other groups who don’t want to invest in making their apps easier to install. Is that not sexy enough to attact the community required? God knows, it would be a huge service to all, and possibly one which could tip the balance.
Comment by Max H. Gano — January 9, 2008 @ 8:55 pm
Hey!
I like this post!
Myself, I’ve worked for a company that was filled with conservative programmers. They even didn’t use the basic power of .NET, creating their own approach, leading to slow and buggy software. While I tried to make them use the latest technologies and think out of the box, my mission only succeeded after leaving the company. Suddenly they sag my goal, i guess. Hell, I even had to prove several times that OnTime was a great piece of software!!!! :s:s:s
At that time, while using .NET to create software, I was fully influenced by the way Apple software work and looks like. And I still am ;-)
The end-users, at first, where surprised that then where provided with screens without buttons. Which was my way to test how they would like their software. After only 2 times explaining, they never had questions anymore. A big contrast with the “default” way of making Windows software.
I innovated the way information was shown and how it was captured.
Getting great feedback, I kept on making it this way, but still tried to innovate. Yes, sometimes it failed, but at the end, I had created great software.
One of my projects was written the way the conservative programmers had made me to. It was slow, end-users didn’t remember how it worked every first day after the weekend. And lots of bugs.
My message is, don’t invent things that are already at hand!
In my personal life, I played with Linux as a student. I loved it! My very slow Windows XP PC became super fast running Ubuntu or Gentoo or Knoppix or even Solaris 10 with the java GUI ;-)
This made me realize something, Microsoft is filled with conservative programmers. Creating theoreticaly correct software, but forget the most important about software: software is created to help or even replace humans. I found Microsoft failed on that first part.
After my first year of working, I was so tired of my personal PC and bought a MacBook, first version.
That MacBook is today, running Leopard, even faster than a newly bought HP laptop running just XP.
And the components of my MacBook are nothing compared to those in the HP laptop.
I love my Mac, I love Apple, Leopard problems where fixed FAST and I never had any problems with Leopard.
Another thing, OS X is way better than XP to be a platform for large companies as for small ones.
After evaluating COCOA I know now that you can create business software, better, faster, safer than on Windows.
Really, if I start a business, it will be ALL APPLE.
I bed that Pages is better that Word, Numbers is better than Excel. Keynote is just better than PowerPoint, that’s just like saying the earth is round.
“You can do more with Word and Excel!!!”, yes, but how many employees know that, or know how? And if they have had lessons, how many do remember, how many use that knowledge, how many of all just keeps on getting angry while using Office? :-)
Innovation, compatibility, integration level and intuitive - responsive interfaces.
My day to day job is making software in .NET for the largest companies in Europe. I’ve made 5 persons switch to Mac, and they are spreading the word around.
Working software is not enough. It must be workable.
Jonathan.
p.s.: buy a Mac, at the end, you will like it. I promise ;-)
Comment by Jonathan D'haene — January 10, 2008 @ 2:30 am
“Until Apple or Linux can be less of a mission statement and more of a tool to help regular people get stuff done, they will continue to be boutique’esque, geek lifestyle accoutrements.”
I do my business stuff and personal stuff faster on a 3 year old Mac than on a new PC with XP or Vista.
What you say is not correct. Use a Mac first, before saying such things.
Comment by Jonathan D'haene — January 10, 2008 @ 2:37 am
-Phillip Blanton
Better! I can do MORE an a mac than you on your PC :-p
Windows is just one of the tirth-party programs in the iWorld :-)
But this thread is not a mac vs pc thing.
I’m just happy to see that Hamid Shojaee is recognizing the effort of Apple, Google, Mozilla, etc… and posting it.
As I recognized that innovation driven mentality within the OnTime product team long ago. Resulting to yet another customer for them.
Only Mircrosoft is stubborn or not getting it, but that’s not my problem! Hihi
Comment by Jonathan D'haene — January 10, 2008 @ 2:54 am
Just want to say that I wrote my comments on my blog.
Comment by Keyvan Nayyeri — January 10, 2008 @ 10:42 am
Jonathan D’haene Said:
“I do my business stuff and personal stuff faster on a 3 year old Mac than on a new PC with XP or Vista.
What you say is not correct. Use a Mac first, before saying such things.”
Jonathan, I am sorry. I was unaware of the speed at which your Mac runs your business apps when I made my thoughtless comments. Please convey my apologies to your computer.
But then again, how would I know. It is totally anecdotal evidence from a single person. Hardly valid evidence that the Apple Mac is a veritable “Mac Daddy” in the business world.
I have a Mac Jonathan. I bought a Mac Mini last year to just see what they were like. I have a “U” shaped desk and the mac sits behind me and plays internet radio all day.
One of my close friends uses a Macbook Pro for his daily work. However, since he is a .NET developer, he runs XP using Parallels 90% of the time. He uses the MacOS for email, web-browsing, and to run Parallels. I also run my development environment (XP Pro) using a virtual machine, but mine runs on an Ubuntu Linux host. I also mostly run the XP VM and use the host for email, web, and to run VMWare.
Until the Mac has at least double-digit market penetration, don’t talk to me about how the Mac is accepted in the business world. I’m sure you love your mac - I like mine, even though I don’t get real work done with it - and I’m sure you are a nice guy. Heck, you’re a regular pistol! You keep good company too. Rush Limbaugh is a big Mac guy (he he he. not a “big mac” guy, I should say Apple Macintosh Enthusiast, but he may be a “big mac” guy too.) and he uses his macs for business, just like you. Since he is the number one rated talk radio host, I guess we could use that as anecdotal evidence that Macintosh computers make you rich and famous!
My point is though, that a single-digit market share indicates virtually *NO* business adoption. I am a consultant and am in lots of different businesses. I am always surprised when I run across a Mac. I usually see them in the marketing department and very rarely on a secretaries desk. I once saw an engineer with one, but it was on a shelf with two Sparc’s and a HPUX machine and shared a monitor, keyboard and mouse with them all, through a KVM switch. It was used for testing purposes.
Now, I am not a religious person when it comes to operating systems. But I realize that talking about the strengths and weaknesses of operating systems openly will always chafe the uber-sensitive, so let me reassure you Jonathan; I didn’t mean to offend your delicate sensibilities when I callously said that the Apple Macintosh isn’t widely accepted as a business computer. While the facts bear me out, it was a mean thing for me to say. Give your mac a hug from me and tell him I didn’t mean it.
Comment by Phillip Blanton — January 10, 2008 @ 6:35 pm
Oh, and I agree with you that OSX is a much better platform upon which to build business software. Unfortunately the business world just isn’t adopting it. Maybe it will.
Microsoft has lost the API war and only stnads to get weaker from here on out. However, with billions in the bank, they can do a whole lot wrong for a looooong time before they can be considered over.
The new frontier is disconnected systems (read web-based software). Web-based software doesn’t tie the user to any particular client. If you like Linux, then use Linux. Same with Mac. Over time I expect Microsoft to lose much of its dominance over the industry, but I never expect it to go away.
In the meantime, most businesses are tied to Microsoft and fat-client software and that won’t change for a long time.
This is a fun thread by the way…
Comment by Phillip Blanton — January 10, 2008 @ 7:18 pm
[...] found some interesting comments on Linux. Here is the original post from Hamid Shojaee, founder of OnTime, and please pay attention to the comments made by Phillip Blanton (comment #7 and [...]
Pingback by Roaming in the .NET World » Blog Archive » A week of Ubuntu — January 14, 2008 @ 11:01 am
The winners are hated again, and the losers are loved.
A strange comment you may think, why did everyone love eddie the eagle and frank brunno ?. Everyone needs to look at some facts here, although i am not a member of the microsoft fan club, microsoft put a pc in close to every household in the modern world, if it wasn’t for microsoft this website and all us devs may not even exist. Back in the 80’s atari st’s, amiga’s and sinclair ruled the roost, pc’s were expensive cumbersome difficult to use monsters that nobody apart from universities wanted. Microsoft had the vision to change all that, and they did an amazing job, no one can dispute that. However as with all profit making bussiness’s the name of the game is to eliminate competitors and create a monopoly, they have done quite well their as well. You can bitch all you like but microsoft are on top of the game because they had the vision and conviction to make pc’s available and usefull to the masses.
As for Apple/mac, owners of such machines are like BMW owners they believe they are a cut above the rest because they own an apple, everything apple do is aimed at the exlusive apple club member which is reflected in the price of their products, I haven’t used a mac so can’t really comment on their useability, but if i want a laptop and i can bye a windows based item for £400 or an apple for £2500 that will basically do the same job what am i to do. Apple corporation are aiming their products at the higher end market, and at their prices they will never get a huge market share, apple know this and are quite content with been the BMW of the computer world.
As for linux i’ve never used that either, why you may ask ?, Well I have a full time job and i don’t have time on my hands to mess around with linux for hours and hours just to send an email. Like i said i’ve not used it so i can’t really comment, it may be quite simple to send an email, but linux is aimed at the comitted geek (which is what i am to a degree) and if linux want to get any kind of home pc market share they need to create an operating system that a thicko can use. You wouldn’t bye a car if you had to have a phd to be able to drive it, so how the hell do devs commenting here expect linux to be in every house when you need to be a wizz just to install the damn thing. Back in the 80’s thats what you had to do with pc’s you had to use dos commands to do anything “thats why nodody brought pc’s cus no bugger new how to use them”. If linux want to be a household name they need produce an os that anyone can use not just us geeks (which incidently is exactly what microsoft did).
I totally agree that microsoft are like a computer black hole now sucking up all the competition, but the competition need to wise up if they want to compete with the big boys.
The fact that microsoft are not inovating is very valid you would think with their resources that they would be producing the most inovative software available but i guess if your on the top spot why bother to risk billions on inovation when your generating $16B a year profit off run of the mill software. Its up to the other big players to inovate and shake microsofts foundations and no one is prepared to do that.
Linux is obviously a profitable company but if they want to be a household name they should produce a household OS make it free of charge (until they have a considerable market share at least) and compatible with everything.
Microsoft are a huge company due to their inovation years ago, you can’t knock them for trying to create a monopoly, its up to everyone else to change that.
So apple and linux lovers, stop moaning and do something about it (I know its easier said than done though).
Comment by monkey magic — January 15, 2008 @ 4:21 am
Great observation. I had similar ideas considering products that microsoft issues since 1984.
Comment by Kyrylo Yatsenko — June 20, 2008 @ 8:55 am