Steve Ballmer has announced that Microsoft will be following a multicore business strategy going forward. His horribly strained anology, likening Microsoft to a parallel computer processor, suggests that Microsoft will be tops in lots of businesses at the same time. Me thinks Mr. Ballmer is just a little bit looney.
In fact, he says “There really is a Sony that lives inside of us…an aspiring Yahoo! or Google… s an IBM mainframe-software business… a desktop-software business… … I want Microsoft to be in all of the good, important big-growth businesses in the world.”
What a recipe for utter disaster! It’s hard to be tops in multiple markets. And to be in all the good, important, big-growth businesses in the world? Hogwash.
This so-called strategy won’t work for the most basic of business reasons. When you make an extra dollar, you have to decide where to put it. If you have two businesses, one producing a 10% return and another producing a 15% return, you’d be insane to put it in the 10% business. You’ll make the most by investing in the 15% business. If you’re public, your shareholders can even blast you for wasting money in sub-par businesses.
Now imagine Ballmer is in “every good, important, big-growth business” in the world. Some of those businesses will do better than others. As Microsoft makes money, they should put it into the best businesses. Gradually, resources and people will move into the high-margin business, starving the low-margin business. And why not? Any other way you split your money, you’ll be making less.
Microsoft started in desktop software, the highest-margin business in the world. Once the software is developed (a largely fixed cost), each incremental copy costs virtually nothing, while Microsoft sells it for hundreds of dollars. Average business consumers don’t know enough about computers to make good purchase decisions, so Microsoft has invested much more in marketing to drive sales than in creating high-quality, user-friendly software(1).
Microsoft wants to be a Google? Give me a break. Google thrives on technological innovation. Microsoft has always been a me-too technological player, with their innovation being in strategy, channel development, marketing, and anti-competitive fraud. Even their recent “Cleartype” technology is just a slight modification of technology from the circa-1978 Apple ][, where Steve Wozniak used the same technique to produce more colors on a TV screen than the system could directly create.
Microsoft wants to be an IBM Mainframe software developer? Maybe they can do it through market power, but through software? Not likely. For all their faults, IBM has become a superb service company, and their software is pretty darned solid. Horrible to use, but solid. Microsoft has neither the service orientation nor the technical skills(2) to compete on those fronts.
Microsoft wants to be Sony? Should I even dignify that with a response? Microsoft’s grand contribution to the world of electronics is a Microsoft-branded mouse and an ergonomic keyboard. Where do they have the capability to compete in a world of Sony?
And oddly, Ballmer didn’t even mention game consoles, where the XBOX—a very late entrant into the world of console games—is successful, but pushes the edge incrementally rather than inventing any fundamental new product category.
In short, this Multicore strategy seems like a rotten idea. Maybe they’ll prove me wrong, but I think Microsoft’s decades-long devotion to winning by FUD (Fear Uncertainty and Doubt), channel manipulation, and technological copy-catting has to shift fundamentally for them to win in any markets in the future.
My advice to Ballmer? Find a strategy and stick to it. Don’t try to be all things to all people. The desktop-dominating strategy worked because the operating system and applications markets drove each other. That game is over. Now you have to produce products people want at a price they’re willing to pay. And how about products that are technically solid, reliable, and secure? Master that game in one market, then worry about being in every good, important, high-growth business in the world. Because until you can do that, the idea of you sticking your hand into other important businesses leaves one shuddering with fear. I do not want my airplane’s navigation system running on Windows, and neither should you.
(1) [Flame on] This is a religious issue with me, so I’m not open to reason or discussion. And even if you catch me in an open-minded mood on the topic (unlikely), if you got into computers post-1990, your arguments will fall on deaf ears. You’ve only worked in the post-Microsoft computer world, so you have no standard for comparison. The Pre-Microsoft world was a happy one. Operating systems were rock solid and never crashed. Installing a new application didn’t overwrite half your operating system. And if things got trashed (unlikely, because systems back then had real protection), you just reinstalled the OS and didn’t need to reinstall every application in existence. Viruses were unheard of … I could go on. Back then, UNIX was laughed at as a silly, toy, sad little operating system. It’s a grand joke of the marketplace that we’ve come to a place where UNIX is considered the technically sophisticated alternative. [Flame off] back
(2) No, Veronica, Microsoft doesn’t produce technically solid products. Mostly, they buy and repackage products (I used to use Powerpoint before Microsoft bought it… in the 15 years since, they’ve done almost no innovation to the basic feature set except to add productivity-wasting “builds”). The next Windows release is years late because Microsoft for decades shoved poorly-written, unmaintainable software out the door. It was the right strategy for dominating the market. And now it’s time to pay the piper. Their systems are so needlessly bloated and complicated that they can barely work on the next version. They conscious traded off quality for market timing and money, and now they’re suffering the consequences. The founders, however, still managed to pocket billions. back