Competing with Apple

Reuters recently reported that Mindy Mount, chief financial officer at Microsoft's E&D division (the division within which I work) claimed that it "wouldn't be unreasonable" to conclude that an integrated device like the iPhone, one that combines music player functionality with "smartphone" features, might exist at some point in the future.

That's not much of a basis upon which to conclude anything about Microsoft product plans. Truth be told, however, Microsoft would be crazy not to try to create a consumer-oriented mobile phone product, and basing it around Microsoft's new portable media player efforts would make a certain amount of sense. Therefore, to state that it "wouldn't be unreasonable" is simply to state the obvious.

Microsoft needs to cater better to ordinary consumers. Sales to businesses and enterprises serve as the backbone of the company (and that orientation helped them to beat Apple in the past, who concentrated on regular consumers at a time when businesses were the single biggest purchaser of computers in the world). Regular consumers, however, are a growing portion of total IT expenditures (particularly in the "devices" category where Apple excels), and Apple's approach to that market segment is quite effective. Microsoft needs to learn from that while not sacrificing the business-oriented products that continue to generate so much revenue.

In aiming to compete with Apple, however, I desperately hope that Microsoft will not try to BE Apple...namely, a maker of hardware AND software that excludes third parties from the important bits. Nobody but Apple can use FairPlay, and the underlying platform isn't in any way licensed to third parties.

Microsoft is not Apple. At its heart, it is a platform company that enables third parties to build products. This is what makes XBOX such a strange product in the Microsoft product library. Microsoft historically tends to create platforms and let third parties deal with the hardware. XBOX is (almost) the first time Microsoft opted to provide a self-branded combined hardware and software platform (I say almost, because the Microsoft Hardware division, maker of keyboards, mice and cameras, is a fast growing division within the company, and it predated XBOX).

What may work for XBOX, however, isn't necessarily generalizable. Offering platforms that anyone can use has been a very successful strategy for Microsoft. Deviating from that strategy should only be undertaken with extreme care, particularly given the time and effort Microsoft has expended on acquiring legions of platform experts who design the APIs for Microsoft's traditional platform products.

Microsoft should make a Zune / Phone combination, but also allow third parties to use the same "guts" of the product in their own devices (maybe not the same UI, but certainly the same core and DRM). Further, that product should be customizable by third parties relatively easily, which is just the kind of contrast with Apple that Microsoft, a platform company, should hope to establish.

By creating a Microsoft-branded hardware product aimed at consumers, Microsoft would develop the design competencies necessary to cater better to non-business usage scenarios and confront Apple. By allowing others to build on those innovations, they grow the ecosystem larger than they could ever manage on their own, while allowing others to innovate in ways that will help the ecosystem as a whole. It's like the difference between the 100 scientists in room A versus the 100,000 scientists in room B. Room B has a better chance of producing more innovation than room A.

Microsoft, in other words, should compete with Apple while continuing to be Microsoft.

Sorry for the slow blogging of late. My vacation, however, was good.