Posts Tagged ‘dos’

The rumour mill has it that Microsoft is set for an embarrassing change in direction. When Windows 8 was announced, CEO Steve Ballmer called this a bet-the-company product. Well, the bet does not appear to have paid off.

The ‘FT’ drew a comparison with Coca Cola, when it announced Real Coke, only to reverse direction, after customers turned their noses up at the new drink.

Real Coke was a flop despite research showing that customers would prefer it.

But the analogy between Microsoft and Coca Cola is not precise. The drinks company changed because it thought it needed to progress, but it underestimated how unwilling customers are to change.

Microsoft, on the other hand, has to change. Innovation and potential disruptive technology demand it.

It is just that customers are conservative. Coca Cola found that they didn’t want to change drinks; Microsoft is finding that they don’t want to see such a dramatic change in their computer’s operating system.

This is classic innovators’ dilemma. See: Innovators’ dilemma Clayton M Christensen, who produced the study that we now credit with giving rise to the Innovators’ dilemma theory, found that most companies look to change their products, but it is their customers who stop them.

Take the disc drive industry, for example. The emergence of 5.25 inch disk drives for desktop computers changed everything. Many of the existing market leaders examined the new technology; some invested. However, they stopped short of embracing it; their customers used mini-computers and were not interested in “here today gone tomorrow” desktops.

By the time the desktop market was established, with 5.25 inch drives showing signs of dominance, it was too late. The new entrants, with their specialisation in the latest technology, held all the cards. The former heavyweights lost market share; many went out of business.

Microsoft is struggling to change because its customers won’t let it. As a result it is vulnerable to new disruptive technology. Microsoft has been here before, when DOS was heading towards the end of its natural life. But back then the company dealt with the challenge differently.

To tell the story, rewind the clock back to 1987. The company had a massive dilemma. It had enjoyed a good run, thanks to DOS, but the world was ready for change. The industry was alive with competitors – many much larger than Microsoft – wanting a slice of the action. Eric Beinhocker tells the story well in his book: ‘The Origin of Wealth’.

These days we just assume Microsoft chose to ditch DOS and develop Windows. But it wasn’t as simple as that. It appears that Windows evolved, and a by-product of its development was the failure of most aspects of the Microsoft plan.

In fact, before Windows won through, Microsoft put more resources into beefing up DOS. It entered into a relationship with IBM for the development of OS/2; it held discussions with third parties for products aimed at the Unix market; it bought a big stake in a seller of Unix systems; created software for the Apple market; and, of course, invested in Windows.

At the time, the company was lambasted in the press for being inconsistent – for having no strategy. In reality, it was just opening itself up to internal gales of creative destruction.

And now back to 2013, it seems Microsoft has forgotten the lesson of DOS. Instead of experimenting, it bet the company.

Windows 8 was not a bad idea, but it was a mistake to rely so heavily on this one idea.

© Investment & Business News 2013

They say Steve Jobs used to fire staff in the elevator. So this was the nightmare scenario for you if you worked at Apple. You step into the lift and just as the doors close, a hand reaches in, the door slides back open and there stands the familiar figure of Steve Jobs. At this point you have limited options. You can pray that Jonathan Ive steps in too, and then you will probably be ignored. You can try to hide in the shadows and hope Jobs doesn’t spot you.  Or you can tough it out, look the potential death of your career in the face, and smile. Regardless, what often happened was a series of quick fire questions, about you, your role in Apple and what you thought about this, that and the other. When the lift journey came to an end, you may well have found you were out of a job.

Today, Apple’s CEO is Tim Cook, and the axe has been wielded, although on this occasion no elevator seems to have been involved.

Out goes a Brit. John Browett is a former CEO of Dixons, and a high flyer at Tesco. He was charged with leading Apple’s retail strategy.

Out goes Scott Forstall, the man who headed iOS software.

Browett was the first appointee of Tim Cook. Forstall had been with the company since 1997. He joined Apple along with Steve Jobs himself, and before that was with the special one at NeXT.  In other words, Forstall was a Jobs man through and through, working with the Apple founder during his wilderness years post and pre Apple. He was considered by some to be the Apple CEO in waiting.

It is not hard to see why Forstall has gone – actually he is leaving in a few months’ time, if you want to be precise. The Apple maps on the latest iPhones were a disaster (darling).

Up goes Jonathan Ive. He is now responsible for the look and feel of software. He already held a similar role for hardware.

Ive has now taken on the kind of role once held by Jobs himself.

If Apple is all about design, design and design, then Jony, Jony, Jony is the man.

But how long can it last?

Regression to the mean is a term all mathematicians know about. These days economists understand it too. In the long run it is not possible to continuously do better than your rivals, unless you have some innate advantage.

Microsoft was in danger of suffering regression to the mean when DOS was coming to an end. It avoided a downfall by playing to its size, and experimenting; trying lots of different ideas, Windows being one of them. It seems to have forgotten that lesson, although the new Surface product does seem pretty exciting.

Companies such as GlaxoSmithKline may enjoy long term success by building upon their huge distribution network and financial clout, to market products developed by third parties.

In a funny way, even Facebook has an asset that may provide long term value; after all its network of users provides an inherent asset that is not going to disappear in a hurry

Apple just has to go on being brilliant.

And Jonathan Ive may just be brilliant enough to ensure the success continues. And, by the way, the company’s valuation is surprisingly modest compared to profits, bearing in mind its recent growth trajectory.

But nothing lasts forever, sooner or later regression to the mean occurs. Are the recent departures at the top a sign of this, or merely indicative of a company ensuring it stays at the top?

©2012 Investment and Business News.

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Windows zzzz. Sorry, must have nodded off there.

Let’s try again. Windows (yes it is possible to say that word without falling asleep) looks a tad bit like yesterday’s news. Now tablets are a different matter; they can cure the headache of many an electronics company and its shareholders.

So Microsoft is now a tablet company. And indeed it’s a hardware company too. Its Windows RT operating system may well turn out to be rather good.

The snag relates to all that legacy. Windows may be a tad dull, but most of us would be just a bit stuck without Word and Excel.

So Windows 8 has backwards compatibility with all that old Microsoft stuff. Presumably, this means that the price you pay for Windows 8 and its backwards compatibility is a slower PC.

But RT, now that’s different. It’s a new operating system and is not being hamstrung by all that baggage.

The new Surface is Microsoft’s attempt to muscle in on the tablet market. It is too early to tell whether the product is any good, or whether it will fly or dive, but credit where it is due, it’s a bold move.

Microsoft’s partners are a little worried. Microsoft is all about producing operating software, and letting its partners worry about the hardware. Sure, the software company moved into games hardware, but that is different. In the world of PCs, Microsoft always has been software, while the likes of Dell and HP focus on hardware.

Now Microsoft has moved onto their turf, so that’s a risk. Of course Microsoft retorts that the Surface is a kind of shop window; it is just trying to trail-blaze a way forward for its partners.

Microsoft’s new operating system is new. One could even say it’s an attempt to start all over again – new hardware, new software. The old PC is not exactly going the way of the Dodo – not yet – but it is tempting to say it is going the way of the Siberian tiger.

The company’s CEO Steve Ballmer admits the new products are vital; that he is effectively risking the company on them.

Then again, Microsoft has been here before. Before there was Windows, there was DOS and that really was dull.

But when DOS appeared to be coming to an end, what did Microsoft do?

Conventional wisdom has it that it ditched DOS and hyped up Windows.

In reality the company experimented. It considered beefing up DOS; it considered working on a new joint venture with IBM or Apple in the Unix market, and even a company sale. Windows was just one of several ideas. The company was lambasted in the media for being too inconsistent, for not having a clear strategy.

Windows evolved in the true Darwinian sense. It was one of many experiments, but it happened to be the one that worked.

Private equity firms don’t like that kind of strategy. They like to see plans stretching into the future and companies that stick to them rigorously.

Luckily for Microsoft, Bill Gates didn’t see things that way and the company flourished.

The problem with these ‘bet the company’ moves is regression to the mean. In the long run companies don’t always perform better than rivals.

Microsoft seems to have forgotten its own lesson.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here