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June 06, 2014

Where is Microsoft Headed?

Microsoft’s mobile history is one of brief success, followed by years of rework and strategy pivots. If you had asked an industry analyst what the future of mobile would look like in 2007, he would have used this market share graph to predict Windows Mobile’s continued dominance. Today we know a very different story occurred, one where Microsoft completely abandoning the platform in 2010 to build a new, user friendly alternative called Windows Phone.

This enormous change was driven by the realization that the Windows UI, built in an era where computing was done while sitting at a desk, did not work on smartphones. Users demanded mobile-first experiences and were flocking to platforms like iOS and (at the time) Blackberry because of their superior software. Windows Phone was a complete break from the mobile work previously done at the company, and heavily borrowed from the “Metro UI” design language Microsoft had begun to experiment with on Windows Media Center and its Zune product lines. The clean, flat look gave the UI a minimalist look and, at a time when Apple still heavily relied on skeuomorphism, made the design language seem ahead of the competition.

The decision to pivot Microsoft’s entire mobile division was a bold move, but not nearly as controversial as their next: Windows 8. The announcement that Windows, their cornerstone product and most ubiquitous operating system in the world, would be completely redesigned was made in 2011. To some industry observers (myself included) the move was seen as a revitalization of the company; others saw it as an act of desperation. And as if the Window software revamp wasn’t enough, Microsoft made yet another unprecedented decision to build their own hardware. The Surface, released in October of 2012, was the first PC produced by the company. They entered 2013 ready to wow consumers and change the perception that they had lost their innovative edge.

So what happened? The results of these initiatives are not as glowing as the company had hoped:

It would be hard to make a case that any of these three strategic changes have met the company leadership’s desired result. In fact, CEO Steve Ballmer announced his retirement in August of last year, signaling yet another strategy shift was needed at the software giant.

Facing a drastically changing technology landscape and three major failed pivots, where does the Microsoft go from here? The answer: more drastic changes. The three mentioned initiatives made at the company over the past 4 years may pale in comparison to what we see in the next 4. Microsoft’s new CEO, Satya Nadella, has already begun to signal this transformation.

To understand the “New Microsoft”, it’s important to understand why the company made the decisions they did. Windows 8, the Surface line, and Windows Phone all serve a central theme: Windows Everywhere. The company has spent the past 30 years with a near monopoly on the personal computing market, and their traditional strategy has been to protect this market share. Office for iPad is the perfect example of how this mindset governed all of the company’s decisions.

Despite the overwhelming demand for the productivity suite on iOS devices, the entrance of multiple competitors looking to fill the gap, and the potential revenue being left on the table, no Office apps (besides OneNote) had been released for iOS prior to March of this year. The company knew consumers wanted Office on their tablets and used it as a key selling point for the Surface. Their assumption that the software would appeal enough to consumers to entice a switch over from iPad, and help secure a Windows presence in the tablet space, was proven wrong when sales disappointed.

Office for iPad was added to Apple’s App Store less than two months after Ballmer was replaced. In a blog post that announced the released, Nadella signaled the start of a new era at his company. In it he writes:

Simply put, our vision is to deliver the best cloud-connected experience on every device.

Bill Gates had a vision of putting “A computer on every desk and in very home”: it has succeeded. The next 10 years for Microsoft are going to revolve around ensuring that no matter what device a user is using, whether its Android, iOS, or Windows, they are connected to Microsoft services. In an era where cloud is king, they are staking a claim. Now let’s see if they can execute.