"Well-managed firms"? Some would debate whether that term describes MS very well. The notion of directing resources towards what's profitable isn't new. The

"Well-managed firms"? Some would debate whether that term describes MS very well. The notion of directing resources towards what's profitable isn't new. The lesson should be to have smaller brilliant teams with clearly focused targets. If they're just entering a market and can't measure profit, it would seem strange to underinvest. They might have to invest for a while. As the Xbox has shown, it can take a while to become well established and profitable. Given that they're up against very strong players in phones and they're doing very poorly in that market, it seems like your book would suggest ditching them and focusing on something they're good at. It seems like they'd also have a hard time doing anything revolutionary (totally new GUI and apps) with tablets, but maybe a hacked version of Windows is so much cheaper to do they might as well even if its third-rate (maybe 4th, behind Apple, Android, WebOS/HP). As for customers, some would argue that businesses cut back more than consumers in a tight economy. There tends to be little expansion, few new startups, and most stick with hardware that's already working. But consumers still have children going to school, and some have machines that become unworkable for them (less skill in avoiding and coping with malware than businesses have). In spite of naysayers predicting that consumers would stay away from premium products during the major downturn, Apple certainly has had healthy growth by any measure, and did well with its' OS upgrade sales as well as hardware. It seems buyers are out there if one has what they want. If Microsoft did focus excessively on corporate IT, it was through lack of insight. They've certainly had the financial and human resources to throw at any market they were after. reliability and profits took quite a while for the Xbox, but it does enjoy a significant loyal base now, probably more than for most of MS' other offerings where there's more lock-in than love. Some feel they've overstated Xbox profitability some by lumping it in with the Mac business (which includes Mac Office revenue). The Zune doesn't seem to have either a huge following or contribute in a very important way to the overall profitability. In terms of an installed base that'll continue to stick with the company, the Xbox seems far more successful. I find it hard to accept that any underachievement in timely delivering of innovative well-received products is the fault of lack of resources. If anything there seem to be too many people not working together with good focus. They've obviously got some very talented engineers and have shown some cool things from R&D. The failure to produce more fruit falls on management. I think they're finally getting the idea that desktop Windows is not the answer for a phone, but they don't seem to have a clue for tablets. If they did we would be hearing from all sorts of developers about NEW apps. Trying to push desktop Windows as the solution is a bit too much like eating yogurt with a pitchfork. They may not yet be ready for a fresh start on the desktop, but they'd be foolish not to start anew on tablets. Patch Tuesday coming up brings 14 patches addressing 34 vulnerabilities. (with the recent hacker convention, it's the season for finding bugs in every platform, even Apples') If Microsoft has had anything that could be considered a disruption for development, it's the constant need to put out fires the vulnerabilities bring. I think it's fair to say that their past emphasis on upgrade sales through feature bloat while neglecting less visible security, performance, and stability, is/was a management failing that has cost them heavily. Besides taking resources, it's also made alternative platforms much more appealing by comparison. "Consumers only buy Windows with new PCs" That seems to be true for the most part but why? Maybe if updates came out more often, most people would at least have hardware that would be suitable. Apple makes gets significant sales of OS upgrades, proving it is possible. Keeping more of the installed base up to date widens the base for app developers to cater to, and would help weed out legacy browsers.