5 ms·
The answer is simple: "Disruption". Smartphones are disruptive to the PC industry. In fact they are a canonical example of disruptive innovation. A phone is no
by scottdw2 15y ago
The answer is simple: "Disruption".
Smartphones are disruptive to the PC industry. In fact they are a canonical example of disruptive innovation. A phone is nowhere near as good as a PC, but it's cheaper and more convenient. It fits in your pocket and gives you instant access to your data, no matter where you are.
The margins for smartphone software, thanks largely to Apple, are much smaller than the margins for desktop software. In fact, you could see the promotion of $0.99 software via the app store as a strategic move by Apple to coerce Microsoft into not pursuing mobile software.
That's a typical move by a disruptive innovator, to focus on low-margin low-end segments of the market, which a dominant incumbent is generally motivated to walk away from, preferring instead to focus on high-end high-margin products.
The 30% fee Apple charges push margins even lower.
In some ways, this is working. There is no version of Microsoft Office for the IPad or the IPhone, for example. Some of this is likely due to the fact that Microsoft's application software business is being disrupted from multiple sources (there is a web version of Office). Both Google and Apple are pushing desktop office in the same direction that Toyota pushed GM : toward SUVs.
Apple also has a strong motivation to commoditize mobile software because it has major positions in several complementary markets: Hardware Sales, Music sales, Video Sales, and Application Delivery (the app store).
If Microsoft doesn't compete, fiercely, in both mobile and web their fate will end up being very similar to both General Motors' and DEC. Windows Mobile 7 is a first step in this direction. It's not sufficient, they should be selling mobile versions of Office too, but it's a fist step.
I would say that Microsoft's efforts to collect Android patents are really an effort to reduce the margins handset makers can extract from sales of Android phones. It's not meant to serve as a profit center for the company.
In any case, Microsoft's introduction of Windows Mobile 7 serves several purposes:
1. It pushes a business model that commoditizes hardware, rather than software.
2. It makes it more difficult for their competitors to displace Microsoft's enterprise business. If they don't release their own mobile OS and mobile Apps, then it's only a matter of time until that happens.
See the following for more info:
http://www.youtube.com/watch?v=nJ7EG58J5eo http://www.youtube.com/watch?v=nJ7EG58J5eo
- raganwald 15y agoI find your comment interesting, however I do not agree that "Pushing a business model that commoditizes hardware, rather than software" is compelling. Google is already doing that, so Microsoft doesn't need to sell Windows 7 to achieve this goal. I also wonder if your statement that "If Microsoft doesn't compete, fiercely, in both mobile and web fate will end up being very similar to both General Motors' and DEC." I agree that it is in danger of irrelevance, but I am not convinced that Windows 7 is the right way to compete in mobile. I can't think of anything better, but that doesn't mean that Windows 7 is the right thing to do. I am reminded of the politician's fallacy: "We must do something. This is something. Therefore we must do it." But doing the wrong thing is worse than doing nothing at all.
- scottdw2 15y agoAccording to Clayton Christensen's model of disruptive innovation, once disruptors push all incumbents out of a low margin market segment, the prices in the lower market segment plummet, and margins drop toward zero. The only way for the disruptor to continue profiting is to follow the incumbent up the market, applying their disruptive invocation to more profitable market segments. The cycle continues until the incumbent is pushed out of the market entirely. Detroit's moves away from low-margin compact cars is what enabled Toyota to make Lexus. Microsoft moving away from mobile phones would have a similar effect. It's essential for their survival. Also, Google's business model doesn't commoditize hardware, it commoditizes software. Google's business model is to monetize data, not software. They are trying to do to Microsoft and Apple what Microsoft did to hardware manufactures.
- raganwald 15y agoI follow the structure of your argument. Going with autos, Detroit's move away from low-margin compact cars enabled Toyota to make Lexus. Let's grant this as true. But does it imply that sticking with low-margin compact cars would have protected their market for luxury cars? What if--like Windows 7 so far--they failed to make significant headway with the low-margin compact cars? What if they lost time and management attention trying to do so much? Or what if someone else--Hyundai or Kia, for example--beat them hollow on low-margin cars while Toyota moved upmarket and beat them on luxury cars anyways? This is why I'm not sure that Windows 7 is the right move. I can see they are in trouble in mobile, but I can't see that Windows 7 is the right thing to do. It would be nice if they could gain a dominant position, but a lot of things would be nice.
- nextparadigms 15y agoAndy Grove understood this idea very well, I think before Clayton even wrote this book, but they later became very good friends. Andy Grove once that that "if we lose the low-end today, we lose the high-end tomorrow." That's actually how disruptive innovation works. The disruptor comes from the low-end and it slowly moves into higher levels, up market. That's why ARM is so dangerous to Intel for example, but Paul Otellini doesn't seem to understand this theory as well as Andy Grove. http://www.youtube.com/watch?v=DaKgMcFP4Mo&feature=related http://www.youtube.com/watch?v=DaKgMcFP4Mo&feature=relat...
- gcb 15y agogoogle should hire you as PR.
- nextparadigms 15y agoI still think Inovator's Dilemma is the most insightful business book ever written. If you truly understand what he's talking about in that book you'll get insights in technology that it's hard otherwise to understand because they feel very counter-intuitive in the beginning. This book should be on the desk of every CEO, especially in large corporations, but it's also very useful for startups to shape their products into something with a high potential for success. Blue Ocean Strategy is also a similar and great book, and the Chasm books series (Crossing the Chasm, Inside the Tornado, Chasm Companion) are very good complementary books to Innovator's Dilemma (and Innovator's Solution).