What it is: Microsoft’s mobile strategy is no longer about making their own operating system but making software for other operating systems.
Microsoft’s former CEO, Steve Ballmer, famously laughed at the iPhone because it lacked a physical keyboard. The iPhone would later go on to make more money than all of Microsoft’s products combined. That moment alone highlights how badly Microsoft missed the mobile computing shift towards smartphones and later to tablets.
Originally Microsoft had a decent market share with their clumsy Windows Mobile operating system that had originally been designed to mimic the desktop user interface of Windows complete with a start button. Back then, Microsoft’s original strategy was to sell Windows Mobile to manufacturers and let them make the hardware while paying Microsoft royalties for using Windows Mobile.
When Apple introduced the iPhone, it made the clumsy desktop interface of Windows Mobile look as antiquated as it had been for years. That’s when Microsoft shifted their mobile strategy towards Windows Phone. Once more, they tried to duplicate their business model of selling the operating system and making money off royalties, but Android got to the smartphone market right after the iPhone and offered manufacturers a free operating system. A free operating system effectively killed the future of Windows Phone before it could even get started.
(Imagine if Windows and Linux were starting from a level playing field. The free, open source nature of Linux would likely destroy Windows every time.)
Microsoft then shifted their mobile strategy from selling Windows Phone to making and selling their own phones though their Nokia acquisition. When that failed to generate much excitement, Microsoft effectively wrote down their entire acquisition as a loss, laid off most of their mobile phone employees, and shifted to their new strategy, which is to develop software for Android and iOS such as Microsoft Office.
With declining Windows revenue, Microsoft no longer has the luxury of endless cash flow to fund their various projects. That’s why Microsoft sold their online advertising division and got rid of their mobile phone hardware hopes. With little chance of catching up to Android, even by giving Windows Phone away for free, Microsoft had little hope of gaining more than a sliver of the mobile computing market.
That’s why Microsoft is pinning their hopes on developing software for other operating systems. Few people are going to dump their Android or iPhone for a Windows Phone, while many Windows Phone users will likely defect from Windows Phone to Android or iOS. That means Microsoft’s new mobile strategy is simply to focus on where the market is (Android and iOS) and make software for those platforms that people will want.
The ultimately goal isn’t to sell software, but to drive people into subscribing to Office 365, OneDrive, and other services that can provide steady, ongoing revenue to Microsoft. It’s a far better strategy than losing money constantly trying to copy Apple’s iPhone, but the rewards are far less as well. Microsoft tried to jump ahead of the Apple Watch in the wearable computing market with Microsoft Band, but have you heard anything more about Microsoft Band’s popularity?
How will the Microsoft Band drive people to using Microsoft services? It seems just another knee-jerk reaction to the Apple Watch just like the Zune was a knee-jerk reaction to the iPod, Windows Phone was a knee-jerk reaction to the iPhone, and the Surface tablets were a knee-jerk reaction to the iPad.
Microsoft’s mobile strategy of the future will be a steady money maker selling software as a service. While that may be profitable, it will never give them a dominant position in the market. Microsoft’s days as the dominant force in the computer industry are over.
That doesn’t mean complete disaster for Microsoft like Blackberry or Nokia, but it does mean that Microsoft needs to cooperate with others rather than try to dictate its way and force the world to follow. Nobody followed Microsoft with Windows 8’s user interface and many still resist the Ribbon interface of Microsoft Office. If you want to see Microsoft’s fate, look at IBM. Nobody looks at IBM as the computer leader any more, but people still respect the company for their research. That’s likely where Microsoft will end up. The industry will still respect Microsoft; they just won’t blindly follow them any more like they did in the 90s. Microsoft’s heyday is over, and that’s actually a blessing for the computer industry because that opens the playing field for true innovation to thrive.