Microsoft Takes the Wrong Risks

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There was an interesting article in The New York Times recently about how Microsoft's new CEO, Satya Nadella, decided to support a product in development called the HoloLens. Worn over a person's eyes, the HoloLens projects 3D images to augment reality. The article, "Microsoft (Yes, Microsoft) Has a Far-Out Vision, " describes how those working on the HoloLens thought Nadella would kill the project, but he didn't.

"That response says a lot about the reshaped Microsoft Mr. Nadella envisions—one with fewer internal fiefs and with more willingness to favor big bets on new technologies over protecting legacy cash cows, " writes author Nick Wingfield.

The article describes how Microsoft has changed in the short time since Nadella took over as CEO from Steve Ballmer in February 2014. Nadella has done a good job with Microsoft's cloud-computing offering, Azure, which was healthy before he took over. According to the article, Nadella has also eliminated many of the fiefdoms that existed within Microsoft.

That's all good news, but what the article says to me is that Microsoft still hasn't learned much. It's still chasing Apple. In the article, Nadella talks about creating a new category with the HoloLens, just as Apple did with its iPod, iPhone and iPad. He discusses building great hardware and software, which is Apple's hallmark. But what he doesn't seem to get is that to be like Apple, you have to be true to your company's core beliefs and skillsets, and you have to not follow anyone.

Apple was always fundamentally a consumer computer company. The McIntosh was easy to use and was designed mainly for consumers (though Apple executives wanted Steve Jobs to create a computer to compete with the IBM PC in the business market). When Jobs returned to Apple, he introduced the iMac, a very consumer-friendly computer. Then he introduced the iPod, iPhone and iPad, all consumer devices.

Unlike Microsoft, Apple was born developing both hardware and software, and that is the skillset it has always developed internally. Microsoft has always been a software firm that occasionally dabbles in hardware. It could become a great hardware company, but that's a big change, and one that can't be achieved in 18 months.

So while Apple did create new product categories, it essentially stayed true to its vision and ability by creating extensions to the McIntosh computer. For Microsoft to rebound and become great again, in my view, it must focus primarily on software, and it must focus on its business roots. To be like Apple, it must anticipate the future and be ready to seize the opportunity.

Microsoft could leverage its business expertise to build the real-time software platform that is needed to turn RFID data into business value. In fact, it already has this. Microsoft BizTalk RFID did not sell well, but it was a solid platform for building RFID applications. Now, with its cloud-computing platform, Microsoft could offer developers a way to build and host RFID apps that dominate the next phase of computing.

The fact that Nadella doesn't see this is not surprising. Ballmer, his predecessor, didn't see the iPod, iPhone or the iPad (and even after he saw them, he sneered at them). Nadella is clearly less arrogant than Ballmer and a better CEO (Microsoft's stock price reflects that fact), but he doesn't have Jobs' vision or willingness to take risks.

The HoloLens could be a very successful product and could enhance Microsoft's success with the Xbox, so I am not suggesting he kill it. All I am saying is that the HoloLens is not the product, in my humble view, that will restore Microsoft to computing dominance. RFID is.

Last update: Jul 23, 2016

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