Per Lamb, Hair and McDaniel, the product life cycle (PLC) is “a biological metaphor that traces the stages of a product’s acceptance, from its introduction (birth) to its decline (death).” The PLC has four major stages: introductory, growth, maturity and decline. Microsoft, the dominant company for much of the personal computing era, faces questions about the maturity and decline of its signature products, primarily the Windows operating system.
Amid this uncertainty about the company’s direction, Microsoft CEO Steve Ballmer announced his retirement, taking effect in the next 12 months. Originally Bill Gates’ friend from Harvard in the 1970s, Ballmer joined Microsoft in its early days to bring business sensibilities to the software startup. Ballmer became CEO when Gates stepped down in 2000. During his tenure, Ballmer personified Microsoft’s stasis as Amazon, Google, Apple and Facebook redefined the tech experience with e-commerce, search, mobile devices, tablets and social media.
The Innovator’s Dilemma: Sustaining Technology Versus Disruptive Technology
A blunt 2012 article in Vanity Fair condemns Ballmer’s leadership and Microsoft’s culture, portraying an old-style corporate colossus more intent on maximizing existing offerings than developing new products that reflect current trends. The thesis is vivid in the article’s analogy of the Big 3 automakers–pumping out bloated wares deemed “new” thanks to more chrome and bigger tailfins, oblivious to customer needs or product quality.
Vanity Fair and other sources report Microsoft’s vetoes of new, internally developed technologies that deviated from Windows and/or usurped part of its Office suite. Such corporate behavior epitomizes Dr. Clayton Christensen’s concepts of sustaining technology versus disruptive technology in his landmark book, The Innovator’s Dilemma. Sustaining technologies comprise currently successful products that manufacturers will “protect” by suppressing or ignoring disruptive technologies.
The overt reasons for suppression inevitably hinge on a comparison between the current product and the newcomer that leads to the disruptive technology being deemed “inferior,” “incompatible” or “threatening.” Another giant company, Sony, offers an example in its hesitation during the last decade to market an MP3 version of its iconic Walkman due its music division’s disdain of digital content. By the time the Walkman X emerged, Apple and the iPod had long ruled the personal music player market, a category that Sony had created.
While preserving its sustaining technology, Microsoft became an also-ran in search, music, mobile and tablets with Bing, Zune, Windows Phone and Surface coming late to market and wresting small shares from the segment leaders. Ballmer was widely derided for missing these trends, symbolized in his now-infamous 2007 proclamation that the iPhone would be a small player.
Failure Across the Marketing Four “Ps”
Microsoft’s dogged allegiance to Windows did not result in superior products. Windows Vista was termed a fiasco–-complicated, clumsy and inferior to its predecessor, Windows XP. The juxtaposed release of Apple’s iPhone and its iOS operating system only cast a harsher light on Microsoft’s shortcomings. The more recent Windows 8 has met criticism as well for trying to bridge desktop and mobile computing, an unsatisfying experience in both environments.
Compounding its mistakes in the marketing “P” for Product, Microsoft’s approach to the “P” for Place diminished the consumer experience and strained relations with its manufacturing partners. The New York Times’ James B. Stewart recalls Bill Gates in the early 1990s dismissing PCs as “…nothing but components held together by plastic and screws manufactured on low-cost assembly lines, a commodity business…”
Throughout its history, Microsoft was the channel captain, the dominant member of its marketing channels, dictating product configuration, delivery and pricing. It commanded high margins on the software it licensed to computer manufacturers, leaving them with little money for innovation of their hardware. This gave Apple the opportunity to introduce more interesting and satisfying hardware, tapping an underserved consumer demand.
Surface Tablet Attempts to Bridge Sustaining and Disruptive Technology
The Surface tablet was Microsoft’s answer to the iPad, featuring Windows 8 and the Office Suite which had been pointedly withheld from tablets running iOS and Android. Immediately, Microsoft alienated its hardware partners by producing Surface tablets in-house. This is known as dual distribution when a manufacturer uses parallel channels to provide product to consumers, one that uses channel partners, one that is often direct. Hardware manufacturers are still able to create Windows 8 tablets, but they now must compete against Microsoft’s branded tablets.
Representing Microsoft’s attempt to extend the product life cycle of Windows, Microsoft’s Surface is a flop. The lower-priced Surface RT was criticized for lack of performance and incompatibility with previous applications. The higher-priced Surface Pro was dunned for being “too good” at replicating a laptop with its bulk, heat generation, and inadequate battery life. In addition to these product failures, Microsoft has been cited for a poor “Place” strategy with sales initially limited to Microsoft stores, another alienation of channel partners, this time retailers.
To address these failures, Microsoft has responded with adjustments in the Marketing “P” known as Price, the easiest part of the marketing mix to alter, as it slashes prices across the Surface line. Meanwhile, Promotion, the final Marketing “P,” has done Microsoft little good as its commercials emulating Apple’s Mac Vs. PC campaign of years past battle for media space against middling reviews, reports of dismal sales, and announcements of the $900 million write-off the company took against Surface RT.
Product Life Cycle Prophecy from a Past Microsoft Leader
Microsoft’s domain has been the desktop (and its extension, the laptop) per its original mission: “a computer on every desk and in every home, all running Microsoft software.” By the second decade of the 21st century, computing has fled the desk and the home. In 2008, author Tom Hayes declared in Jump Point: “The assumption that the Internet is a PC-driven network has been proven wrong; its diffusion will be mobile device-driven and at a much quicker pace.” By 2013, PC sales were declining by double digits with blame assessed to Microsoft for the unpopularity of its technology-straddling Windows 8 operating system installed in the latest units. By 2014, Steve Ballmer, sentinel of the original Microsoft business strategy, will be gone.
Another Microsoft leader, former Chief Strategist/Chief Technology Officer Nathan Myhrvold, foretold the fate of companies that failed to heed changes in technology and the progress of the product life cycle (NOTE: I went to Mirman School with Dr. Myhrvold and had the pleasure of interviewing him for the school’s 50th anniversary publication.) In 1993, Dr. Myhrvold wrote a company memo/treatise which became tech industry lore, “Road Kill on the Information Highway.”
Among his many prescient observations 20 years ago on the rise of the public Internet, Dr. Myhrvold envisioned slow company extinction due to technological change…
One very important thing to keep in mind is that when I talk about companies or industries becoming “road kill” it doesn’t mean that they will go out of business tomorrow. The actual process by which the information highway will displace current businesses will be far more like the start of an ice age rather than an instant calamity. In the long run the changes will be massive, and in retrospect it may seem to have happened overnight, but from this vantage point it will be slow transition. The only dramatic part is that the window of opportunity for a company getting on another strategy and avoiding extinction may come and go many years before it becomes obvious that they are doomed.
Dr. Myhrvold gave Microsoft poignant advice…
Growth, profitability and the focus of the company have historically shifted from one area to another, and this will continue past our current product lines. The day will come when people will say “hey, didn’t Microsoft used be the company that made office software?” and the answer will be “yes, and as a matter of fact they still do, but that isn’t what they’re known for these days.”
…and an ultimate warning…
Our own industry is also doomed, and will be one of the more significant carcasses by the side of the information highway. The basic tasks that PCs are used for today will continue for a long as it makes sense to predict, so it isn’t a question of the category disappearing. The question is one of who will continue to satisfy these needs and how?
NOTE: Read my warnings of marketing failure for the Surface one year prior in “Microsoft’s New Tablet: Scratching the Surface.”