Has Microsoft Leapfrogged Apple?

Has Microsoft Leapfrogged Apple?What a difference ten years can make!  Merely decade ago, we were just getting used to the idea that Apple would survive as an independent company.  Now it’s the most valuable business in the world.

Microsoft, on the other hand, went from being the dominant player with monopoly power to the gang that couldn’t shoot straight.  They’ve seemed to miss every major trend, stumbling, bumbling and putting out inferior products.

The funny thing is, among all the failures and screw-ups, Balmer and team seem to have finally put all the pieces together to gear up for a major resurgence.  Over the next few years, it looks like Apple and Google will be the ones playing catch up.  Right under our noses, Microsoft might just be pulling of one of the great turnarounds in history.

The Rise and Fall of the PC and Wintel

The 1990’s were the age of the “Wintel” duopoly.  When I first started my career in the early 90’s, computers were just beginning to make their way into the workplace.  There were a few PC’s scattered around the office and us younger folks would show the old-timers how to use word processing, spreadsheets and clip art.

Microsoft and Intel rose to dominance as corporations began to invest in IT and by the end of the decade there was a computer on every desk.  When the internet came, Microsoft stumbled for a moment, but then developed Internet Explorer in record time, bundled it in with their Office software and hardly missed a beat.

Apple missed out and by the end of the decade was on its last legs.  It was only saved, ironically, when Steve Jobs convinced Bill Gates that Apple’s failure would only add to the anti-trust problems Microsoft was having at the time and got him to invest $150 million in Apple.

Thus began the first great comeback in of the digital age.  We’re about to see the second.

The Post-PC World

Microsoft, of course, is in no stretch of the imagination in the kind of shape Apple was back then.  They have about $50 billion in the bank and will generate another $30 billion this year.  Their operating margins are north of 30%, return on equity is an astounding 42% and they have almost no debt.

Still, Microsoft, the icon of the PC era, finds themselves in a Post-PC world and that’s been a problem.  While consumers and even enterprises are snapping up smartphones and tablets, computing has become increasingly social, local and mobile.

Microsoft has remained, for the most part, tied to the desktop while Apple’s strength in smartphones and tablets has created inroads to the enterprise market. Their share of connected devices has dropped from 95% to less than 50% in just a few years.

It might seem that Microsoft has missed the boat, but I’m not so sure.  In an impressive act of strategic jujitsu, they appear to have gained the upper hand in the new digital battlefield of in-home entertainment and now are in the process of putting together an ecosystem that will integrate everything into one platform.

Xbox Live and Kinect

Apple’s resurgence was led not by computers, but by consumer products.  It was the iPod, after all, which was the first great product after Steve Jobs’ return and iTunes which provided the platform on which the iPhone and iPad thrived.  It wasn’t just the products, but the ecosystem.  The whole became vastly more than sum of the parts.

In much the same way, video games have been the key to Microsoft’s great comeback.  In 2001, they launched the Xbox and shortly afterward went to market with Xbox Live, an online gaming service that allowed gamers to play top games against others in the network.  The video game, in essence, became a social platform.

Since then, Xbox live has become much more than a gaming platform.  While Apple and Google have been racing to create the new TV interface, Microsoft is already there.  Xbox live integrates TV, Skype (which provides voice and video communication), a marketplace and just about everything else you would want a connected TV to do.

Further, the Kinect system, which allows for voice and gesture control was launched well ahead of Apple’s Siri and remains superior.  In a very quiet way, Microsoft has built out the next generation computing ecosystem under the guise of a video game platform.

Windows 8

The problem up till now is that the Xbox ecosystem has been separate from the PC environment in which Microsoft excels and they have had no real presence in the post PC environment.  That’s all about to change.

As I wrote earlier, Windows 8 is a mobile first platform, which will integrate mobile and desktop into one unified interface, something Apple has yet to achieve.  They are also launching Kinect for Windows, which will be available on smartphones, tablets and PC’s. Early reviews have been overwhelmingly positive.

Will it be better than Apple?  I’m not sure, but it doesn’t have to be.  It just needs to be better than Google’s Android.

While iOS is available only on Apple products, every other manufacturer in the world needs an operating system.  Microsoft still dominates productivity software and the potential of platform that incorporates everything into one interface is compelling.

Open Innovation and the New Web of Things

Playing well with others has always been Apple’s Achilles heel and it is here that Microsoft has a distinct advantage.  Microsoft’s strength is its modular, collaborative approach. While Apple is famously prickly, Microsoft encourages third party development.

For instance, they partnered with Ford on their successful Sync platform.   When hackers started fiddling with Kinect, they released a software development kit (SDK) and offered prizes for the best hacks.

Moreover, they have decades long relationships with manufacturers and are skilled collaborators.  Neither Google nor Apple have been able to prove that they are.  In the next era of computing, that may be the crucial skill.

The new hotbed of innovation is the Web of Things, a mash-up of the virtual and the physical.  It’s unrealistic to assume that one manufacturer will adequately service smart homes, smart cars and smart retail.  There will however, need to be a unified platform and it appears that Microsoft has put more of those pieces together than anyone else.

A Tale of Two Architectures

Since the beginning of the computer revolution, Microsoft and Apple have traded places as the dominant player.  Apple won the 80’s, but failed in the 90’s.  Microsoft dominated the 90’s, but has faltered over the last decade.  Now Microsoft looks poised to take the lead again.

However, it has not been simply a rivalry between companies, but two very different approaches and philosophies.  Apple has always been tightly integrated, controlling every aspect of the user experience.  Microsoft has been modular, focusing on software and partnering with manufacturers to develop the end product.

Integrated architectures are superior for building something completely new, when standards are weak.  Modular architectures win out when technology becomes mature and standards become more clear.  It seems to me, that we are entering an era where Microsoft’s collaborative approach will be favored.

Much of this is still in the works, we’ll know if I’m right in 12-18 months.

image credit: g2goutside.org

Follow @ixchat on twitterDon’t miss an article (4,250+) – Subscribe to our RSS feed and join our Innovation Excellence group!


5 Principles of InnovationGreg Satell a consultant who concentrates on media, marketing and innovation. Check out at his site, Digital Tonto and follow him on twitter @digitaltonto

This entry was posted in Apple, Design, Digital, Entertainment, Open Innovation, Product Innovation, Social Media and tagged , , , , , , , , , , . Bookmark the permalink.

33 Responses to Has Microsoft Leapfrogged Apple?

  1. Pingback: Tools Sandbox | Pearltrees

  2. JimmyFal says:

    I have been talking like that for a long time now. This post puts it all into plain English. Time will tell said the Tortoise who beat the Hare.

  3. Pax Dickinson says:

    Playing well with others has always been Apple’s Achilles heel and it is here that Microsoft has a distinct advantage. Microsoft’s strength is its modular, collaborative approach. While Apple is famously prickly, Microsoft encourages third party development.

    One of these companies bases their flagship OS and flagship browser on an open source core, and the other is strictly closed source.

    Maybe try this again.

    • Jack Schofield says:

      > One of these companies bases their flagship OS and
      > flagship browser on an open source core, and the other
      > is strictly closed source.

      The only reason Apple did both of those things is not because it loves open source, but because its in-house efforts failed. Indeed, the whole basis for Mac OS X (NextStep) was bought in, and its original intention was to buy the proprierary BeOS.

      In any case, while the core of Mac OS X just happens to be open source, the huge superstructure perched on top is wholly closed and proprietary. (Check out what Linus said about this.) It’s so unfree, that even if you pay for a copy, you can get sued for installing it on a non-Apple machine (Psystar).

      If you look at the way Apple works, it tries to control almost everything from top to bottom: hardware, software, apps, even the shops. It’s well known to be very bad at working with partners, because usually it either sues them or screws them.

      Microsoft, by contrast, is pretty much a platform company. The vast majority of its income only comes when one of its partners makes a sale — a PC or server OEM, a software reseller or whatever. Microsoft is obviously not perfect, but it’s orders of magnitude better at it than Apple.

      There’s quite a bit of research on how Microsoft operates as a platform company. You could try reading Platform Leadership from Harvard Business School Press.

      • Greg Satell says:

        Good point. Thanks Jack.

        - Greg

      • Aaron Frank says:

        That’s not quite how the Microsoft sales model works.

        In the server world most customers buy their hardware without an OS and buy the software separately.

        In the client world all PCs come with an OEM copy of Windows which the OEM buys from Microsoft, marks up, and then resells to the customer. The customer may then also pay Microsoft to have this PC licensed as part of their fleet of client computers.

        For applications like Office of SQL Server Microsoft does the selling and gets the signatures on the POs. The resellers then provide fufillment and manage the agreement and try to sell ancillary services.

        But it’s Microsoft who actually does the selling.

        • Greg Satell says:

          I think what’s pertinent is that the OEM relationship needs to be managed and Microsoft has proven that it does that very well. Apple, historically has not. Google really doesn’t have a history either way.

          Incidentally, the lack of skills in this area (managing partnerships) seems to be to be real handicap for Apple in the TV business. By all accounts, their negotiations are going horribly.

          - Greg

        • George Hanus says:

          This reply is convoluted with half truths.

          All the above are correct and false. servers are purchased both preinstalled (Which heads off driver conflict issues) and non instaled.

          Client / desktop or laptop computers are offered the same. in larger organizations PCs are either bought blank and imaged upon deployment, or imaged to specifications to the vendor (Dell or whoever) all through open license. In smaller houses, Open License is used or machines are purchased simply online and reconfigured in house. You dont double purchase licenses as implied by this comment.

          Partners are regarded by Microsoft as their true evengelists, and actually do most of the selling, yet Microsoft will provide all the internal support needed to close the deals. THAT support network, by the way, is a huge difference between Microsoft and Apple. Apple does not even have that in place, it stops at that genius bar.

    • Greg Satell says:

      Pax,

      Using an open source platform says absolutely nothing about how a company partners with other companies and, by all accounts, Apple is a pretty lousy partner.

      Here’s what Steve Jobs himself said:

      “You know, because Woz and I started the company based on doing the whole banana, we weren’t so good at partnering with people. And, you know, actually, the funny thing is, Microsoft’s one of the few companies we were able to partner with that actually worked for both companies. And we weren’t so good at that, where Bill and Microsoft were really good at it because they didn’t make the whole thing in the early days and they learned how to partner with people really well.

      And I think if Apple could have had a little more of that in its DNA, it would have served it extremely well. And I don’t think Apple learned that until, you know, a few decades later.”

    • Kevin R says:

      Pax makes a great point and one that has enabled every business I’ve been a part of for 15 years

      While the Mac OS core is open source the business model is the complete inverse. Look at the $ trail and all will be answered. Which is less expenses Adobe or Office for Mac or Windows? Then ask why. The truth is in the $ trail not the OS core.

  4. Mobile Dan says:

    Interesting post, thank you Greg.

    I’ve wondered if we’re entering an age where small computers (laptops, smartphones, tablets, home entertainment systems, etc) and their operating systems must be made by the same company to remain competitive. This allows for faster innovation and more consistency for developers and users. It is inline with computers appealing to a mass audience who is less interested in tinkering. They view computers as fundamental tools not an experiment and want their tools to “just work”.

    Examples of one company successfully creating hardware and OS include Microsoft’s XBox and Apple’s iOS (iPhone, iPad, iPod Touch). Microsoft’s partnership with Nokia and Google’s purchase of Motorola suggest these companies recognize the value in tighter integration between OS and hardware.

    I appreciate your suggestion that the success of tight hardware/OS integration vs open hardware/OS integration may be cyclical depending on the stage the product is in the innovation lifecycle. I had not looked at it that way before.

    Note: Another space where Microsoft is forward thinking is with it’s cloud computing product, Azure.

    • Greg Satell says:

      I do think there is a market for Apple is an integrated brand, but it’s probably something less than 30%. That’s a huge business for Apple, but still an enormous open market.

      btw. I’m pretty bullish on Apple as well and think they’re enormously undervalued (http://www.digitaltonto.com/2012/is-apple-a-bubble/), it’s just that I think Microsoft will do even better.

      - Greg

  5. yoda says:

    flight of fantasy.

  6. Pingback: THE APPLE INVESTOR: Has Microsoft Leapfrogged Apple? (AAPL) |

  7. Florian says:

    No, microsoft is not on a way to re-emerge somehow miraculously.

    1) Kinect: It’s a cute toy, but both its spatial and temporal resolution is miserable beggaring belief, and now a spate of small companies with superb products is poised to eat their lunch after they failed to make any meaningfull follow trough on the first version.

    2) Browsers: It’s debatable weather or not browsers are important to Microsoft. In any case, their browser is again, bottom of the barrel as other browsers move on. Consequentally they’ve been bleeding market share nearly at a linear scale and there’s no end in sight.

    3) Windows 8: Trying some convergence is all fine, but underway Microsoft has somehow managed to screw over both the tablet and the desktop experience, badly, a mistake Apple carefully avoided.

    4) Stumbling on consumer patience: Excluding competing browsers from their ARM Windows 8 device, and excluding other OSes to boot on their ARM devices is not winning them points there.

    5) Botched mobile strategy: Win8 phones are scarce. That is mainly because the other two vendors who where developing some jumped ship (to android), and the only remaining vendor (Nokia) needs so much money just to stay afloat after they performed business seppuku and all but sold themselves to microsoft, that they are seriously challenged to bring any number of Win8 phones to market, let alone profitably.

    6) Botched tablet strategy: Apple can squeeze the tablet device market if they want to. The trouble is, no other vendor can even match apples pricepoint if they do that. And that’s not counting the windows license these devices would require. If Apple decides to squeeze the tablet market, even if Microsoft decided to give Win8 away for free, the other tablet vendors would still sell at a loss.

  8. Greg Satell says:

    Florian,

    I do think it’s a little early to concede 100% of the Post-PC market to Apple. In my mind 70%-80% will go somewhere else and it will be either Microsoft or Google. I’m betting on Microsoft.

    Thanks for you comment.

    Greg

  9. taylodl says:

    The game hasn’t even started and Microsoft has won? Apple is succeeding because they combine the hardware and software into a unified experience. And they have the best supply chain management operation in the business – meaning no one is capable of producing products of comparable quality at a similar price point (and still make money). These are the obstacles Microsoft must overcome. It’s by no means clear that Microsoft will be successful, let alone leapfrog anybody.

    • Greg Satell says:

      Nobody is saying that Microsoft has already “won,” but with the TV interface and integrating it into the rest of the architecture, Apple is now chasing Microsoft.

      - Greg

  10. David Bryson says:

    Greg,

    SYNC is nothing that Microsoft should be trumpeting about. It is a user interface and usability nightmare for anyone attempting to use a car. If one turns off the car while playing music, it takes no less than 5 menu clicks to resume playing the same music after turning the car back on!! I rented the Ford Fiesta for a road trip, it was so bad that it made me not want to purchase or rent the car on that basis alone!

    Dave

    • Greg Satell says:

      Everybody’s experience is different, but generally SYNC gets good reviews. In any case, Apple has done nothing at all in that area, which like TV, highlights the importance of being able to collaborate well.

      - Greg

    • George Hanus says:

      I could not dissagree more. My sone in law owns one and it is slick.

      As Greg mentioned eeveryones user experience is a little different. I would presume you had a rented car issue (belive me rented car issues are no stranger to me either, but for a different article).

      Think now, since SYNC came out in 07, and in light of all the finiancial disasters in 08-09 affecting the auto industry, if it was such a miserable product FORD would have dropped it liek a hot potato. Yet these features have helped launch FORD back into its leadership in the auto industry. That alone should speak volumes.

  11. Pingback: THE MICROSOFT INVESTOR: How Microsoft Blew Windows (MSFT) | Don't Call Me Tony

  12. david says:

    TV is not the way to mobile. Heck, TV is dying, people have moved to smaller devices. MS is not even a blip on the screen in the mobile war. For every 10 new apps started by a developer, seven are for the iPhone, and just three are for Android. http://read.bi/L5T8cm. I don’t count out MS, but Balmer is not the one to lead them out of the hole they have found themselves in.

    • Greg Satell says:

      David,

      I don’t think the issue is whether TV is the “way to mobile,” as much as there is a growing need for a true multi-screen platform and Microsoft seems to somehow have moved ahead of the pack in that regard.

      - Greg

  13. Pingback: Articles of Interest 6/8/2012 « National Creativity Network

  14. Steve says:

    Great post. I think folks underestimate Microsoft, they may have a questionable leader in Ballmer but they do have talented people creating some really cool stuff. It will be interesting to see what the future will bring.

  15. George Hanus says:

    Greg thanks or this article, it made a lot of things really clear.

    I am a bit amused that you had left out a few major players at Microsoft, The new Windows phone, IPTV (ATT U-Verse) and Smart Glass.

    The technology in the Windows Phone as part of this single-platform cohesivness is phenominal, fluid and fast. It just makes sense. The Windows phonr has been outselling the iPHONE in Chine since its release is also interesting sinc Apple has out priced itself there. The whole philosophy this fluidness has caught a whole new younger audience. And it just works.

    That aside, Microsoft has also aggressively taken back the ownership of the Microsoft Experience via the Microsoft Store. No longer are computers sold with any “trial ware” that duplicated and inhibited the true user experience Microsoft had intended. Mix that withthe new WIDI technologies, and wow! All microsoft Store computers are sold in a Microsoft Signiture configuration. ihave personally tried out these computers and never, as an IT professional, have been so impressed with an out of the box computer preinstalled with a Microsoft OS. About time too.

    IPTV – ATT Uverse and many other global content providers have been using this for a few years now and is gaining popularity on its ability to provide a more immersive entertainment environment. I see this eventually being integrated into the rest of the entertainment devices Microsoft is offering in the future.

    Smart Glass is not only a way to tie in not only Windows 8, Windows phone, but also iPAD, and Androids to interface… THIS is SMART. Not only does this open the door to new vendor relationships, but also takes non-player companies nike Apple and Android and envelopes them back into the Microsoft Experience.

    If i may post a link to a demo here,
    http://www.xbox.com/en-US/live/smartglass

    I wont mention the educational technologies Microsoft has been developing with NASA called th World Wide Telescope. Intensely beautiful, ok I mentioned it, heres the link.
    http://www.worldwidetelescope.org/Home.aspx

    These technologies and the model to work together with others is what keeps Microsoft out in front, way out in front. For those calling these “botched toys”, hardly understand. Thats ok, they live in an infinate loop. While some enjoy being a closed system, I revel in the inclusive and imersive experience Microsoft offers.

    Thank you,

    George

    • Greg Satell says:

      Great points George! Especially about Smart Glass. As I wrote, I do think that Microsoft’s modular architecture will be an advantage over the next decade. The ecosystem is just getting too big for one company to build on it’s own.

      - Greg

  16. Pingback: Innovation Excellence | Top 20 Innovation Articles – June 2012

  17. Pingback: Technology - Who Will Win It At The LAST? - Marketing Bloggers

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Keep Up to Date

  • FeedBurner
  • LinkedIn
  • Twitter
  • Facebook
  • Slideshare
  • Email
  • YouTube
  • IPhone
  • Amazon Kindle
  • Stumble Upon

IX Community Members

SIMAnswers License Error: Unable to communicate with iono

Innovation Authors - Braden Kelley, Julie Anixter and Rowan Gibson

Your hosts, Braden Kelley, Julie Anixter and Rowan Gibson, are innovation writers, speakers and strategic advisors to many of the world’s leading companies.

“Our mission is to help you achieve innovation excellence inside your own organization by making innovation resources, answers, and best practices accessible for the greater good.”