This past weekend I spent some time thinking about the two presentations in June by Apple and Microsoft. Apple's WWDC Keynote was once again on stride, showing break-through hardware with the MacBook Pro Retina Display, OS X Mountain Lion and iOS 6. All three demonstrate Apple isn't lost, wandering in the desert, but has a plan and knows where it wants to go next. However, Microsoft's announcement manifests how much trouble the software giant is in.
Steve Ballmer did his best to put a smiley face on a project that is clearly late to market. The announcement of Surface would've been revolutionary if Ballmer made it in 2008 — even 2009. While the number three is usually good to Microsoft, Microsoft's third attempt at developing hardware and software together (Zune, Xbox and now Surface) will ultimately fail. The reason why is pretty simple: the market has passed Microsoft by.
Microsoft only has two, maybe three, major wins to show for its multi-decade effort as a tech-giant: DOS, Windows (coupled with Office) and Xbox. Examining those areas it is easy to see that in each case, Microsoft only had one challenger who was significantly smaller or less focused. With DOS, there really was no competition except for Apple who was charging 2-3 times as much for their product. Windows took several years of development, as most don't remember Windows 1 or Windows 2. It wasn't until Windows 3 and the 3.1 that Microsoft got it "right enough" that the market shifted gears. Again the only competition was a struggling Apple under the helm of John Scully (and soon several other ineffective CEOs) and a natt called Amiga. Windows 95 came to market with a roar and soon after Office took out struggling competitors WordPerfect and Lotus 1-2-3. Again Microsoft was taking on competitors that were far smaller or far less focused. The gaming market saw Sony and Nintendo as the Kings until Microsoft entered with Xbox. It took several years for Microsoft to make an offering compelling enough to steal Play Station's Thunder. In response, Nintendo ran to a different niche called "causal gaming" with their Wii.
Historically, for Microsoft to win a market, marketplace conditions must be just right:
- A limited number of competitors
- Competitors struggling to take the lead
- No competitor has captured 50% of the marketplace
- Competitors are resource constrained compared to Microsoft
In marketing terms, the market must be in the Innovative or Early Adopter stage.
As the graphic above shows, customers in the Innovator and Early Adopter stages are willing to live with technology that occasionally fails, provide feedback and then eagerly await fixes. This is where Microsoft has won, when the market is in these two stages. Windows 1, then 2, then 3. Xbox, Xbox improved, then Xbox 360. However, in the later three stages customers are unwilling to put up with the test, break, fix, test-again mentality. They want products that work and make their lives easier. The only feedback they will provide a company is that they will never buy another product from that company again. With blogs and social networks, the opinions of these people spread like wildfire, and a company's product then has an extremely difficult hurdle to overcome: public perception against their product.
Ultimately, this is why Surface will fail. It's not because Microsoft is a bad company, or incapable of making a good tablet. It is because the market has already crossed the chasm into the Early Majority stage. People are unwilling to see which Surface product makes it in the market place: Surface RT or Surface Pro. There are already very good tablet solutions for customers (iPad / Android). Despite all this, Microsoft came out of the gate last week pretending they were the fist to introduce the market to this new tablet technology.
History has shown Microsoft doesn't succeed in the later stages of a market. Surface will be no exception.
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