In the latest issue of Vanity Fair, journalist Kurt
Eichenwald chronicles the twelve-year decline
of Microsoft. Over the same period, Apple
prospered, but America floundered. Analyzing
Microsoft's failure and Apple's success helps us
understand what the US needs to do to get
back on track.
In December of 2000, Microsoft shares (MSFT)
were worth $119.94; it was the most valuable
corporation in the world with a market
capitalization of $510 billion. Then the slide
began; now Microsoft's stock is worth $30.63
per share and it's market capitalization is
$257B. During the same period Apple's stock
(AAPL) increased in value from $8.19 to
$614.32 and its market cap rose from $4.8B to
$574B. Now Apple is the world's most valuable
company.
Why did Microsoft decline while Apple
prospered? Eichenwald focuses on
management and strategy. But purpose is as
important.
Eichenwald details a series of bad decisions
made by Microsoft management, particularly
CEO Steve Ballmer and founder and chief
software architect Bill Gates. Microsoft has
three product lines: personal computer (PC)
operating systems - Windows, PC productivity
software - Office (Word, Excel, Powerpoint...),
and Server products (intended for businesses
rather than individuals). For thirty years it's
been the dominant software provider.
In the nineties, Microsoft was the number one
US technology company. Brilliant techies
flocked to its Redmond, Washington, campus
and many suggested products outside
operating systems and Office. For example,
Eichenwald reports that in 1998 a Microsoft
group developed a workable e-book - a digital
reading device. Bill Gates killed the product
because, "He didn't like the user interface,
because it didn't look like Windows." Ten years
later, in November of 2007, Amazon introduced
the Kindle e-book and it became a sensation -
selling millions of units.
Eichenwald attributes Microsoft's decline to the
shortsightedness of Gates and Ballmer, their
unwillingness to look beyond Windows, Office,
and Server. It's more accurate to say that
Microsoft had a strategy that worked very well
until 2000 and then strayed off course - but
the company was making so much money
Gates and Ballmer didn't notice. In 1980
Microsoft executives laughed at IBM executives
because the Armonk crowd had been so
enamored with their success, as a main-frame
computer provider, they hadn't noticed when
the technical paradigm shifted and the
personal computer supplanted the mainframe.
In 2000 the paradigm shifted again - from the
personal computer to the personal digital
device - and Microsoft didn't notice.
Apple did recognize the paradigm shift. In
October of 2001, Apple introduced the IPod -- a
digital music player. Steve Jobs saw a sea
change in consumer preferences. Smart
handheld devices, such as cameras,
camcorders, and organizers had become very
popular. As a consequence, Jobs moved Apple
into the personal digital device marketplace.
(Eichenwald writes that Microsoft initially
laughed at the Ipod. By the time they realized
the importance of the paradigm shift, it was too
late - Microsoft introduced Zune, a digital music
player, in November of 2006; the product was
discontinued last October.)
Apple followed the overwhelming success of the
IPod with the June 2007 release of the IPhone.
Thought by many to be the technical product
of the decade, the IPhone was not the first
smart phone, but it was the first to provide a
effective touch screen. Building upon this
success, in April of 2010 Apple introduced the
IPad - a tablet computer. (Last month,
Microsoft announced it's own tablet computer,
Surface, availability to be defined.)
Eichenwald quotes Steve Jobs saying Bill Gates
was the basic Microsoft problem: "Bill likes to
portray himself as a man of the product, but
he's really not. He's a businessperson. Winning
business was more important than making
great products."
This difference between the two companies can
be seen in their corporate statement of
purpose. Microsoft's is "Your potential. Our
passion." Apple's is "Think different." Over the
past twelve years, Apple thought different,
developed a long-term plan based upon strong
products, and prevailed. Microsoft got hung up
making money and stagnated.
Since 2000, the United States has floundered.
We've suffered from the same malaise that
plagued Microsoft. We've had poor
management and weak strategy. Our leaders
have been hypnotized by wealth.
Microsoft laughed at IBM for getting stuck in
the age of dinosaurs and then joined them.
Unfortunately the US has followed suit. The
social paradigm has shifted but, as a nation, we
haven't recognized this.
The official US motto is "In God We Trust," but
it should be "Big is Beautiful." Our leaders are
overly enamored with big: big military, big
business, and big money. Some would argue
that Microsoft stalled because it got too big.
Today, some argue that the US has gotten too
big. But Apple is big and it has prospered
because it had the wherewithal to capitalize on
a paradigm shift. It had the guts to think
different.
The problem with the US is not that we're too
big to govern or that government is too big.
Our problem is vision: we're stuck in the age of
dinosaurs and we don't get it. Americans need
to shake it up: emphasize growth rather than
profits. Americans need to think different.