Tuesday, June 19, 2012

Microsoft's Surface: A strategic disaster in the making?

Microsoft's highly anticipated and highly publicized unveiling of its new Surface tablet raises many questions, several of which relate to the "Blue Oceans" and "Seven Ways to Fail Big" articles.

First off, we can't help but wonder whether Microsoft has thoroughly thought through the inherent challenges of diving into a big "red ocean" dominated by a gigantic shark called the iPad. Apple has sold more than 50 million iPads in less than two years.

It is worth bearing in mind that iPads sell for about $500. Will Microsoft be able to match that price with Surface? And even if it can, will profit margins then be dangerously small?

Apple is a particularly tough competitor when it comes to price because of their incredible supply chain and manufacturing contracts. Can Microsoft even come close to matching Apple's efficiency?

Furthermore, with 50 million iPads in circulation now, how much of a market is left for a competitor, regardless of price? While tablets might be lighter and sleeker than laptops, many laptop owners might see little need to spend additional money on a tablet.

Microsoft is moving not only into a red ocean, but into an adjacent market.

The thinking in Redmond, Washington, is obviously that the company's success in developing operating systems will lead to success in selling hardware, too. After all, software and hardware are certainly adjacent.

But will success translate?

Yes, Microsoft developed the Xbox, which has become a very popular and profitable video-game console. But Apple doesn't make video-game consoles, so the analogy might not hold.

We saw in "Seven Ways to Fail Big" some examples of companies that moved into adjacent markets, as Microsoft is doing, and failed spectacularly.

From a strategic standpoint, the big, unanswered questions are:

Can Microsoft compete head-on with Apple in the tablet sector?

And can Microsoft succeed in an adjacent market?

What do you think?

1 comment:

  1. I believe Apple's Tim Cook CEO described this competitive offering as a fridge-toaster.

    Microsoft countered that it was a toaster-oven, a fairly lame response. By Microsoft's own account, you'd end up with either burnt toast or an under-cooked roast.

    My wish for Microsoft is that they'd get out of operating systems and concentrate on making applications, only, for all hardware platforms.

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