Wednesday, April 17, 2013

Is Microsoft colorblind? Can't it tell the difference between red and blue water?

The irrelevance of competition and creation of new demand are two of the characteristics that make blue ocean strategy infinitely more attractive than operating in the red waters of fierce competition and ever decreasing profit potential. Capturing these benefits by moving an organization to clear, blue waters is not as easy to accomplish in real time as retrospectively reviewing success stories like Cirque du Soleil make it appear. Even if the desire is there, not every company has the vision to recognize and exploit these rare opportunities. However, what every organization does possess is the ability, but not always the courage, to make the decision not to enter into deep red waters. The decision not to act can be every bit as valuable as the one to create a new blue ocean. Unfortunately, many organizations have a follow the leader mentality which puzzles and frustrates me more than any other part of corporate strategy. 

Microsoft's rumored decision to enter the "smart watch" market is a recent example of this lemming like approach to business operations. All signs point to wearable devices, namely "smart watches", as the next step in consumer technology, notwithstanding Google glass. While the concept of embedding technology in watches has existed for roughly 30 years, I'm considering the approaching wave of products a semi-blue ocean since it will re-purpose largely existing technology and make watches attractive to a younger demographic of consumers who have moved away from wearing watches in recent years. So far so good for Microsoft, there is money to be made here. Who will make it is the question. Microsoft's decision to produce a technology-laiden wristwatch begins to unravel as two questions are examined: 

1) Where does the company's leadership see enough market share available in this product space to justify dedicating resources to it? Apple, Google, Samsung, Pebble, i'm Smart, Motorola, and Baidu (and this is an incomplete list) either already have a "smart watch" available for purchase or are closer to release than Microsoft.

2) Is this a product category Microsoft should be involved with in the first place? The company has had success with software over the years through its Windows operating system (although the jury remains out on Windows 8) and the Office suite of programs. Its track record with hardware is not as storied. How many Surface tablets or Windows phones do you see in a day compared to Apple iPads, iPhones, or Samsung Galaxies?

Do you believe there's enough profit to be had in the "smart watch" market to support 8 or more competing products? If you were Microsoft, would you rather spend your resources fighting day in and day out for a piece of the "smart watch" pie or creating the next in-demand consumer product in your own blue ocean?

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