Monday, June 12, 2017

Microsoft's consistent failure in diversifying

Microsoft is one of the most successful companies of all time, and currently one of the largest in the world. Their software and operating systems are everywhere in business and personal computing. In my experience, most businesses would come crashing down if they no longer could use Microsoft Excel or PowerPoint. Even though over the years suitable competitors for those products have surfaced, such as Google's free software products, the Microsoft Office line of products is still the gold standard. Microsoft Windows also still remains the overwhelming operating system leader for businesses. This group of software products has been a consistent cash cow for Microsoft for decades.

Over the last 20 years Microsoft has continually tried to diversify its revenue sources by expanding into related fields, however they have consistently been late to the competition or produced products that never gained traction with consumers. Internet Explorer is routinely the least popular browser among internet users, Bing search engine still lags far behind Google search, and the Microsoft Zune music player and Windows phones were both failed attempts at competing with Apple products. They have also tried acquiring new-aged internet companies like Skype and LinkedIn, and while those services have remained viable Microsoft has not gained large new revenues from them.

All of those attempts seem to me to be "Pseudo Adjacencies" as mentioned in the "Seven Ways to Fail big" article. Microsoft continually tried to move into attractive markets or high growth markets like internet search and music players, even though they didn't have existing strengths in search algorithms or manufacturing consumer products.

Microsoft's newest attempt at moving into a new business line, their Azure cloud computing service, does seem to be working though. And this move goes against one of the other seven ways to fail, "Betting on the Wrong Technology". Microsoft bet on cloud computing and fully committed to it, and they have seemingly picked the right technology.

With Microsoft's Azure business line looking like a success after years of relative failures, perhaps we shouldn't judge all of those past endeavors as relative failures. Maybe we should give credit to Microsoft for using their cash cow to fund bets in adjacent businesses, and not giving up until they found that they could succeed in.

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