I found a truly fascinating quote in an article from The Wall Street Journal on Wednesday. The quote is from Terry Myerson, executive vice president of Microsoft’s Windows and Devices Group. Here it is:
“When I look back on our journey in mobility, we’ve done hard work and had great ideas, but haven’t always had the alignment needed across the company to make an impact,” Mr. Myerson wrote in his email to employees.
I find the quote fascinating because it’s simultaneously consequential and preposterous.
The quote is consequential because it’s an admission of the failure of a $7 billion acquisition. That’s what Microsoft paid for Nokia. Over the last 12 months, Microsoft has written down the value of their mobile business by almost exactly that amount. Basically, Microsoft took $7 billion and flushed it down the toilet.
The quote is preposterous because it assigns blame to the nebulous notion of “alignment”, or lack thereof. Hard work? Check. Great ideas? Check. Alignment? That’s where we failed.
And that explanation appeared in an email sent to employees? Yikes. I can imagine precisely zero people took it as a compelling explanation of what went wrong.
Look at the mobile landscape today. At the highest level, from an operating system perspective, you have Android and iOS. What’s the business model in these two cases?
Google gives Android away for free. The idea is to push users toward Google’s services (search and the Play store, predominantly). Handset manufacturers can focus exclusively on the hardware, knowing they’re being gifted a world-class operating system from one of the world’s largest companies.
Apple bundles iOS with the iPhone, selling it as a package. Like Google, Apple also harvests some service revenue from its users. Apple uses iOS to offer a differentiated user experience. The software plays more nicely with the hardware. Because Apple measures and controls the totality of the user’s experience, it has more opportunity for optimization.
With that information in our back pocket, what was Microsoft’s real problem with mobile? They were late to the party. The iPhone revolutionized smartphones. Android was commercially disruptive, since no one had to pay for a world-class mobile operating platform. If you’re third out of the gate, following those two juggernauts, you’re probably toast.
It’s easy to think of smartphones as a race for consumers. It’s just as much, if not more so, a race for developers. That’s one of the reasons smartphones were so groundbreaking: their use cases were practically infinite. Touch screens and accelerometers opened the flood gates of potential applications.
There are a finite number of first-rate app developers in the world. The race was on to bring them to your platform. The network effects could not have been more clear. The more and better developers you enrolled, the more customers you attracted. That’s why Google and Apple had deliberate approaches for how developers could commercialize apps, which would incentivize these developers to build sustainable businesses around smartphones.
It’s not like a car. Say Apple builds a decent car. Say Google builds a better car. Then Microsoft comes along and blows everyone out of the water with a truly great car. You can be third, or later, out of the gate with cars and still win big. (Which is exactly what Tesla is trying to do.)
With smartphones, it’s different, primarily because of the network effects. It’s not easy to port apps over from one proprietary environment (e.g. Google’s) to another (e.g. Apple’s). Adding one more transition (e.g. Microsoft’s) is even more cumbersome.
That’s the primary reason I find the “alignment” quote from the Microsoft executive fascinating, and frustrating. Who wasn’t aligned? How did lack of alignment suppress the hard work and great ideas that were springing from this executive’s group? Who exactly is responsible?
Executives at that level are extraordinarily well paid. It’s a simple issue of accountability. If your team failed on your watch…you failed. Sure, you can blame the broader organization. But that’s a coward’s way out.
I’m not trying to beat Microsoft over the head about its mobile failure. Microsoft did what its shareholders should have hoped…it took a big swing. With the financial resources Microsoft has, it can take those swings. Kudos to them for having the stones to do it.
With that said, Microsoft lost the specific battle around mobile phones. I would think the executive vice president of Microsoft’s Windows and Devices group could own that fact.
You know what I thought of when I read the quote from Terry Myerson? “Success has many fathers. Failure is an orphan”. What a frustratingly poor excuse for leadership.