The Wisdom of Shutting down Windows Phone


Well it seemed inevitable, maybe even late but Microsoft’s phone division went through another downturn,  announcing that it is all but exiting the smartphone business and taking a $950 million charge and laying off 1,850 employees, primarily in Finland.  In a way it seems like the end of a long miserable journey.  A journey that cost a lot to Microsoft financially as well as cost a lot of its industry reputation as a visionary company.  In many ways it caused Microsoft to age faster than it would have or should have.  As bad as this all may sound this could be a crucial and a positive step for Microsoft, causing it to search for new lucrative revenue streams rather than spend time and money trying to recapture something lost that will never come back again (I call this the Ronald Reagan syndrome).

A lot of time could be spent and has already been spent on what went wrong.  I, personally, having sat in the building with the Windows Phone team, am at the point where I feel I could write a book on the subject, but frankly what purpose would it serve? Possibly a historical one, but it would simply be repeating a lot of what has already been said and is known.  I am sure there are many college graduate courses that are covering the subject in detail.  We all took hear them in business school, lessons in business on what not to do. The simple fact is Microsoft blew it, but now it is time to move on. Microsoft is a very proud company, but sometimes it is better to just swallow your pride, and move in a new direction.

I can only conjure up what Satya Nadella and Terry Myerson and team could have been thinking, but depending on who you listen to and what stat you like, since Microsoft acquired Nokia for more than $7 billion, its market share has never been much more than 5%,  Over the past few years it has simply been declining.  The question had to be asked, “how much more are we willing to invest so we can increase market share?”How much do we need to invest to get to 10%?  How do you get emotional appeal like Apple?   How do we differentiate?  I can only guess the numbers involved in product and marketing investment would have been in the billions.  Then you also have to ask, “By the time we get there will the market have moved on to somewhere else?”  Again I can only guess,but the answer must have been, “Can we do better placing our bets elsewhere”?  the answer is simple, “Yes”.

The industry is lining up behind a lot of new initiatives and technologies.  First for Microsoft is the cloud, and Microsoft is competing here with Office365 and Azure.  Are there threats?  You bet, but Microsoft is competing against leaders like AWS and upstarts like Google Docs.  They are in the hunt and generating revenue.  Money should be spent here as it represents the future growth of the company.  The demise of Windows Phone will be an opportunity to double down on this strategic business at Microsoft.  It can place bets on new markets, existing profitable business and growing businesses within the company.  Microsoft is in the game and up near the forefront with Amazon.  They are already generating $20 billion in revenues, the only concern being what will happen to the other $74 billion?

We have a lot excitement in  the industry for new emerging markets such as the AI initiative that is still in the early stages of market development.  To me AI is a horizontal platform play.  Once you create something of industry interest it will be something that can be incorporated into a variety of technologies such as voice and driver less vehicles. Fundamentally the companies or companies that get this right will be able to entice developers to their AI platform.  Something that would greatly appeal to people at Microsoft, since they lost so much developer mind share in the mobile phone upheaval. Not to mention since it would be a horizontal product by nature in could span industries, such as financial, retail, telecommunications etc..This market is in the early stages of development with a lot of grand talk, but no proven market leader at this point in time. The key for Microsoft will be to be in the game when it starts to take off and not fall too far behind. If you are not in the game at the inflection point, all will be lost, as competition accelerates into the future.

Microsoft Satya Nadella has used the term Mobile First, Cloud First world to reignite the innovation pipeline at Microsoft.  On the latter he is doing just fine.  The former will be a challenge to redefine and it is having an impact in other areas.  The failure of Windows Phone means Microsoft currently has no play in Mobile search, Google is sitting pretty with over 90% share.  Could Bing meet a similar fate as Windows Phone?  Probably not as the learning from search will be value in products across the company.  We already see how Google has expanded with search across industries.  I do not see Microsoft catching Google anytime in the near future but the learning alone can lead to new ideas and applications.  In time this will extend to the Cloud First world where Microsoft is quite competitive versus Amazon Web Services.

There are certain technologies that extend themselves.  If you think of Google Maps, it’s a natural technology that has made its way into our cars, whether it be in our car or on a iPhone or Android Device.  The next step will be the driver less car, whose next big hurdle will not be a technical one, but the ones our lawmakers put in front of it. Can government more fast enough.  This emerging market is one that is moving fast but there is still a window of time for Microsoft to be the automotive platform of the future as well as look internally at technologies they own and see how they can be extended into new markets.  I think anywhere we use the term platform, is a natural one Microsoft should play in as it is part of the corporate DNA in Redmond.

As was pointed out at the beginning the death of the Windows Phone need not be something to lament very long.  Rather than waste valuable cycles on what is lost it is time to look at opportunities on where it can gain.  There is a lot of valuable and painful learning that came out of the Windows Phone, but that can be used to springboard the company to the future.  Microsoft will need to make big bets n Cloud, AI, Big Data, and IoT.  It needs to be not afraid to fail, but take those failures as valuable educational opportunities and apply to whatever the next big bet will be.  Where we are today as an industry is in large part due to the early work Microsoft did in the PC and then extending that into the enterprise.  It still spends billions on R&D.  It has the second largest cash n hand on the planet (next to Apple).  In short it has a lot of assets that play to its advantage.  The next five years will challenge Microsoft to define and execute on its big initiatives, but it will no longer have to look over its shoulders as to what is happening on the iPhone, it will only need to look forward.

Good Night and Good Luck

Hans Henrik Hoffmann June 7, 2016

 

Advertisements
Categories Uncategorized

2 thoughts on “The Wisdom of Shutting down Windows Phone

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s