An Institutional Failure

For decades, productivity meant Microsoft. Now, it is difficult not to wonder if that time is coming to an end. The company has built its empire on the sale of software, and it is almost certainly never expected to find itself in such a predicament, with consumer devices quickly cannibalizing its enterprise stronghold. Adding to its woes, Microsoft's competitors are giving their software away for free. Even Apple's most ambitious system upgrade to date, the Mac's OS X Yosemite, will be handed out to consumers at no charge. And for those who aren't Apple users but want an inexpensive laptop, the catalogues of major manufacturers are now stocked with Chromebooks powered by Google software that can cost as little as $200. It's a problem that is only getting worse. And as it becomes more common, Microsoft's business model becomes less viable. 

Microsoft's story has turned from that of an industrial giant to a floundering fish. With an ailing Office and no hope in mobile, its focus is scattered and its catalogue is dwindling. Combined with the struggling public image of its gaming division and, most recently, the worst round of layoffs in company history, the corporate story now seems rudderless, if not dead in the water.

Windows and Office

By now, the release pattern for Windows is all too familiar. Usually Microsoft releases a solid version of Windows (Windows 98, Windows XP) followed by an awful version (Windows ME, Windows Vista). With Windows 8, Microsoft needed to break this pattern. As sales declined, the traditional computer had to be reimagined if new life was to be injected into the aging Windows business. In an effort to have "no compromises," Microsoft awkwardly layered a mobile system over the desktop. The icing on the cake? A brand new paradigm for users to discover. To date, Windows 8 and its subsequent updates have not been well received.

By contrast, Google Docs hums along as the gold standard for cloud productivity software, and every iPad and iPhone now comes with free copies of Pages, Numbers, and Keynote – Apple's own solutions for getting things done.

Mobile

Windows Phone is well designed. Rather than merely copying the look and feel of Apple's popular iOS, Microsoft forged a new path, basing Windows Phone on a smooth scrolling tile interface and beautiful typography, all nestled inside premium devices. Unfortunately, having dragged its feet in a mobile space defined by iOS and Android, Microsoft's mobile ecosystem now finds itself locked in a crushing virtuous circle. If users aren't interested in switching to Windows Phone, developers won't make apps for it. Without apps, users have no reason to switch. Windows Phone is arguably a good alternative that seems to have been held back by the company's internal failure.

Microsoft’s story has turned from that of an industrial giant to a floundering fish.

Games and TV

Microsoft won the last console war. While the Xbox 360 and Sony's Playstation 3 ended up neck-and-neck in overall worldwide sales, Xbox 360 was the household name. Much like you went to a friend's house to "play Nintendo" in the 80s, for the last 7 years, we have all happily been "playing Xbox."
 
No longer. With the Playstation 4, Sony came out swinging with a powerful machine at a reasonable price that focused on gaming, pure and simple. Meanwhile, the Xbox One suffered in sales due to scattered focus, producing an overpriced and underpowered machine that wanted to dominate the living room. Even after dropping the mandatory Kinect camera and lowering the price by $100, Xbox One was still trumped in sales by the Playstation 4 in North America for the month of June. Clearly, the mindshare belongs to Sony, forcing Microsoft to trim the fat, killing off their ambitious TV plans meant to create original content for the console. 

The Layoffs

Microsoft CEO Satya Nadella (left) with VP Stephen Elop.

Microsoft CEO Satya Nadella (left) with VP Stephen Elop.

Microsoft recently laid off 18,000 employees. Yes, two-thirds of them came aboard when the company purchased Nokia's mobile operation, but the news is still devastating. 5,500 of those employees were people that had nothing to do with the Nokia buyout. This is the largest reduction of the workforce in its history. To break the news to their workforce, Satya Nadella and Stephen Elop, Executive Vice President of Microsoft's Devices & Services business unit, each sent emails on the state of the company to employees, stating why they believed this was a painful but necessary move. At least, that's what they attempted to do. Instead, employees opened inboxes only to be treated to meandering memos full of corporate buzzwords, insensitivity, and general confusion. The fallout continues to drift, as workers are summarily laid off over the next six months. 

Microsoft is full of brilliant employees that make brilliant products. Some of these products, stemming from great ideas and pushed by passionate people, make it into people's hands. Others do not. Such is the cost of doing business. But those products are themselves victims. The real issue lies in a problematic corporate culture struggling to stay relevant in a mobile world. It remains to be seen whether their new leadership can right the ship. Going by the excessive use of the word "synergy" in most recent manifestos, it's easy to think things stay business as usual for a little while longer.