Where am I coming from with this one you may ask? Or perhaps your answer is both. Anyway, this blog post is really about an interview with Steve Ballmer published in the San Jose Mercury on October 6th regarding Microsoft’s position in consumer electronics.
The article states: “In less than 10 years, Microsoft has become a major player in video games, mobile phones, set-top boxes and Internet search and advertising.”
“But the company is nowhere near as dominant in consumer electronics as it is in operating systems. It has spent billions of dollars establishing its various electronics businesses with only limited success.”
As I started my career in consumer electronics, I have always been a bit over-fascinated with the high tech industry’s efforts to enter this market. From National Semiconductor’s and Intel’s ill-fated foray into watches and Texas Instruments disastrous attempt at consumer calculators, high tech companies seem to feel that since they make the “guts” they should be able to collect the “added-value” the consumer pays that is mostly derived from the brilliance of the high tech company’s ability to create this wonderfulness.
And yet, these companies continue to fail and Microsoft is no exception.
The article makes these salient points:
Its Xbox 360 has lost its lead to Nintendo’s Wii and is losing ground to Sony’s PlayStation 3, despite debuting a year earlier than either. Smart-phones such as Research in Motion’s BlackBerry and Apple’s iPhone are stealing share from Windows Mobile devices. Microsoft’s Zune MP3 players are an afterthought in a market dominated by Apple’s iPods.
Ballmer started off the interview with an acknowledgement of the real issue when he said: “Consumer products are as much about the way they’re marketed as the way they’re built. And we have some work to do, I’d say, on the marketing side.”
That is an understatement, but at least he seemed to get it. But then…
If you look at what they’ve done in the last year or two, do you view any of your consumer products as unqualified successes?
“I certainly would say the work that we’ve done around Xbox is an unqualified success. No question about that. The product is selling very well. The Xbox is an absolute home run.”
But sales of the Xbox have slowed markedly. It’s been overtaken by the Wii. The PS3 is starting to catch up. What else would you say has been an unqualified success of late?
“I’d also refer to Vista as an unqualified success”
Now here’s where Ballmer goes off the rails or is just spouting the party line. My, albeit limited, survey data shows virtually no one likes or wants Vista and that it single-handedly may cause more Apple converts from PCs than anything Apple has ever done. The fact that Microsoft can force its PC partners to bundle Vista and not XP has juiced Vista sales, but at what cost?
By the time you finish reading the interview you begin to wonder if Ballmer understands that his operating system monopoly (created by his predecessors) is what provides his current apparent dominance, not the wonderfulness of his products, or his company’s understanding of the consumer.
Once upon a time Ford had more cars on the road than any other car company. But Henry Ford attempted to dictate to the consumer what they should want in a car. Alfred Sloan took that opening to lead General Motors to market dominance. And through skill and excellent management by his successors, General Motors has steadily lost market share and is apparently on financially difficult ground.
Is Steve Ballmer delusional or just wrong … don’t know, but the results are likely to be the same either way.