Over the years I've seen Microsoft pursue the same strategy in taking over a market:
Wait for someone else to start and build an area, like Lotus 1-2-3 in spreadsheets, WordPerfect in word processors, Apple Macintosh in GUI operating systems, Netscape Navigator in web browsers.
Come out with a competing product in this area. Usually, version 1 is either so inoffensive that nobody even notices it (Microsoft Word for DOS), or is actually way behind the competition (Windows 1.0).
Instead of giving up, gradually improve the product until version 3 or so is at least competitive, if not better.
Start to leverage the product using all the dirty or not tricks at their disposal - deploy Fear Uncertainty and Doubt (Windows), tie in with already-dominant software (Internet Explorer on Windows), or even (gasp) just be better and wait for people to come around.
Wait for the competition to screw up and drop the ball. Then take over.
Step 5 has happened over and over for Microsoft. WordPerfect and Lotus 1-2-3 were the dominant office apps in the DOS era but they didn't transition to Windows very well (and yes there are a number of conspiracy theories about that!). Netscape, at the height of the browser wars, got bloated and ungainly, and decided to take a few years to rewrite the entire thing from scratch. By the time they were done, they were irrelevant.
Well, this strategy seems to be happening again in game consoles. The big war this Christmas season was going to be between the Sony Playstation 3 and the XBox 360. Well, Sony seems to have shot itself in the foot, building their system around such leading edge technology that they can't get the parts to produce enough machines in time, and the console - even as a loss-leader - is still way more expensive than the competition.
It was only a matter of time before Sony crashed out - they've spent most of this decade missing opportunities (iPod) or actively abusing customers (the rootkit fiasco) - so all Microsoft needed for a win was just to not screw up in an area they already know about, and like so many times before that's what they did.
(I'm going to leave Nintendo out of this discussion, since they're a surprise 'zig instead of zag' success, aiming at a different target than MS and Sony).
Microsoft can follow this strategy because they have a guaranteed massive income stream from Windows and Office and an experienced long-term-view corporate culture. Most companies can't afford a version 1 product that sucks - but Microsoft can. Most companies are looking to the next quarter to keep their investors happy - while Microsoft could live for years just on the money that they have in the bank. This lets them grow a product or technology gradually and still be standing with something to offer when the competition falls over.
You can see the new Zune is at stage 1 of this process - getting active derision from many quarters. Their earlier success against Apple didn't quite follow this model - instead they rode the combination of hardware competition in PCs and a growing lock in the business software environment and in games - so it will be interesting to see whether Apple drops the ball on the iPod, something they haven't done yet and seem unlikely to do, at least as long as Steve Jobs is running the show.
There also seems to be a Stage 6: when Microsoft completely dominates an area and stops really caring all that much and gets flabby and bloated. This becomes an opportunity for competitors to start nipping at its heels again. Linux and Mac OS X have been doing this in the Operating System space, Firefox in browsers, and Open Office in office suites. It's interesting to note that except for Apple, Microsoft's competition this time around is Open Source, which is inherently less likely to completely drop the ball like a corporation would.
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