Sunday, March 22, 2015

Microsoft’s New Operating Strategy (OS) Mindset: From Innovator Exclusivity to Generic Convertibility to Indian Ubiquity!

There are no two opinions that the phenomenal growth of Apple led iOS and iOS devices and Google led Android OS and Android devices have dealt a significant blow to the dominance of Windows as a once-monopoly operating system, and also started raising questions on the rigid coupling between computing devices and Windows software. This challenge to Windows and Microsoft hegemony has not been helped by Microsoft’s inadequate response to the mobile smartphone revolution in terms of delayed development of Windows (or any other OS) for mobile devices. Microsoft’s exclusive tie-up with Lumia for dedicated Windows based phones and the subsequent acquisition of Lumia mobile devices business have not helped in any dramatic manner either (as yet).

There are always critiques who try to predict the end-of-the-road for monopoly technologies and inflexible business strategies which have been slow to recognize the changing ecosystem. Such firms, instead of changing their strategies and products (or services) to cater to the new ecosystem, try to defend the established business models and product offerings but eventually fail to stem the tide. As version after version of Windows is developed and as the new Microsoft devices (whether the Lumia smartphones or Surface tablets) continue the attempts to make it big, the question is whether Microsoft is immune to the risk of business model decadence. The question assumes even greater significance as the latest version of Windows OS, Windows10, is getting ready to be launched.

The new Microsoft

Ever since Satya Nadella has taken charge a little over a year ago as the new CEO of Microsoft, there has been a palpable change in Microsoft strategies. Some of these relate to announcing of unlimited free cloud storage on Office 365, development of connectivity between Dropbox (a Google product) and Office 365, and offering of more effective and productive Office Apps for Apple’s iPhone and iPad. Azure, the cloud based software has been set for continuous development while Skype and other apps are also actively developed for all devices. The new Microsoft under Nadella has started recognizing its major competitors as likely unintended partners in its new quest for device-agnostic software acceptance. Clearly, in the new strategy, higher pricey software sales has become less important than more open acceptance of its once highly proprietary software.

Microsoft’s devices and tablets business has also been doing better, with the smartphone business focusing on the low price endpoints with multiple Lumia smartphones and the tablet business focusing on high end Surface tablets. Microsoft is also trying to broaden its appeal to youngsters and gaming addicts and virtual reality fans who may not care about Windows and Office at their stage of life. Building on its organic success of Xbox, Microsoft has moved inorganically too with the purchase of HoloLens and Minecraft with an eye on the future. HoloLens is the futuristic 3D holographic virtual reality headset, compatible with all systems. Minecraft is more than a game; it is a cross-platform community with a huge cloud component.  In addition, despite the virtual failure of Windows Vista and lukewarm success of Windows 8, the new Microsoft has not drawn back from launching its most audacious software development ever, Windows 10!      

Windows 10

If Microsoft is to be believed, Windows 10 is more than just a major software upgrade; it is a transformative operating system for Microsoft. Technology magazines are agog with 10 top features of Windows 10 that are announced (and another 10 top features not announced!). From all this promotional material, one can identify certain unique characteristics of Windows 10.  Primarily, it is cloud-centric, pan-device and cross-platform. It is touch (new Start menu) and speech sensitive (improved Cortana), with an inbuilt ability to adjust itself to different types of devices (Continuum); from smartphones to desktops and 2 inch screens to 84 inch screens. New browser (Spartan), new Outlook and new Xbox applications are also proposed. Commercially, with these features and more, Windows 10 is proposed to be offered free, at least for Windows recent version users and for the first year to start with.

More than all these features, the attempt by Microsoft to convert phones operating on Android system to a version of Windows (in association with one device manufacturer, initially) is an interesting play. Potentially, this may be extended to iOS. While it is too early to comment on what IP and patent related issues, this is a bold new stride; from offering Windows Apps like Office and OneDrive to Android and iPhones to convert alien operating systems into Windows own. Whether the convertibility option is superior to encouraging device makers to offer Windows based phones is for the future to judge but in the realms of contemporary business play the convertibility strategy is certainly a novel option. This is not without its risks, however, there is no guarantee that it can fit all devices smoothly and seamlessly, and also that the costs and experience will be any better. Apple and Android may not plan a counter-strategy given the low share of Windows OS devices but the risk would still remain.

Convertibility strategy

The convertibility strategy has probably some similarities to the strategies adopted by retailers of multi-brand and own brand franchising. It has also some parallels in after-sale service. In manufacturing and products, broadly speaking, there is no history of convertibility option as proposed for Windows. It could be outlandish and over-expensive even to think of it in such domains; like one automobile maker retrofitting its “superior” engine in another competitor’s automobile! The larger issue here, probably, is the attempt to draw users to a larger unified ecosystem. Whether it should be done through the way Microsoft now proposes or through the integrated elegance route of iOS and iOS devices as Apple has always done is a moot point at this stage. Microsoft has little to lose but a lot to gain by the convertibility strategy.

That said, as the importance of operating systems in products grows, the possibility of convertibility strategy could increase. As automobiles become driverless and self-navigated, Microsoft, Apple and Google could be the three players pitted against each other to control the new generation automobile development. The success that may be scored by Microsoft in the Windows 10 conversion strategy may hold some pointers to future successes in other more challenging arenas. One may think of home appliances, audio and video equipment, and remote home management systems as potential areas for the convertibility strategy. The convertibility strategy may bring to the fore once again the risks and benefits of open source versus proprietary operating system development and the defences against portability without restraints.

Competitor as customer

At a more philosophical plane, the unravelling Microsoft strategies bring forth the concept of ‘competitors as customers’. The advantages of the philosophy are that it provides economies of scope for key functions such as R&D and manufacturing, and also helps in the development of hybrid components and systems that integrate the superior systems of competitors. While firms may be initially dismissive of this concept, there is no reason why this cannot be a viable concept at least in the maturity and decline phases of the industry players. As an example, the two truck makers of India who are battling out for decades with independent designs from bolts to drivetrains but with little change in the market share over the long decades may opt for internal convertibility to bring down costs dramatically.

Domestic airlines, which are in the fragmented and declining phase, could also benefit a lot by making planes, aircraft maintenance and ground services portable across the carriers. Rather than drive down fares to completely unviable levels to boost capacity utilization of individual planes and routes of carriers, the carriers can operate at viable fare levels and have infrastructure portability to serve the customers better. While excessive collaboration amongst competitors may raise cartelisation fears, oversight by regulatory bodies and metrics of customer satisfaction could be certain moderating factors. In fact, there could be a counter-hypothesis as to whether competition without tangible differentiation is not worse than a monopoly with robust product specifications and service characteristics.

Indian ubiquity

While examining the Microsoft convertibility strategy, one may marvel at how India offers a fascinating spectrum of commonplace convertibility or portability; call it Jugad or otherwise. We have a mobile micro-sim card being precision-cut with scissors to convert it into a nano-sim card for the new generation phones! You may find a Maruti car spare part being customized for a Hyundai small car in a workshop specializing in the service of Toyota cars!!  More (intellectual) options could come up in the Indian context, in future. Indian higher education system is famous for certain overarching brands; Indian Institute of Technology, Indian Institute of Management, Indian Institute of Information Technology, Indian Institute of Science Research and Education, for example. While the admission to each Institute is governed by a specific common entrance test, once admitted in a particular location-specific institute the student would have to stay with that institute all through. There could be convertibility options across locations and branches under each overarching brand, something which a Harvard and Stanford can never hope to achieve as they try zealously to defend their distinctive identities!!!

Lighter vein discussions apart, the current and likely commonplace examples of India suggest the great Indian intellectual ubiquity; an openness to accept any proposition, an enthusiasm to deliver on anything and a willingness to fit into any culture. This ubiquity, if channeled in intellectually constructive modes focused on technology, quality and compliance, could deliver from and for India a host of Microsoft Windows 10 like or even superior convertibility options. This is because, the operating system convertibility is not a software challenge; it is a strategic mindset shift (it is a moot point if Satya Nadella being an Indian has helped in this new flexibility at Microsoft). If Windows convertibility is viewed as a mere software issue, we have already many App developers who straddle multiple platforms and devices, the latest being Star India’s mobile application, Hotstar, which achieved 10 million downloads in just 40 days, and is claimed to be capable of running on as many as 7,000 variations of operating systems and screen sizes. What matters is the strategic mindset that enables a firm develop a universal and standardized ecosystem for the customer that promises to the customer a true hassle-free convertibility and portability of low-cost and high-value user experience.

Posted by Dr CB Rao on March 22, 2015

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