Onuora: OK.
Adam: And in Clayton Christensen’s language it’s called sustaining. I’m looking for a way to continue to sustain the install base by trying to move them forward in a way that’s nice and easy and pretty and comfortable for them.

Onuora: OK.
Adam: What I will tell you again is that we have a large body of research now that shows that we don’t have any examples of that working. None. What we see is that once users transition markets, they say the old market is the old market and the new market is the new market.

So let me give you another sort of analogy but a lot of people click to this. And that is the idea that at one point in time you had manual transmissions in cars and then we had automatic transmissions in cars, right?

Onuora: OK.
Adam: You’re probably aware that there were hybrid transmissions that were made.

Onuora: Sure.
Adam: You’d get in the car and you could operate it as sort of a mix – they were clutchless, you had semi-automatics, but there was no clutch but you still had to move the gears

Onuora: OK.
Adam: And then we have the hybrids where you actually have it in drive but you can have it in auto and you can shift with it right?

Onuora: Sure.
Adam: Those hybrid transmissions were never successful because people either drove a manual or an automatic and eventually the market became automatic, 99.9% automatic.

Onuora: Well yeah but I mean that’s a great example because the entire world is aware of automatic transmission but I mean I’m originally from Africa and I’ll tell you that great portions of the world know about automatic cars but they still prefer to use the stick shift.
Adam: And you do know and I’ve seen this in comments to me as well. Nobody in America in this marketplace is gonna win based upon trying to sell a lot of products in Africa and India.

Onuora: Well I’m just talking about…
Adam: Come on be practical with me …

Onuora: No I’m not talking about a percentage of the world’s cars. You used an example saying we started out in the world with stick shifts and then built “superior” technology called automatic transmissions. I’m saying logically well, everyone should go to automatics and say “why do we need stick shifts anymore?”.

But even in a lot of the markets and territories where automatic cars are available, people still make the choice to go with stick shift.

Adam: That’s right but you don’t see GM, Chrysler, or any major manufacturer as a winner doing that. And that’s the problem you’ve got. Microsoft is so big (and this is the part you come back to), Microsoft is so big that it has to win in a developing world that drives the vast majority of profitable high end volume.

You have to win there. You can’t say that you’re gonna fall back on this other market because there’s not enough margin in it. You see Microsoft’s got a business model and they have to make a certain amount of money and you can’t fall back and say “Oh great I’m gonna sustain this company by selling into Africa or another low-priced, low-margin market”.

This came up when I said RIM was dead and I got slaughtered with comments and emails from people in India telling me how nobody in India could afford an iPhone and how everybody used a Blackberry and therefore RIM would live forever.

Onuora: OK.
Adam: The problem is no, that’s not true. Because there’s not enough profit in it. Go back and look at the profits at Microsoft. They’re completely dependent on Windows and Office profits now. That’s the “defend our company” problem.

You say I’ve got to make Windows 8 work because that’s where all our profits are. Five years ago I didn’t sit down and say look I’ve got a division called Entertainment and I’ve got to make that wildly successful and wildly profitable. I’ve got a division called Online and I’ve got to make that wildly successful and wildly profitable.

You know, I’ve got a division called Servers and Tools that needs to be wildly successful and wildly profitable. Of those three, Servers and Tools is doing the best by far.

Onuora: Sure.
Adam: There’s no where near enough profit in that to keep Microsoft alive unless Windows 8 and Surface match the kind of sales growth and profitability that you had historically in those units. So if you get a slip in Windows 8 and Surface sales, the underpinnings of the profit model for the whole corporation called Microsoft suddenly slides out from under you.

And that’s why I put those bullets in there when I said here’s what I see happening. Very quickly your profits start to evaporate and at that rate what do you have to do? You’re gonna have to do layoffs. We already know that the profit per employee at Microsoft is far lower than the competitors just mentioned including Apple and Google.

Head over to check out Part 2

Not Backing Down – Windows 8 and the future of Microsoft: My Exclusive Interview with Adam Hartung Part 2

About the Author

Onuora Amobi is the Founder and VP of Digital Marketing at Learn About The Web Inc. Onuora has more than a decade of information security, project management and management consulting experience. He has specialized in the management and deployment of large scale ERP client/server systems.

In addition to being a former Microsoft MVP and the founder and editor of EyeOnWindows.com, he is the CEO of a Pasadena based online marketing education startup - Learn About The Web Inc. (www.learnabouttheweb.com) and The Redmond Cloud (https://www.theredmondcloud.com).

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10 Comments
  1. I have to agree, brilliantly thought through and MS might just do it but like Adam, I’d argue they will have done it the hard way. I have a Surface RT Tablet, the more Tablet friendly version and I find myself turning to my Nexus 7 and iPad for ease of use, they are just not awkward. Add to this that Google has a great set of tools in Doc’s, Spreadsheets, Google+ & Email mean I can have a really good, cost effective, anywhere usage which further threatens Microsoft sales of Windows & Office… Imagine you are an SME starting from scratch, would you use these tools or the new ones available on tablets and any device… Ok Lunch over back to work…

    • Your description outlines the opportunity MS has to win market share; Google does a few things well and Apples does a few things well but they don’t do them all well. If MS can figure out the ease of use thing and seamless integration, they will do what the others have not. Google continues to ignore what real business users need. You can’t use Google Docs to prepare a professional document and Apple isn’t even trying. MS just needs to improve ease of use and pull their products together so people can use one platform. I’ve been using Apple, Google and MS for years and recently dropped Apply because the Surface and Windows 8 phone fit my needs with seamless integration. I’m frustrated learning Windows 8 RT and that is the arrogance of MS thinking it is okay to make consumers completely relearn how to use their OS. It is a better browser IF it is compatible with websites, reliable and faster.

  2. I don’t see why defending your customer base by adding innovating technology is a bad part of your strategy. A seamless integration of business systems makes it harder to move to other systems. At the same time innovative technology competes with others taking market share. A two pronged approach seems smart. The problem is that Microsoft has been arrogant for years and thinking they don’t have to compete. Microsoft has put about several lack luster products thinking the market would just accept them since they are from Microsoft. Consumers are not blind minions following Microsoft. If Microsoft can be humble and realize they must product great products and services seamless integrated and encourage development they will gain market share. Apply and Google have captured market share because their products are easy and just work. Microsoft puts out IE 9 and 10 and it has constant performance and integration issues. Every time a user has to close IE because it crashes or freezes Microsoft loses stock with users. I have a Surface and a Windows 8 phone and both are excellent choices. If Microsoft can get more apps they will be going head to head with iPad and others plus have the advantage of Office product integration.

  3. george_szubinski / January 28, 2013 at 5:41 am /Reply

    and I disagree with Coatsey.
    Having owned a Surface RT and sold it patiently waiting for my Surface Pro… I found my ipad Nexus grossly inferior and couldnt wait to get onto my Surface. I have been in IT a very long time and seen too many people like this guy pumping up his background and his mentors… only to still be there in 10 years when his predictions have failed….

    nope…. I cannot see it happening…

    as for great set of google tools… Coatsey… perhaps but not for the heavy duty stuff I do… and my corporate customers need…. you see there is the difference … the toys are for kids to consume… but business is totally different…

  4. Forget about it. Microsoft ppl are smart. They are different, they deal with technology and those kind of people can adapt very fast if they want to. Besides I have had convertibles for about 5 years now (Vista, 7 and 8). Well yeah, Vista convertibles were clunky heavy and ultra-expensive, but they were awesome. Windows 7 convertibles were also nice, with the addition of multitouch and capacitive screens (vista’s ones were resistive). But the device was still somehow heavy and was more of a laptop than a convertible that could be used as a real tablet. And now I’ve got a Windows 8 convertible (Sony Vaio Duo 11 256GB SSD i7) and I can tell everybody it is just SO MUCH F&*&*ING better than whatever other tablet / convertible / whatever ever made. And Windows 8 is just a complete pleasure to use!! Absolutely nothing can beat up this beast!!

  5. Very interesting. I was really sure I would disagree with what he said, but instead found myself agreeing in large part. MS has a big job ahead of itself for exactly the reasons he states. MS is reacting defensively instead of proactively attacking a new market. I think people intrinsically see that and make decisions base on confidence displays by the manufactures.

    That said. People do have a problem, which enterprises are the first to recognize. “How do I get all I need to do done on a tablet?” The solution to this must be either on the front end or the back end, or a combination. MS has the complete answer to this already on the front end with Windows 8. It is just not conveying that message to them well. Apple has absolutely no answer to this, as iPad is at least 3 generations away from that and shows no signs they understand the problem. iPads are only viable to consumers that have computers to fall back on when necessary. Their hope then lies in a third party building a backend solution. Google is a lot closer if they combine Android with Google Chrome OS. However his comments really sinks in to me that Windows RT is exactly the type of venture that MS needs to avoid. This is the exact sign that MS is hedging its complete solution bet. This shows that MS is not confident in its convergence strategy. People are picking this up and unless MS changes its message, it will be in trouble.

    So where does that leave Windows Phone? I am sorry to admit this, as I am really wanting Windows Phone to be a viable platform. The current endevor seems bound to fail. It has been playing catch-up and will continue to appear this way even thought technically they have caught up. They actually need to go beyond. MS has always been about taking some idea and making it better. That works when they are ahead, but they are not in the phone and tablet arenas. It is time that MS implements disruptive technology or they will never break into this market.

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