Microsoft lost the chance to catch on mobile internet
Good morning! Welcome to Mister Sivann’s digital learning column, Mister Sivann & The Answer. Last week we raised the topic, of Microsoft battled successful transformation. Then there are two aspects to make a successful story. Next, let’s talk about the first key point and the circumstance of that time. And, how Microsoft lose the chance to catch on mobile internet.
We know that Microsoft started with Windows from the very earlier. Before the resurgence of Apple, the Windows operating system had an absolute monopoly on personal computers. Relying on its monopoly advantage, Microsoft’s application software on Windows, such as Office and IE browser, also occupy a fairly high market share. It can be said that Windows is the core engine and “cash cow” of Microsoft, and charging licensing fees for Windows is Microsoft’s most fundamental profit model.
Since Windows is so important, once Windows sales growth slows down or even stagnates, Microsoft will inevitably suffer a major blow. And indeed it is. After decades of rapid growth, the global personal computer market has approached the limit of sales and has begun to enter a downward path. This is an objective business law, and Microsoft can do nothing about it. But Microsoft’s mistake is that it failed to keep up with the rise of the mobile Internet era.
In the mobile Internet era, personal computers are no longer the first terminal for individuals to access the Internet. The importance of personal computers is decreasing, and they are rapidly replaced by smart terminals represented by smartphones.
It stands to reason that technology giants like Microsoft should be the first to see changes in technology trends and act quickly. Incredibly, however, Microsoft didn’t respond to the wave.
In 2014, when Nadella took office, global PC shipments were only 70 million units per quarter, while smartphones reached an astonishing 350 million units. In this huge smartphone market, the operating system is divided between Android and Apple, and Microsoft has no chance to participate.
What should we do at this time? When a former monopoly giant is eaten by competitors, its instinctive reaction is often to fight head-on with the opponent, and then regain the market. That’s what Microsoft intended from the start. In September 2013, half a year before Nadella took office, Microsoft announced the acquisition of Nokia’s mobile phone business and related patents for $7.1 billion. The direct purpose of this acquisition is that Microsoft wants to produce smartphones by itself and use its own mobile operating system, Windows Phone, to compete with Android and Apple.
For this merger, Nadella did not support it. He voted against it in the company’s internal vote at that time. Nadella’s reason is simple: the Internet world has always had only one of the best giants, and there is no third place. Microsoft has already lost in this war. If Microsoft cannot completely change the rules of the game, Windows Phone, as the third-ranked operating system for smartphones, has no chance to stand up.
It’s so regretful that the then Microsoft CEO Steve Ballmer did not adopt Nadella’s opinion and insisted on completing the merger. The later results fully confirmed Nadella’s concerns: Microsoft’s smartphone business did not improve, and there was no hope of a comeback. Microsoft finally had to announce the failure of the merger, abandon the mobile phone manufacturing business, and lay off 18,000 employees. This merger has also become one of the most failed typical cases of mergers and acquisitions in the history of IT.
As a result, Microsoft bought recognition at an expensive price of US$7.1 billion: the era of Windows is gone forever, and the glory of Windows on personal computers cannot be replicated on smartphones. Nadella realized that if Microsoft wants to get out of the crisis, it must make two fundamental changes in concept: first, face reality, and no longer regard Windows as Microsoft’s core growth model; growth engine. The strategic transformation promoted by Nadella starts from these two aspects.
I think you have understood the circumstances Microsoft faced at that time as I have briefed above. And, which allows you to be clearer on what will be in the following articles I will discuss more how did Nadella promote strategic transformation at the business level in the next column.
The specific digital proof will be explained in detail in another column I will release in a series next, or you also can do research about it by yourself, or read more in the book, Hits Refresh by Satya Nadella. Of course, what I have provided or shared here is just some idea or thought that be able to help you to ignite and activate your potential knowledge and skills through your own traits. See you in my article next week.
