When Microsoft announced this week its new CEO would be Satya Nadella some felt the choice was a bit out of place. For sure, Nadella has the chops and experience to be a CEO. He’s been with Microsoft since 1992 and was previously the executive vice president of the company’s Cloud and Enterprise group. But here’s the thing: cloud and enterprise aren’t Microsoft’s problems. The company is doing just fine in those departments (no doubt, in some part, thank to Nadella).
So it’s understandable why the needle didn’t move much at all on Microsoft’s stock price after Microsoft’s announcement of Nadella as the new CEO. After all, can a guy whose background is cloud services and enterprise really turn Microsoft around? Market watchers and, more importantly, investors want to see Microsoft become the 800 pound gorilla it was in the 1990s—but in order to do that the company needs to focus on consumer goods and services—something that hasn’t been Microsoft’s strong point for at least six years now.
Focusing On Your Only Remaining Strength: The Xbox
Make no mistake about it. Microsoft today isn’t just “uncool” in the eyes of consumers (and teenagers), it’s almost irrelevant. Apple, Google, Samsung, Amazon, Facebook (though it’s being shown the door too), and Twitter are where everyone is at. Walk down the street and you’ll see an iPhone or Android phone in virtually every hand. Ninety percent of the laptops in a Starbucks are MacBooks. iPads own the tablet space. Android and iOS own the mobile space. When kids want to write a school paper, they more often now turn to Google Docs instead of the bloated and expensive Microsoft Office. We share and search and communicate through Google, Facebook, Twitter, LinkedIn, and even Snapchat. And we buy all our tech goods from Amazon and Apple stores.
You’ll notice Microsoft doesn’t have its fingers in any of the above—not as a major player anyway.
In other words, the company is now where Apple was in the late 1990s—heading towards complete irrelevance.
But while Satya Nadella is most likely not another Steve Jobs, he can take a play from Jobs’ book and refocus the company—and in the process make it relevant again—by cutting dead weight and really building up the one strong product the company does have to create a halo effect for all its other products.
That product is the Xbox and it could be as important to Microsoft’s future as the iMac was to Apple’s.
After all, Steve Jobs took one product—the iMac—and reinvigorated the Mac community with it. When the iPod launched a few years later, fans, because of the success of the iMac, were willing to bite even though dozens of other companies beat Apple to the MP3 player market first. And it’s the iPod, which would not have been possible without the iMac, that started Apple’s turnaround from nearly-dead computer company to the leader in technology for the 21st century.
The “X” Ecosystem
While Microsoft makes mainly “ho-hum” products that are distant competitors to market leaders (its phones, its tablets) it does have one product that screams “cool” and is arguably the leader in its field: the Xbox. I mean, show me someone in his teens through thirties who wouldn’t want a new Xbox One and I’ll show you someone who’s dead inside. With the Xbox One Microsoft has done everything right: its hardware design is spot on, the tech inside rocks, and the content offerings are immense. The Xbox One is as perfect a consumer product as there can be and, more importantly, it shows that Microsoft can still make wonderful tech.
So now what Microsoft needs to do is build upon the success of the Xbox One and center its entire future ecosystem around it.
For starters, Microsoft can take the wonderful team of hardware designers and engineers it acquired with Nokia and put them to work on the future of its hardware products all banded under the new “X” moniker. Yes, get them working on a new “Xphone.” Forget about the past. Sever the company’s ties with Windows Phone and Windows Mobile. Those products may be adequate, but they aren’t selling.
What Nadella must do is be brave and bold enough to get rid of the Windows Phone altogether and take a few years to really invest in R&D and get the hardware right on the Xphone and Xwear wearable technologies. It’s there then that Microsoft could really begin to build out the inherent trust and loyalty Xbox users have and expand the company’s offerings into a wider, truly innovative ecosystem. And from there Microsoft could really stretch its legs and build upon the company’s (and Nadella’s) strengths in cloud computing and its Xbox One by positioning it as the hub of the next great system of consumer computing: the Internet of Things.
The Control Center of the Internet of Things
In the next decade we will be entering the “Internet of Things” era. All our devices from our phones to our computers to our ovens and central air and cars and you name it will be interconnected. This will become no more apparent than in our home. As the Xbox is already king of the living room, Microsoft needs to be ready to make it the king of the house—and they can do this, if they are quick enough, because they already have such a stranglehold on the room we spend most of our time in.
Imagine your Xbox having a super-smart Siri-like digital assistant—but one that can control the things around you. You simply speak to it and tell it what you want it to do: “Turn on the lights upstairs.” “Set my thermostat to off when I leave for work.” “Warm up the oven thirty minutes before I start cooking dinner.”
All those commands may seem far-fetched in 2014, but by 2024 some device in our home will be able to do that—so why not the Xbox? Microsoft has proven it’s got the cloud service chops and technology to be the leader in IoT, but in order to realize a product that will be as important in ten years as the iPhone was in the last decade, it needs to start building its Xbox ecosystem now and cut any of the dead weight on useless products that aren’t leading in any markets. That may seem hard to do at first, but whoever controls the automated home in the future will be the tech leader for at least 10 years—just as Apple set the tone of smartphones and became the world’s tech leader for nearly a decade because of it.
No, Putting An “X” In Front of Everything Won’t Solve All of Microsoft’s Problems
To be clear, simply rebranding all of Microsoft’s products with an “X” moniker in honor of the Xbox isn’t going to save the company. But what it will do is build a focus around improving its existing products and bringing them more in line with the quality of Microsoft’s only star right now. Once the focus is there—once the company is working together as a whole to create the ecosystem that will control the tech market for the next twenty years—Microsoft will finally be able to break out of its funk and do what Apple did in the early 2000’s: steadily build its products and offerings to become the tech leader of not this decade, but the next.
by rgoodwin via Featured Articles
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