In the latest issue of VANITY FAIR, journalist Kurt Eichenwald chronicles the twelve-year decline of Microsoft. Over the same period, Apple prospered, but America floundered. Analyzing Microsoft's failure and Apple's success helps us understand what the US needs to do to get back on track.
In December of 2000, Microsoft shares (MSFT) were worth $119.94; it was the most valuable corporation in the world with a market capitalization of $510 billion. Then the slide began; now Microsoft's stock is worth $30.63 per share and it's market capitalization is $257B. During the same period Apple's stock (AAPL) increased in value from $8.19 to $614.32 and its market cap rose from $4.8B to $574B. Now Apple is the world's most valuable company.
Why did Microsoft decline while Apple prospered? Eichenwald focuses on management and strategy. But purpose is as important.
Eichenwald details a series of bad decisions made by Microsoft management, particularly CEO Steve Ballmer and founder and chief software architect Bill Gates. Microsoft has three product lines: personal computer (PC) operating systems -- Windows, PC productivity software -- Office (Word, Excel, Powerpoint"), and Server products (intended for businesses rather than individuals). For thirty years it's been the dominant software provider.
In the nineties, Microsoft was the number one US technology company. Brilliant techies flocked to its Redmond, Washington, campus and many suggested products outside operating systems and Office. For example, Eichenwald reports that in 1998 a Microsoft group developed a workable e-book -- a digital reading device. Bill Gates killed the product because, "He didn't like the user interface, because it didn't look like Windows." Ten years later, in November of 2007, Amazon introduced the Kindle e-book and it became a sensation -- selling millions of units.
Eichenwald attributes Microsoft's decline to the shortsightedness of Gates and Ballmer, their unwillingness to look beyond Windows, Office, and Server. It's more accurate to say that Microsoft had a strategy that worked very well until 2000 and then strayed off course -- but the company was making so much money Gates and Ballmer didn't notice. In 1980 Microsoft executives laughed at IBM executives because the Armonk crowd had been so enamored with their success, as a main-frame computer provider, they hadn't noticed when the technical paradigm shifted and the personal computer supplanted the mainframe. In 2000 the paradigm shifted again -- from the personal computer to the personal digital device -- and Microsoft didn't notice.
Apple did recognize the paradigm shift. In October of 2001, Apple introduced the IPod -- a digital music player. Steve Jobs saw a sea change in consumer preferences. Smart handheld devices, such as cameras, camcorders, and organizers had become very popular. As a consequence, Jobs moved Apple into the personal digital device marketplace. (Eichenwald writes that Microsoft initially laughed at the Ipod. By the time they realized the importance of the paradigm shift, it was too late -- Microsoft introduced Zune, a digital music player, in November of 2006; the product was discontinued last October.)
Apple followed the overwhelming success of the IPod with the June 2007 release of the IPhone. Thought by many to be the technical product of the decade, the IPhone was not the first smart phone, but it was the first to provide a effective touch screen. Building upon this success, in April of 2010 Apple introduced the IPad -- a tablet computer. (Last month, Microsoft announced it's own tablet computer, Surface, availability to be defined.)
Eichenwald quotes Steve Jobs saying Bill Gates was the basic Microsoft problem: "Bill likes to portray himself as a man of the product, but he's really not. He's a businessperson. Winning business was more important than making great products."
This difference between the two companies can be seen in their corporate statement of purpose. Microsoft's is "Your potential. Our passion." Apple's is "Think different." Over the past twelve years, Apple thought different, developed a long-term plan based upon strong products, and prevailed. Microsoft got hung up making money and stagnated.
Since 2000, the United States has floundered. We've suffered from the same malaise that plagued Microsoft. We've had poor management and weak strategy. Our leaders have been hypnotized by wealth.
Microsoft laughed at IBM for getting stuck in the age of dinosaurs and then joined them. Unfortunately the US has followed suit. The social paradigm has shifted but, as a nation, we haven't recognized this.
The official US motto is "In God We Trust," but it should be "Big is Beautiful." Our leaders are overly enamored with big: big military, big business, and big money. Some would argue that Microsoft stalled because it got too big. Today, some argue that the US has gotten too big. But Apple is big and it has prospered because it had the wherewithal to capitalize on a paradigm shift. It had the guts to think different.
The problem with the US is not that we're too big to govern or that government is too big. Our problem is vision: we're stuck in the age of dinosaurs and we don't get it. Americans need to shake it up: emphasize growth rather than profits. Americans need to think different.