Decoding the new economy

Is there a tablet to cure the reality distortion field?

Microsoft founder Bill Gates puts up an argument for Windows 8 tablets. But is he living in a reality distortion field?

It’s hard not to be impressed by the calibre of guests CNBC’s Squawk Box when they’re able to get Warren Buffett and Bill Gates on together for an interview.

During the interview Bill Gates made an interesting assertion about Apple’s iPad, ““A lot of those users are frustrated, they can’t type, they can’t create documents, they don’t have Office there.”

Bill’s undoubtedly right, some iPad users are frustrated by the device’s limitations. However for every irritated iPad user there are a dozen baffled by the lack of a Start button on Windows 8.

The reality distortion field though is strong, “Windows 8 really is revolutionary,” says Bill. “It takes the benefits of the tablet and the benefits of the PC and it’s able to support both of those.”

The Microsoft founder is enthusiastic about the company’s Windows tablet, “you have the portability of the tablet but the richness, in terms of the keyboard and Microsoft Office, of the PC.”

It’s notable Gates mentioned Microsoft Office, particularly given the question was about the cloud. It’s clear one of Microsoft’s priorities is to maintain their strength with productivity applications and move with their customers onto the cloud.

The problem though for Microsoft is that Apple’s iOS and Google’s Android are dominating the cloud focused operating systems, leaving Windows behind.

Making matters worse for Microsoft is it’s clear Windows 8 tablets are never going to catch their competitors. Consulting group Gartner last year predicted the global market for tablet computers will double over the next three years, but Microsoft will capture barely 10% of the sales.

OS	2011	2012	2013	2016
iOS	39,998	72,988	99,553	169,652
Android	17,292	37,878	61,684	137,657
Microsoft	0	4,863	14,547	43,648
QNX	807	2,643	6,036	17,836
Other Operating Systems	1,919	510	637	464
Total Market	60,017	118,883	182,457	369,258

Sitting in a reality distortion field is fine when things are going well and you dominate your world, but Microsoft – despite still being insanely profitable – no longer dominates the markets that made it into one of the world’s leading companies.

The challenge for Bill Gates and Microsoft’s management is adapting to those changes, projecting your own frustrations onto the users of a competitor’s product, isn’t a recipe for success.

The Five Stages of abandoning a product

Microsoft show us how to kill a product with the slow abandonment of Windows 8

Killing a technology product is never a clean process, as Google well know. Microsoft show the way to deal with a failed project and we’re seeing their five stages of abandoning a product as they prepare to retire Windows 8.

The stages of Microsoft are abandoning a product are well known – the failure of Microsoft Vista is the best example, but not the only one.

As Microsoft smooths Window 8’s pillow and prepares for its imminent demise we can see the process at work.

Denial

At first the company denies there is a problem, the flashy advertising campaigns are boosted and the various ‘in the camp’ commentators get informal briefings from company evangelists to fuel their snarky columns about people getting Microsoft’s latest product all wrong.

This usually goes on for around six months until the market feedback that the product is dog becomes overwhelming – usually this happens at the same time the first reliable sales figures start appearing.

Anger

As the consensus in the broader community becomes settled that the new product isn’t good, the company’s tame commentators turn nasty and lash out at the critics for ‘misrepresenting’ the new product.

This is usually a touchy period for Microsoft and other vendors as they can’t risk being too aggressive but they have to allow their allies to both let off steam and try to recover the credibility they lost in hyping what’s clearly been a market failure.

Bargaining

Once it’s clear the perceived wisdom that the product isn’t very good isn’t going to be shaken, the vendor comes out with special offers and pricing changes to try and coax users over to the new service.

With Windows 8 Microsoft tried something unusual, rather than cutting prices, Microsoft announced they would increase the cost of Windows 8.

The idea was probably to panic people into buying the product and giving Microsoft a revenue and market share bounce for the quarter.

It didn’t work – the consensus that Windows 7 is a better product meant people stayed away.

Depression

As the realisation that pricing tweaks and promotional stunts won’t work sends the company, and its supporters, into a funk.

For experienced industry watchers, the silence around a product that’s been heavily hyped and defended for the previous year or two is a good indication that the next version is being accelerated.

Acceptance

Eventually the vendor accepts the product has failed and starts working on its own exit strategy – hopefully one that doesn’t see too many executives sacked.

With Microsoft’s this process starts with a quiet announcement that the replacement version of Windows is on the way, in this case Windows Blue.

At the same time, the tame commentators start talking about ‘leaks’ of the wonderful new system that is in the pipeline. Early beta versions of the new product start popping up in developers’ forums and file sharing sites.

Eventually you get stories like this one that appeared in The Verge yesterday – Windows Blue leaks online and we can be sure the Microsoft public relations machine has subtly moved onto the next version.

Vale Windows 8

So Windows 8 is coming to an early end. In one way this is a shame as it was a brave gamble by Steve Ballmer and his team to solve the ‘three screen’ problem.

Computer users today are using three or more screens or devices – a desktop, a smartphone and a TV or tablet computer.

Microsoft were hoping they could develop a system that unified all these platforms and gave users a common experience regardless of what they were using.

It appears to have failed, probably because the different devices don’t have the same user experience so a keyboard based system doesn’t work on a touchscreen while a touch based system sucks really badly on a desktop or laptop computer – which is Windows 8’s real problem.

Unrealistic expectations

Another problem for Microsoft were the unrealistic expectations that Window 8 would halt the slide of personal computer sales.

PC manufacturers have been baffled by the rise of smartphones and tablet computers – vendors like Dell, HP and Acer have miserably in moving into the new product lines and they hoped that Microsoft could help arrest their market declines.

This was asking too much of Windows 8 and was never really likely.

So the cycle begins again with Windows Blue, the question is whether it will be the last version of Windows as we move further in the post-PC era.

Reputation’s long tail

Cutting customer support costs in many ways

When you decide customer support is an unnecessary cost, you make a statement that defines your position in the market place. Dell are reaping the consequences of this now.

Micheal Dell, CEO and founder of Dell Computers, hopes to grab some of the tablet computer market from Apple with the release of Microsoft Windows 8.

It’s a big goal – Apple have owned the tablet computer market since launching the iPad.

Dell, along with most of the other PC manufacturers, squandered the decade’s head start they had in tablet computers with poorly designed and overpriced tablet PCs which were based around a clunky version of Microsoft Windows using styluses.

Part of the problem was Windows itself; the operating system was designed for desktop users and to make it work on tablet computers it required a clunky workaround. Being designed for smart phones and tables mean Windows 8 may overcome previous limitations.

But Dell have a problem; they are perceived as a low price, low quality supplier and have a competitor in Apple that has locked in the supply chain for the product.

So Dell will struggle to beat Apple on price while customers believe the Dell system is inferior.

Even more difficult for Dell is their support reputation, a quick look at the comments to the Bloomberg story illustrates the problem.

Of the the sixteen reader comments, admittedly not a scientific sample, three business owners claim they will never buy Dell again after customer support issues.

This is the critical mistake Dell’s management made in the 2000s – in order to cut costs so they could be profitable at lower price points they trashed their support.

Eventually this culminated in the Dell Hell debacle where Jeff Jarvis’ experience summed up the frustrations of thousands of Dell’s disillusioned customers.

Apple on the other hand chose not to go down the rabbit hole of cheap and nasty systems. Today they can offer free, and skilled, support in their genius bars as their fat margins allow them to provide constructive and helpful assistance to their customers.

Now Dell has the reputation for at best indifferent after sales service which means they are locked into competing on price and ever declining margins.

It’s not a good place to be for Dell but that’s what you get for treating your customers like an unnecessary nuisance while fixating on headline prices.

We often talk about the Internet’s long tail; our online reputations could be the longest tail of all.

Tag: windows 8