Thursday, January 5, 2012

Microsoft and Kodak - same company, different timeline?

As Rochester, NY residents we wax perhaps a bit more philosophically about our local "founding" company Kodak.  I've been alive long enough to know Kodak in the heyday of photography when nothing seemed to be able to bring the "Big Yellow Box" down, to today's more sobering announcement in the Wall Street Journal that they are relying on a sale of some of their most important digital photography patents (not licensing or enforcing mind you - selling) to prevent bankruptcy.  I predicted their demise into a tiny office selling patents downtown filled with lawyers and brokers from one of the largest and most diverse photographic giants 10 years ago when they started selling off profitable divisions to fund quarterly stock price expectations and a long tradition of paying out unsustainable "profit sharing bonuses" to employees.

If you look back over the timeline for Kodak, one of the key things that jumps out at you are their lost opportunities.  One of the reasons that digital photography patents exist in Kodak's portfolio at all is that for a large part - they invented it.  And yet once invented it was quietly killed by an internal team stuck in the past - looking at chemical sales and the blade/razor effect and refusing to think that someday that might not work for them and digital would make them obsolete.  Love those cool OLED displays?  Also invented at Kodak, but they never made any instead selling the patent to LG Electronics to make some quick cash.  They similarly bet wrong in the videotape arena, refusing to believe it would replace handheld film - getting into it too late to matter and choosing and betting on the wrong platform (Beta not VHS).  Another misstep was the inability to identify the importance of instant photography from competitor Polaroid.  Recently they've entered the consumer printing market, well after it had become commoditized.

So let's look now at Microsoft's recent timeline.  Beholden to inertia they've now missed the boat on at least 3 of the most recent 4 innovation thresholds.  Their windows phone 7 for all it's evolutionary but not revolutionary technological superiority is too little too late in a mobile marketplace now dominated by Android and Apple.  They bet that something better than Windows Mobile (which never held more than 7 or 8% of the market) was all they had to make and that they could roll it out after everyone else - hubris of the worst kind.  Sales of windows 7 phones lag behind usage of their now no longer sold windows 6.5 phones - hardly a promising beginning a year after release. 

Similarly their tablet effort has been derailed by tying it directly to the windows OS - with usable tablets from Microsoft now not due until 2013, they might as well just throw in the towel.  The market will be saturated with cheap Android and high end iPad tablets by that point, and they'll be stepping into a well established commodity market yet again.  If they get 5% of it I'll be surprised.  Similarly the trend away from big hardware and iron and towards the cloud is being only 1/2 well managed by Microsoft.  Though they have a powerful and well managed cloud offering in Office365, competition with the server and desktop divisions within their company has rendered them ineffective at competing with Google, Amazon and other providers, with their offerings significantly more expensive and complex to manage than those of their competitors.  Even partners are getting confused messages about what to sell to whom, and their sales and marketing have been woeful in trying to clarify why Office365 vs other platforms like Gmail, probably due to fear of cannibalizing their currently fat server and office divisions that run the rest of the company financially.

Microsoft could learn a thing or two from Kodak's fate:  if you let the line of business guys decide what to market and be innovative with you are doomed to fail.  Disruptive technologies like the iPad are DESIGNED from scratch to be disruptive.  Did you see Apple's laptop division try to kill the iPad - no you did not.  The reason is that they would rather create an innovative and competitive new product than retain the tail end of a laptop sales era they could see disappearing in the future.  They looked at more than next quarter.  Similarly Zune, though they have a superior service to Apple came in too little, too late to compete with the iPod juggernaut.  Even the Android crowd hasn't yet figured out how to break that barrier.  The only real success Microsoft has had is with the Xbox360 and Kinect.  One gaming platform a company doesn't make.  Kinect like devices could completely change the way we interact with all sorts of devices - laptops, tablets, kiosk displays.  But if we leave it to the LOB folks at Microsoft, Apple and Android will have competing camera based products out there eating their lunch by the time they actually get anything in the hands of consumers.

This is really a hard post for me to put up there.  I've been a staunch Microsoft advocate for years, and I despise Apple's rigid control over their platform hardware and sales process - don't even get me started on the whole iTunes thing.  But I gotta say Microsoft - if you stay on this path - in 10-15 years you could find your stock under a $1 and be the host of a bunch of patent lawyers squabbling over who gets your most valuable stuff before you go the way of the Dodo.  Microsoft needs to take a hard look at itself and make some significant changes to the way they think about innovation and being first to market.  Because second to market with a 2-3 year lead time is no longer an option.  If they don't think it can happen to them - look at Kodak 15 years ago.  Then tell me it can't.