Pressure Makes Diamonds

Here is how Microsoft is putting this x factor and it’s ring savvy to good use in their crucial battle with Google’s

Larry the Kid.

Steve Job’s was clearly correct when he pointed out the hazards of having a Salesman at the helm of a technology company. What he did not speak to was the advantage of having a salesman at the helm when a company needs to come from behind. Steve Ballmer is a salesman with a capital S. Like most salesman he works better when under pressure, anyone who has ever managed the sales division of a company can attest to this fact. Sales managers know that performance is related to pressure. Rewards and sales contest are designed to mimic this effect in the work place. I have always found that salesman subconsciously put themselves under pressure to bring out that adrenalin needed to achieve. They buy houses and cars they can not afford, they gamble with money they do not have and get involved relationships that are destructive , all in need to get it up for a sale. Steve Ballmer and Microsoft under his leadership are no different then the auto salesman or the every day stock brokers trying to make a living. They respond to and thrive on, pressure.

Last year I was ahead of the curve in calling out Microsoft’s partnership with Nokia. At that time hardly anybody believed it possible, never mind gave Microsoft any chance of gaining any market share in the smart phone business. I am by no means a Microsoft fan but I must say Microsoft’s execution of its strategy here is nothing short of remarkable and deserves attention.

By the way, I see a similar partnership happening with HP on the horizon, but that’s another post you can link to below.

Disclosure: I am not predicting Microsoft’s success, what I am saying is that they have done everything possible to suit up and position themselves ready should Google Android’s drop the ball. Let me detail here, how Microsoft once again was blindsided by the emergence of a new technology. Like an earlier time, when they were caught sleeping at the dawn of the Internet boom, Microsoft now finds themselves needing to play catch up in the Mobile computing market.

The salesman enters the ring:

Faced with the position Microsoft found themselves in 2007 when Apple introduced the iPhone, there were only a few options Microsoft taken. One, they could have ignored mobile and continued to focus on the desktop and software, enterprise and the Xbox. After all Microsoft makes quite a bit of money in those businesses. For about a year, Microsoft did exactly that, they did nothing, remaining, instead, faithful to Ballmer’s now famous dismissal of the iPhone as a no starter. Or they could admit to themselves that they were wrong and commit the company to bet the farm strategy to catch up and be relevant in the mobile business market. I do not know why, I do not know when they realized they were late to a significant occurrence but sometime in 2009 that’s the path Ballmer choose, here are the steps he undertook to make it happen.

Microsoft becomes a Southpaw

First off , they have committed their most talented programmers and went out and hired outside talent to design a new mobile OS. Under extreme short notice they were able to come up with a unique OS, and note to google’s attorneys an OS not even worthy of one Apple lawsuit. Next, to their credit, Microsoft swallowed their pride and admitted to the genius of a close integration between hardware and software and the protection of the “Walled Garden” approach to development. This represents a seismic shift for a company whose DNA bleeds licensing . This was a courageous decision coming from Microsoft. I would not be surprised to learn that this is some advice Steve passed to Bill Gates in those last couple of years before his death.

Time to get in Shape:

In a need to get up to speed quickly, Microsoft had to leapfrog the normal growth process and find a manufacturer who could give them the quality, production capacity and worldwide distribution to be a real player on the world stage.They looked around and they saw in Nokia a company who was in a similar situation as themselves and proposed marriage. Nokia accepted and Steven Elop was put in place at Nokia to smooth the transition and prepare Nokia to pass the regulations they would faced together until they were ready to announce their joint venture. Yes I am saying this was done before Elop took the post. In the meantime Microsoft made their operating system available to the Asian market who could turn on a dime and start shipping phones giving Microsoft sparring partners.

Apple is in Microsoft’s corner:

Microsoft begins to use a classic tactic a combination of strong-arm tactics by threatening law suits for patent infringement and smooth talking good cop to extract licensing fees from these manufacturers for their use of Android. They play it smart by not asking for the world and are able to settle all this unpleasantness in a very short order, putting them in weird position of not only receiving licensing fees for their Windows Phone OS but also a small fee on every Android phone sold. Something they do not even pay Google who provides the OS free. This is pure Microsoft genius at its best. Its classic one , two combination. Watch what happens later when I refer to this secret punch.

Microsoft buys Skype and calls in the note on Facebook, forming a strategic alliance with a major Google competitor and shutting Google out from search and ad revenue from Facebook, forcing Google to scramble and get Google+ up and running.

Again looking to Apple, Microsoft develops a vertical market to take advantage of music, gaming, media and books.
Google in the meantime is not sitting still , the begin to realize the threat and move to hedge their bet, by purchasing Motorola Mobility a failing company with sixteen thousand employees.

Microsoft and Apple begin subtly and not so subtly begin whispering in manufacturers ears that Google intends to cut them out and go the Apple route by make their own phones thru Motorola.

This is where the mobile market stands as of May 2013 as Microsoft & Google are both bleeding, Microsoft is waiting for one or all of these three scenario’s to go their way.

Any of these are very serious and can cause serious damage to Google:

One: Negative press about a fragmented operating system, viruses from an unprotected OS, a pirated operating system, privacy concerns, starts to eat away at Google’s once stella reputation, their commitment to Android becomes too costly both in dollars and focus that it abandons it, cuts it losses and concentrates on building back it’s core business. Besides it was all Eric Schmidt’s crazy idea anyway.

Two; Android manufacturers begin to buckle under Apple’s relentless lawsuits and look to get out by switching to Windows Phone OS of face having their products refused entrance to the market and their profits vanish.

Three; Google does in fact begin manufacturing phones thru Motorola and develops a ” Walled Garden ” approach. Forcing its current third-party manufacturers into Microsoft’s open arms and it’s users to abandon them.

Secret Combination revealed:

Remember earlier I pointed to a move by Microsoft that would reveal itself later, a secret punch, well here it is. The fees that Microsoft has these manufacturers paying for each Android phone can be credited to switching to Windows Phone OS.

Data is coming in showing that no one besides Apple and Samsung is making money building smartphones. Samsung already believes its hardware is the reason for their success and could easily be persuaded to switch to Windows Phone OS. If nothing more than the ability to get out from under Apple’s Lawsuits and cancellations of its very lucrative manufacturing contracts.Steve Ballmer and Microsoft have worked their butts off to get to this place waiting for the ball to drop right in their laps. I give them credit for a great effort. They have met their obligation regarding due diligence to their shareholders. Only time will tell if it works.

It certainly can be argued , as Steve Jobs does, that it is the very fact that a salesman was in charge, that Microsoft was caught sleeping, and he is right. However Microsoft can sleep well at night, knowing they did everything they could do and did it well.

I hope that’s not whats written on their tombstone.

This is not the only place Microsoft has positioned themselves to remain relevant, read the post below on how I see them migrating from a shrinking PC business.

See this post about a vision for Microsoft success.

And these

It Begins Ballmer Makes a move

For deeper background on Googlerola

Great Read on Android Fragmentation

Google fires back with an uppercut to Microsoft’s solar plexus Chrome Box

Updated 11/15/2012