Microsoft's strategy: a rotten imitation of Apple?
‘It truly is a new era at Microsoft,’ chief executive Steve Ballmer recently claimed in his annual letter to shareholders.
And there is plenty of evidence that Microsoft has committed to a radically different approach in recent weeks. We’ve seen the opening of a series of Microsoft retail stores across the US featuring clean modern environments and “technical advisers” to assist consumers with their Windows-related purchases.
There is also the growing speculation that Microsoft will break with the tradition of occasional big new software launches, like Windows 8, and opt for an annual release cycle from now on. Under the codename “Windows Blue” Microsoft now plans a mid-2013 launch of a new operating platform that will be updated with annual incremental versions for both Windows phone and PC users.
And it seems to be working. There have been global reports of both the new Surface tablets and the co-branded Nokia Lumia selling out in various retailers. The Lumia, in particular, made headlines recently with reports of a sell-out in Germany and long waiting times at both AT&T and Amazon.
However, what might appear to be a new era for Microsoft seems like little more than a concerted and ultimately fool-hearted attempt to copy Apple. Rarely in the history of big brand strategy has a company been so guilty of competitor orientation. Look again at Microsoft’s brave “new era” and I see an Apple redux.
The idea of being both a software and hardware platform is, in itself, a fundamental Apple approach. Microsoft’s high concept, spacious retail spaces look like second-class replicas of Apple stores and technical advisers who patrol them just an underwhelming version of Apple’s ‘Geniuses’. Updating software platforms annually is also hardly new - Apple has been using the approach for a decade. Even the sell-out premise that Microsoft seems so keen to communicate is an Apple tactic.
A quick look at the pricing of the new Surface also reveals the Apple influence. The entry level Surface’s US retail price is $599 (with cover). When hardware experts did a “tear down” of a model and estimated the total hardware cost of the device they came up with a figure of around $284. That means that the gross margin of each Surface device is 53 per cent - spookily close to the margin that Apple achieves on its newer product ranges.
So what, you may ask? If it works for Apple, why shouldn’t Microsoft follow suit? Isn’t imitation the sincerest form of flattery?
Not in branding. Imitation in our world is often a signal of imminent failure. The central purpose of branding is to be different from the rest and when one brand achieves this rare goal, only a fool would ape its approach in an attempt to replicate its success.
That’s what Apple did so well when Steve Jobs returned to the company he founded, and that’s exactly what Microsoft is not currently doing under Steve Balmer.
Already I can see evidence that Microsoft’s strategy is coming undone. There are dark murmurs from many of Windows’ hardware partners, such as Acer, about suddenly having to compete with a brand you have supported for decades. And for all the PR about the new Microsoft stores, a report from research firm Piper Jaffray based on observational data taken in an American mall on Black Friday, the busiest shopping day in the US, suggests that despite the newness of Microsoft’s retail and product offerings it had 47 per cent less traffic than the Apple store across the concourse.
But the biggest concern comes down to sales. Despite the claims of sell-outs, sales of Windows 8 licences are sluggish compared to Windows 7 after the same period of time and in the Piper Jaffray analysis, 11 iPads were sold every two hours while Microsoft did not sell a single Surface.
This may be partly to do with the $500+ price tag. I believe the reason Microsoft has opted for such a hefty price tag compared to competing tablets from the likes of Amazon and Google is simple: that’s the way Apple does it and so that’s what it is doing too. But Microsoft does not have the proven product and brand equity that Apple does to pull this off.
There are three things wrong with competitor orientation. First, it’s impossible to differentiate because you are literally doing what your rival did before you. Second, you struggle to pull off
your strategy because it was designed for a different organisation with different brand associations and very different core competencies. And third, there is no guarantee over the long haul that a brand like Apple has the right strategy either. Who knows if following it is actually the best move for the future?
If only Microsoft had been as bold with its strategy as it has been in its execution it might have had a chance. But for me, “think different” is just about the only thing it didn’t copy from Apple.