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.

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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.

Readers' comments (11)

  • It looks like a mess (just like its products, you might add if you’re unkind).

    But isn’t it just raw capitalism at work?

    They have thrown the kitchen sink at Google in search and online advertising. And now they are doing the same in other markets.

    Jobs once remarked in the 90s that the PC/Mac war was over; Microsoft had won and they were moving on to the next thing. Voila the iDevices and their impact on the good old mac.

    I wonder if a new product from their future labs might come to the rescue of Microsoft. (They already have relative success in games consoles)

    They are certainly cash rich (like RIM), debt free and still attract top talent. (Also they are in a better shape than any Japanese electronics brand)

    So what’s stopping them? Well, isn’t that the $64,000 question.

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  • Mark one thing you omitted was the differences in target market. Microsoft has always been a business focused co (excluding xbox) whilst Apple is primarily a consumer focused co.

    Would your analysis have been different if you said that Microsoft was trying to win the war in the business sector space. Yes many corporates are using iPads, iPhones etc but 80 / 20 what operating system do you think most S&P 500 etc will be using in a 5 years?

    If it is still Windows, then maybe Apple and Microsoft may actually be fitting a different war.

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  • Apple is not perfect either Mark and the financial community is clearly not happy! - http://www.news.com.au/business/companies/apples-downward-spiral-accelerates/story-fnda1bsz-1226531117050

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  • You cannot club everything under one umbrella. Is premium pricing purely branding?

    The big advantage for MS is that there will be a huge array of partner devices that will fill the medium price segment. Something Apple does not have. So, the Surface can be premium priced to differentiate within the 'Windows Tablet Market'

    As for where the re-branding efforts are going? The logo change and all consistent look across all platforms is a bitter pill to swallow if you are a desktop user.
    With the $39.99 upgrade price, Win 8 has the ability to disrupt the market. If it hits critical mass and developers flock to it- then trends can get reversed VERY quickly.

    If Microsoft start annual releases of the OS like MAC, it will be because you cant have customers upgrading hardware every time you release a new OS.

    So- no, i dont think the premium pricing is aping apple's strategy.

    Also, yes if you copy you cannot differentiate- but Microsoft has differentiated-> the kickstand, the keyboard were genuine product innovations. And the start screen while questionable on desktops, is a breath of fresh air in the tablet market filled with Apple/Android clones where everything looks the same.

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  • I am not sure if Microsoft is really going after retail customers and trying to imitate Apple (although it may seem like that from their branding and marketing strategy). I think Microsoft is actually targeting enterprise mobility customers. Given the high penetration of MS into enterprise infrastructure, a tablet, a phone and a PC .. all running on the same environment (windows 8) and offering consistent enterprise security is a solid value proposition and pretty awesome "convergence" that no other company offers.

    Whether the strategy works out in future or not, but I give points for trying.

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  • I think Microsoft´s strategy with windows 8 is brilliant and quite different than Apple´s, the only way to actually build an app market and not falling in the Palm and Blackberry trap. But it will take time to do catch up, however, I have heard of plenty of people, praise for the surface tablet, and let´s be honest, it is not really an Ipad competitor, the value propositions are quite different. On the pricing, I fully agree that Microsoft is trying to copy the Apple "luxury" margin too hard, but again, if they begin discounting heavily as Kindle Fire did, how then later they raise prices?

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  • Fully agree mark. A Software company can't suddenly become like apple which as hardware and software so tightly coupled and have created a huge ecosystem in terms of iTunes. This is difficult to copy.

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  • And hence (with all the due respect to the Software powerhouse), drop that hefty price tag, bring down that price point to a sensible level inline with the quality of offering, Perhaps the scoreline may even change to 11-2 instead of 11-0 :)

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  • And their hero product is more bark than bite, at least on the pc. May be better on tablet, which is where they're driving new focus, but if you get customers to pay for an upgrade and leave them feeling very disappointed, they're unlikely to try your new products. Simple really.

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  • And their hero product is more bark than bite, at least on the pc. May be better on tablet, which is where they're driving new focus, but if you get customers to pay for an upgrade and leave them feeling very disappointed, they're unlikely to try your new products. Simple really.

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