“Microsoft is not the problem. Microsoft is the symptom.”
Dear Steve,
It’s taken 30 years, but Steve Jobs is finally kicking your ass, and you are starting to look like Wile E. Coyote chasing after the Road Runner. Soon, Apple will own the consumer and drain business accounts away from you faster than you can say Windows Phone 7(“meep meep”). You’ve spent $2 billion on cloud infrastructure and the Azure platform, and you haven’t come close to what Google offers. You think tablets are the next big platform. That’s three app platforms, Steve, and now you are planning to open Microsoft Stores as well? You are letting Apple and Google show you what to do next, you’re about three years behind both, and most of your products suck. You’ve dug the hole so deep it’s going to be difficult for anyone to save the company. It won’t be Ray Ozzie, and it isn’t going to be Andy Rees, that’s for sure. And, as you must be increasingly aware, Steve, it isn’t going to be you.
Rather than selling you more Acme gunpowder for your latest me-too scheme, I’m here to offer a solution, one the company has enough cash to adopt, but one that will go against your corporate culture so much that you won’t recognize the company when I get through with it. And not a moment too soon.
First, you’ll have to go do something else. I’m sure you have a hobby you enjoy, perhaps you could add to your nude Kate Moss photo collection, or you could go shoot mosquitoes in Africa with Bill Gates. It’s time to set up your foundation and start figuring out how to spend your $14 billion personal fortune to help the world (I have a few suggestions there, by the way, in case you’re interested in an alternative to the approach taken by the Gates Foundation). I don’t know your top C-level managers, but I imagine many of them will need to go become venture capitalists or buy big boats (I know of one for sale). I have no idea who would be the right person to run Microsoft, but we’ll have to find him or her and start turning the rudder, or you’ll run the ship onto dry land because where you’re heading is no-man’s-land.
The good news is that the fantastic opportunity you’re looking for is sitting right under your nose at this very moment. Apple will continue to build proprietary hardware and sell apps (and ads) to run on it. It will take a long time for Apple to realize that the real opportunity is in the cloud. There will always be more apps built for the Web itself than for Android or Apple, and these apps will run on cheap netbooks. I call them screens – they will be tiny and wearable or huge and wall-sized. They will cost a tenth of what Apple products cost and will be much more powerful. Rather than dealing with multiple hardware platforms, developers will only have to know what the screen size and resolution is. The apps themselves will run online, not on the device. Google, with its Chrome OS, will be the main competitor, but I believe I can give Google a run for their money, even though it will be a huge challenge, because I’m going to be focused on building this world while Google heads in a million different directions and tries to compete with Apple, Skype, Twitter, Hulu, and Facebook all at the same time.
You’re sitting on about $44 billion in cash. I’m going to need about 3% of that, and whoever replaces you will have to manage the rest carefully. Here’s what I would do with the money:
Phase 1: $200 Million
I would start a new company, to be mostly owned by Microsoft, but it would have a new mission and a new culture, and a new way to provide liquidity for successful entrepreneurs. For the purposes of this exercise, I’ll call it Microsoft Open.
Microsoft Open would establish grass-roots development centers in major cities around the world, and it would become a beacon of light to people in the open data movement. The first phase would focus on building infrastructure. To keep everything interoperable, the company would set up an umbrella for creating new standards that would be open and governed by nonprofits – something like a United Nations of data and data formats. We’ll have to allocate around $200 million to this effort, which should be enough to give people the tools to strengthen existing standards programs and build new ones. It would work with the W3C, other standards bodies, governments, organizations, and corporations to migrate to open standards across all industries. It would create new application stack layers below and above HTML 5, so developers can write applications for the cloud without having to jump through legacy browser hoops. Importantly, it would help build a new micropayment infrastructure that will let people use apps or consume content by paying online as easily as they pay at the Apple app store now. There’s a key advantage – the App store uses people’s credit cards, and PayPal charges exhorbitant fees. By creating a new, practically frictionless payment layer, the web will finally have a pay-as-you-go model that will enable millions of content creators and application developers to sprout.
Phase 2: $600 Million
As the infrastructure build starts to pay off, and in many cases it’s already starting to today, Microsoft Open will fund thousands of app developers who can build apps on top of the infrastructure as it grows. Microsoft Open would be a big incubator, sort of Y-Combinator style, where people could get funding to work on their projects. People would keep much of the equity in their projects, but Microsoft Open would have a call on their future funding rounds. The goal would be to build a loose-knit portfolio of companies that can all work together and grow as the infrastructure improves. It will be a way for companies to “go public” in today’s regulatory environment.
The new company would invest in those building the data infrastructure and applications for:
- Energy and Green tech
- Travel and Transportation
- Design, Architecture, Engineering, Construction
- Media, advertising, marketing, vendor relationship management
- Telecom
- Food industries
- Product descriptions, Supply chain
- Manufacturing, Mass customization, Product lifecycle management
- City management
- Personal data management (for consumers and business people)
- Identity and Security
- Life Sciences and Medical
- Banking and Investments
- Transparency, Regulation, Government interaction
- Etc.
Phase 3: $400 Million
The last phase is to manage the portfolio of existing companies, keep seeding new ones, and help the standards bodies become sustainable. This is a much more “bottom up” approach than Microsoft traditionally takes, making it more agile and responsive to customer needs. Microsoft Open will continue to be a subsidiary with its own culture and its own management, and will give Google a run for its money. Google’s revenue stream is built on ad sales, and keywords are the cash cows. Because the new company would be a part owner of thousands of new companies that can now charge money for online content and services, providing real value, Microsoft Open should be able to compete against Google and win.
I know this isn’t very detailed, Steve, but it turns out I’ve written the rest of the plan in a handy format called a book, which you can order online right now and read over the weekend. I’m happy to work with your successor and your board to craft a strategy that will make Microsoft a viable, relevant company for the next 30 years. I know you want what’s best for the company. You’ve accomplished a lot. Let go now while there is still something left to save.
