MS lost a decade because they tried to control the exponential economy

wave bigby Jeff Rowley Big Wave Surfer

Want to know why Microsoft lost (at least) a decade starting in
[Via Dave Winer’s linkblog feed]

Want to know why Microsoft lost (at least) a decade starting in 2001? They tried to foreclose on the web, and failed.


One of the hallmarks of the exponential economy derives from things like Moore’s Law – it gets cheaper every year to do what you are doing today.

Companies hate that. If they do nothing they get creamed by new startups that can to what the big guys do only on less money. The great innovations of today become tomorrow’s commodities.

So Industrial Age companies do what they always try to do – control the market, create monopolies and such. They think there is a stairway to heaven that they can take and control access to. IBM tried that after taking Apple down. It failed, with MS and Intel winning for a while.

But then innovation came along and instead of riding the wave of change, MS and Intel tried to control it also by dictating the market. They tried to make everyone take that same staircase. But the tools had changed and the entry to the market could not be stopped.

Exponential economies are not stairways. They are waves. There is no defined path upwards, one that can be controlled.

A wave can not be controlled and its path can not be predicted. Someone who approaches a wave as though there was one path will  wipe out.

By being resilient, adaptable and most of all constantly aware of how the wave changes moment to moment, we can successfully ride wave.

Apple has succeeded the last decade because it did not try to control the market as much as adapt to it. Jobs famously said they moved to where the puck was going to be. They actually surfed there.

To survive, they have to react quickly to changes, not try and control the changes. Reaction is as important as action. To surf a wave, you do not make the wave do what you want. You respond to what it is allowing you to do.

A recent example – a new guy brought in to deal with the retail stores. Apparently he went against Apple culture – ignoring insiders who tried to stop him.

He decided that he could raise Apple’s profits not by selling more product but by getting rid of people. See, if they paid less salary but sold as much, more profits.

Typical retail MBA crap. Make himself look good for a couple of quarters then move on. Who cares about the company or customers? This report was telling:

Browett disagreed with his staff, and said the chain needs to learn to run “leaner” in all areas, even if the customer experience is compromised.

Apple has always valued the customer experience over all else. If they are really changing to a penny-pinching group that no longer cares, they will lose what makes them special. They become another company and no one will pay a premium anymore.

This broke on wednesday. By Thursday afternoon, the Wall Street Journal was reporting that Browett was reversing his earlier approach and telling the retail staff “We messed up.”

Apple made a big mistake allowing Browett to do what he did. They corrected that mistake faster than any other company I have seen. Within 24 hours the Apple PR stated:

“Making these changes was a mistake and the changes are being reversed. Our employees are our most important asset and the ones who provide the world-class service our customers deserve.”

This was one of the bluntest and most critical statements some Apple watchers have ever seen. I would not be surprised if Apple is starting to look for a new retail chief.

Browett acted like he kne the steps to take to increase profit of his division. He did not realize he was on a wave, not on stairs. The good news is that the mistake was recognized before it did much damage. The worry is that it happened at all.

I’m hoping Tim Cook has learned from  this also and that Apple will continue to surf the wave.

If not, there are others who will be willing to catch the wave.

The new VP, who reported directly to Tim Cook

2 thoughts on “MS lost a decade because they tried to control the exponential economy

  1. Thanks, Man with a Ph.D. HP’s another company that reversed a huge announcement semi-recently. They didn’t work near as fast as Apple, and are still struggling because of it. Do you think their cuts are justified?

    1. One of the key impacts of exponential economy influences if rapid and sometimes massive feedback when things go well and when they go poorly. A modern company must have the ability to sense that and correct it, the earlier the better.

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