In the history of Microsoft, there have been five major mistakes which Satya Nadella (News - Alert) is doing a pretty decent job of either undoing or is lucky to not have to deal with because they were already been fixed before he got the job. There is a famous saying that goes something like, “those that don’t learn history are doomed to repeat it,” but Google has done one better and has clearly studied Microsoft’s mistakes (heck they actually helped create one) and seem to have adopted the motto that whatever screw up Microsoft made, Google can screw it up even worse.
The latest, which ironically is the one that Google actually helped with when Microsoft originally made it, is an anti-trust ruling that tops the one the EU made against Microsoft (that Google supported). Let’s take a run down memory lane now that Google appears ready to set another record - this time for the biggest EU fine ever.
Losing Track of the Customer
Microsoft really started off, much like Apple did, focused on computer users. Paul Allen saw a need for something affordable as did Wazniak and Jobs with the end result largely being the PC market that founded both companies. The key element of their success is they focused on users while the existing mainframe and mid-range computer companies focused on IT (then called MIS) corporate buyers. When IBM (News - Alert) and Microsoft broke up, Microsoft continued to focus on users while IBM, who was far more enterprise-focused tried to dethrone them and Microsoft wiped the floor with IBM.
After Windows 95, Microsoft, likely because IBM scared the crap out of them, diversified first flipping to an IT focus and then diversifying their revenue sources. Over time, Windows seemed to be increasingly focused on anything but users as they lost track of the PC user and lead the stall of the PC market. Only recently with Windows 10 do they seem to be focused back on users and OEMs and the market is finally starting to improve.
Netscape, who founded the Internet, did much the same thing pivoting from their browser effort to an IT focus and died mid-pivot, certainly suggesting that losing focus on the user wasn’t particularly smart.
Google started out being user focused and with the apparent motto “don’t be evil,” resulted in a massive amount of ad driven revenue. Then they diversified, now it really isn’t clear who their “customer” is. They were getting accused of being “evil” and their response was to change this into a fuzzier code of conduct. Hey if you can’t comply with a rule, make it voluntary and fuzzy; that always works well…
Microsoft used to have a really bad reputation for stealing ideas and then using those ideas as if they were their own. It got so bad that at one time they actually had a group that would go around and teach smaller companies how to protect their ideas from Microsoft. At the core of this was a complete lack of controls over keeping what people pitched to Microsoft from their product groups. Generally there was no attempt to actually steal, but initially, Windows was created as a copy of the MacOS and as a result of Steve Jobs (News - Alert) refusing to license the OS to Microsoft.
Google’s CEO Eric Schmidt was on Apple’s board and Steve Jobs was actually mentoring the Google founders when they took the idea of Android from Apple and not only create a competing product they gave it away for free. Steve Jobs did sue Microsoft, but he wanted to put Google out of business. It takes a special kind of person to screw the company you are on the board for and the person who is helping you get started. It is interesting to note that Bill and Steve Jobs eventually made up, Google not so much.
At Microsoft for the first several decades security was not only boring it was someone else’s job. This pitted the security firms that came up to fill the gap against Microsoft because, to sell their offerings, they had to disparage Microsoft’s. Microsoft eventually, in the last decade, came around to the idea that security was incredibly important because the lack of it was causing global problems and currently has taken ownership again. This week, Microsoft announced a major enhancement to their security service and they clearly have learned from their mistake.
Google, watching Microsoft, did the exact same thing but on Android where people were unlikely to actually load security software. Granted this eventually created a huge opportunity for both Samsung (News - Alert) and Blackberry to create security solutions but, today, Android is still so unsecure parts of the platform are being blocked by the U.S. Congress. It is also the only platform where McAfee was able to demonstrate a destructive failure, they demonstrated Malware that cold overload an Android phones and cause to burn itself out. To be fair Google is now starting to take security seriously but they could have learned from Microsoft’s mistakes.
Microsoft didn’t take the threat of anti-trust seriously and the related actions had a devastating impact on the firm. Not only were they punished by the U.S. Government but the States jumped in as well. However it was the EU that started slapping them with billion dollar fines that really got them to change their ways. Collateral damage was Bill Gates, who, after a grueling deposition session that made him look stupid even to himself, lost interest in running Microsoft and moved on leaving the company to old friend Steve Ballmer (News - Alert) - which turned out to be a bad choice and likely cost him his closest friend when he was forced to force Ballmer out of the job. The back story was that Google along with Sun and Oracle were partially behind the EU effort which cost Microsoft so much and which created interest in the EU in watching tech companies.
Google did appear to get unusual influence over the Obama administration largely protecting themselves against any major anti-trust action in the U.S. but pretty much told the EU to go pound sand. The EU has not been amused and is reported to be hitting Google with a $3B (actually $3.4B) fine (easily eclipsing what they fined Microsoft) and this likely won’t be the only fine.
Once Obama is out of office the U.S. is likely to do what the EU did in the Microsoft case and go after Google themselves. The creation of Alphabet was likely in anticipation of this but, unlike Microsoft, who had a far more diversified revenue stream when they were hit, Google is still largely making their money from the services being challenged. Oh and with the EU there seldom is just one fine, if they don’t see enough progress, they just keep fining over and over again.
I guess you could also file this under “what goes around comes around.” Actually, this may be a better example of that saying. Microsoft is apparently re-gifting…
Wrapping Up With #5
If you’ve been counting I only listed 4 mistakes but there is a 5th that is common with companies that get really successful and that is arrogance. I first saw this when I worked at IBM and, after pointing out that our customers were getting really upset that we were charging them to fix mistakes we made, was told to basically shut up because they had no choice. This didn’t end well. For Microsoft, like a lot of companies that become massively successful, there was a sense that because they were Microsoft what they did was OK. Its compass went from doing what was right in the 1990s to concluding anything they could do was right. In effect, they confused doing the right thing with doing things you have the right (authority) to do. I call this getting “right” “wrong”. Also, just because a company is profitable doesn’t mean it is well run, huge margins often cover up extreme inefficiencies. It was bad at Microsoft but at least the revenues were connected to products.
At Google they largely decoupled revenues and products. For instance they don’t make money from you for services or products you purchase from them. They make money by selling information on you and giving you ads that third parties pay to put in front of you. As long as the advertisers pay them they don’t really care if you are happy you don’t pay them someone else does.
You saw this attitude with Google Glass where they basically forced people to pay to be part of their Alpha test program which didn’t go well.
Now why a company that clearly studied Microsoft would want to repeat their mistakes, let alone excel at making them, is beyond me but hey it gives us something to talk about.
I do think, however that this speaks to the danger of decoupling revenue and profit from the folks that use your products and makes it way too easy to ignore the importance of users which is at the heart of Google’s bad behavior.