Microsoft saw the future, but missed creating it

futuristic Microsoft concept videos from 1999 and 2000. In these videos, it’s clear Microsoft did have vision (and continues to), and foresaw much of the evolution and innovation of the past 15 years. And it’s a bit of irony that this was on Slate, which started out as an online magazine on Microsoft’s MSN online service in 1996 (for kicks, check out Slate founding editor Michael Kinsley’s 2006 retrospective here).
At any rate, watch the videos and you’ll see rich online collaboration, smartphones, tablets, location-aware services, voice controlled devices, personalized cloud based content on multiple devices, and more. At the dawn of the millennium, Microsoft was one of the richest companies on the planet, sitting on over $20 billion in cash and continuing to grow revenues at a 25% annual clip. Despite its well documented foibles in many areas, today’s Microsoft continues to be cash rich and extremely profitable. But where did it go wrong?
Much has been written about Microsoft’s missteps of the past 15 years in particular. A large part of the blame has been directed at Steve Ballmer’s leadership of the company since 2000, and the company’s historically competitive culture. In most cases, the CEO of a company gets a disproportionate share of both the credit and blame for a company’s performance. Of course, credit or blame has to go somewhere, and the person at the top is the lightning rod.
But reality is usually more complicated than that. Most companies that once dominated their core markets, like IBM and Microsoft, also tend to be criticized for not being innovators. People say they’re just followers, adapters of others’ innovations, and better marketers. As companies build huge businesses, they tend to take less risks with them. While there is some truth to the innovation criticism, the real story is more nuanced.
The history of computing shows that one company rarely gets to dominate the next great technology shift. IBM dominated mainframes, successfully weathered the minicomputer wave, and created the PC architecture and market that opened the door for Intel and Microsoft. But IBM didn’t dominate these other businesses in the same way as mainframes. Microsoft dominated the market for PC operating systems, extended that dominance into PC applications, and successfully weathered the initial shift of computing to the Internet. But it failed to extend that dominance to Web services, mobile devices, cloud computing, or even gaming — despite investing tens of billions in those areas in the past two decades.