Bill Gates is, by any standard, a successful retired businessman — one of the most successful businessmen to ever live, by any traditional metric of wealth or impact on the world. For better or worse, Windows functionally powered the majority of the consumer PC revolution, particularly during the internet-fueled boom days of the late 1990s and early 2000s. But according to Gates, his biggest mistake was in failing to see the threat Android presented, and missing the mark when it came to ensuring that Microsoft continued to dominate phones the way it had dominated in mobile.
In an interview with Village Global, a VC firm, Gates revealed what he views as his biggest miss.
In the software world, particularly for platforms, these are winner-take-all markets. So the greatest mistake ever is whatever mismanagement I engaged in that caused Microsoft not to be what Android is. That is, Android is the standard non-Apple phone platform. That was a natural thing for Microsoft to win. It really is winner take all. If you’re there with half as many apps or 90 percent as many apps, you’re on your way to complete doom. There’s room for exactly one non-Apple operating system and what’s that worth? $400 billion that would be transferred from company G to company M.
On the one hand, he’s not wrong, and this isn’t the only product category Microsoft failed to win. A few years ago, a post went viral for noting that Bill Gates correctly intuited 15 separate predictions that would occur (or got reasonably close enough), and yet, Microsoft has either a limited presence or no presence in any of the 15 markets. That’s not automatically evidence of failure, because in many of these cases, Microsoft never even tried to enter the space. What it speaks to, however, is the difference between seeing the potential in how a market will evolve and having a business plan to establish yourself as the linchpin dictating how that evolution will unfold. It’s also worth noting that Gates wasn’t actually the CEO of Microsoft at the time, having stepped down in 2000. Steve Ballmer was heading the company with Gates on the relative sidelines as Chief Software Architect.
Of course, Gates isn’t wrong. Microsoft unquestionably missed the mobile revolution. Its phone operating systems were years late to the party. I’ve often felt as though Windows Mobile (which enjoyed some success) got the success that the later Windows Phone deserved, in what might be seen as cosmic karma, but might also be seen as the vagaries of the market and human nature. What’s interesting about revisiting this period of time, to me, is that there’s simply no way to argue that both Microsoft and Intel didn’t make huge efforts to succeed in mobile. Both did.
For Microsoft, this involved the entire Surface device push, porting Windows 8 to run on ARM, and a hoped-for market in slates and tablets that didn’t materialize. For Intel, it focused on writing its own open-source OS (Moblin, MeeGo, Tizen) and on inventing an entirely new type of low-power CPU intended to serve these markets. Both Intel and Microsoft had intelligent engineers who understood the need for new products to address new markets. What they lacked was the understanding of what sorts of products would be successful. Intel’s ideas for MIDs (Mobile Internet Devices) had bulky keyboards, small screens, and generally undesirable form factors. Microsoft’s Windows Mobile devices in the pre-Android era were keyboard-equipped phones, though in fairness, that’s what everyone was building — BlackBerry didn’t build an empire for itself based on the idea that everyone wanted touchscreens.
It would be easy to halt the critique there and say that Microsoft missed being Android because it missed the importance of touchscreens. I think, however, that the actual issue goes deeper. My understanding is that with Microsoft, particularly in this time period, the question the company always asked was “How does this fit into our existing market for Windows and Office products?” At the time, that made perfect sense for Microsoft to ask. But it’s also a question that tends to function as its own form of lock-in. If you begin thinking about a mobile product from the perspective of “How do we provide Windows and Office-style functionality?” the UX and UI elements you consider are going to be drawn directly from the Windows / Office paradigms that people are already familiar with. That’s what the original Windows Mobile, based on Windows CE, tried to offer. It’s not an approach that mapped well to what people actually chose to use, however, and it’s an idea that locked Microsoft into thinking about how to use phones in a much more restrictive way than Apple or Android, which were inventing new UI concepts to go along with their touch-first architectures.
The fact that Microsoft moved to such a dramatically different visual design for Windows Phone 7 is proof that the company was capable of thinking outside the box and coming up with its own new and distinct visual language. The problem is, Microsoft didn’t start early enough. Steve Ballmer’s reaction to the iPhone is one of the more infamous remarks in history. When asked about the device, Ballmer told USA Today: There’s no chance that the iPhone is going to get any significant market share. No chance.”
But I can’t trash Ballmer for that. Because, if I’m being really honest, I didn’t see it coming, either. I didn’t have a huge opinion on the iPhone one way or the other in 2007, but I genuinely believed that tablets wouldn’t cannibalize the PC market in 2011. Like Ballmer, I thought a physical keyboard was a critical factor for many people. Like Ballmer, I was wrong. Even though I’m paid to watch tech trends and see what’s coming, I ultimately assumed that the PC market was mostly driven by purchases from people who needed a keyboard. Why? Because I need a keyboard. To this day, the idea of doing all my writing on an iPad or equivalent gives me hives.
That’s why I’m not sure Bill Gates can really claim that missing the value of what Android would become to Google is his mistake. I suspect that was the mistake of a great many people, most of whom were more directly in-charge of Microsoft than he was.
In order to really catch the wave breaking, Microsoft would have had to begin work much earlier than it did on a Windows Phone-like product, and it would have had to pursue a radically different strategy that didn’t focus on its two largest cash cows. It’s incredibly rare for large companies to pivot that gracefully, much less that early, and we’ve had front-row seats to the fact that being a huge company with success in one market doesn’t necessarily help you succeed in a different one. If it did, Intel and Microsoft would own the mobile sector right now.
Top image credit: Bill Gates (Photo by JP Yim/Getty Images)