Microsoft Innovates But Falls Short on Capitalizing

Quick quiz: Who developed a smartphone operating system first -- Apple or Microsoft? Of the two, who released a tablet first?

In both cases, it was Microsoft, and the race wasn't even close. The Microsoft Tablet PC was announced in 2001, and tablets built to its specifications were released in 2002, eight years before the iPad first appeared. That same year, Microsoft Pocket PC 2002 was developed for smartphones. (It later became Windows Mobile, and now is Windows Phone.) Apple got around to building its first smartphone, the iPhone, five years later, in 2007.

Apple has long been portrayed as the technology world's leading innovator, coming up with visionary ideas well before anyone else and creating entire product categories from scratch. Microsoft has been thought of as an unimaginative plodder, waiting for others to develop innovations, and then coming in with brute force and cornering the market with big marketing budgets and smart business moves.

In fact, though, Microsoft has been out front on a number of occasions. It's not that it can't innovate. It's that it doesn't do a good job of turning innovations into market-changing products.

Take the Tablet PC. At the time, it was certainly innovative. But Microsoft never figured out how to make a marketable product out of it, largely because the company thought about it as a traditional computer in a different form factor -- essentially a tablet-based Windows PC. In a press release at the time, Microsoft described it this way: "The size of a legal notepad and half the weight of most of today's laptop PCs, the Tablet PC is a full-powered, full-featured PC." Full-priced, too, typically costing $2,000. It wasn't until Apple rethought what a tablet should be -- less expensive, app-driven and primarily for consuming content rather than creating it -- that the tablet market took off.

As for Pocket PC/Windows Mobile, Microsoft made a similar mistake. Rather than considering what the ideal smartphone operating system would be, Microsoft tied the features and technology of the phone to Windows, an operating system not well suited to a phone's form factor and features. Once again, Apple took a fresh look at what a phone should be able to do, and essentially created the consumer smartphone market.

There's a common thread to both of these Microsoft innovations that ended up as failures: Microsoft tried to force-fit them into its Windows universe, rather than consider what consumers would truly want in them. That's where Apple excels. It didn't build the first tablet, the first smartphone or the first portable music player. But it intuited what people wanted in them, knew when the market was right for releasing them, and then did a superb job of engineering them.

This isn't to say that Microsoft never gets it right, or isn't capable of getting it right. The best example of that is the Kinect, a remarkable marriage of motion-sensing technology and intelligence used to control the Xbox 360 with movement, gestures and voice. It's been a hit not only in the market, but also among researchers at universities and with hardware hackers everywhere.

Kinect wasn't developed as an adjunct to Windows. That freed Microsoft to start its development with a clean slate. Microsoft needs to find a way to do the same with other products, or else it will remain an innovative company that can't capitalize on its innovations.

Preston Gralla is a contributing editor and the author of more than 35 books, including How the Internet Works (Que, 2006).

Copyright © 2012 IDG Communications, Inc.

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