Yesterday I talked about an event outside of Microsoft’s control that led the company to this point in time: the changing structure of software sales. Today I want to discuss an event completely within its control: the abandonment of its corporate strategy.
Most Microsoft business books talk about Microsoft’s strategy in the 1980s and 1990s as an “embrace and extend” strategy. In short, Microsoft embraced existing technologies or products and then extended them to do new or proprietary things. It was wildly successful. A few examples from this era of Microsoft’s history:
- Microsoft embraced the deal with IBM and then extended it to other vendors, particularly Compaq.
- Microsoft embraced the mouse-driven interface and then extended DOS with it.
- Microsoft embraced the word processor and spreadsheet, extending them to mouse-driven interfaces.
- Microsoft embraced the idea of individual apps and extended them to sell as a bundle (Office).
- Microsoft embraced Office’s success and extended it with new applications, including OneNote, Outlook and PowerPoint.
- Microsoft embraced the Internet and extended it with new protocols that were non-compliant with Netscape and 3WC.
- Microsoft embraced Java and C and extended them to be more proprietary.
- Microsoft embraced the browser and extended it by bundling it free with every copy of Windows
In the late 90s, however, this strategy ended. In almost every case since that era ended — game consoles, handhelds, smartphones, tablets, you name it — Microsoft has abandoned the “extend” portion of the strategy. 
What caused this? Maybe it was Bill Gates retiring or the Department of Justice’s anti-trust investigations. Maybe it was just hubris. Whatever the case, with only “embrace” remaining from the strategy, Microsoft stopped differentiating its products. Yes, Windows Phone looks nice. But really is this device fundamentally any different from iOS or Android?
“Extend” was Microsoft’s differentiator. Without a differentiator, Microsoft was just a sitting duck waiting to be shot.
 This doesn’t mean the company wasn’t successful with many of them, just that the strategy changed. And I say “almost” since Azure is definitely vintage Microsoft.