If I Were Running Microsoft…

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(I do this periodically regarding companies I think are screwing up royally. The last few times RIM has been my target. This time it’s Microsoft.)

Microsoft is moving in completely the wrong direction. The company is sadly disintegrating before our eyes, suddenly trying to emulate Apple and become a hardware company. Microsoft has little hardware in its blood, though. If I were running Microsoft, I’d focus Microsoft’s future on Microsoft’s past: making developers really really happy.

In the late 1970s Microsoft focused on developing and selling tools to help developers write applications. MS-BASIC was their big application. They licensed it to hardware companies, including Apple, and sold it to developers for other platforms. When IBM came calling, it was really originally because of MS-BASIC. IBM also needed an OS and, with more history then I want to explain here, MS-DOS was born.

Over the years the Windows-Office-Server triumvirate has reigned supreme but now Windows is faltering. The first thing I would do is spin out the Windows division into its own company, making it responsible for PCs, tablets, phones and gaming systems. In other words, I’d finish what the Justice Department failed to do ten years earlier: break up the company.

The second thing I’d do is double-down on developer tools. Now I use this term loosely. To most the term “developer tool” means the kind of tool a developer would use to write in C or .net or some other programming language. But in this case I have a much broader meaning. Yes, I mean Microsoft should still create those tools, working closely with the Windows Company to give them away for free, but it should also focus on a series of developer tools we don’t really consider tools: Azure, Server, and Office.

Azure is the perfect 21st century developer tool set. Developers upload their code to Azure, integrating basic services like push notifications very easily, and paying Microsoft a monthly sum for the benefits. Small business? Not likely. For Microsoft it is already a billion dollar business. Amazon and Google make serious money off these services, too. Fully focusing on a suite of tools that help developers make and deploy apps across all platforms is a no-brainer for Microsoft and gets them even more services revenue, the kind of revenue all software companies should be looking for.

The second group of developers Microsoft should focus on is the IT departments. Yes, controlling workers is still big business (and again with recurring revenues) and even more critical in a world where bringing your own devices to work is quickly becoming the norm. What apps get developed, how they get deployed and how those employees access corporate resources (or don’t when they are fired) is mission critical and also big business.

The third group are end-users. The amazing power of the Office suite is that any poor schlub on the street can “write an app,” or rather build a solution for their specific needs. With Word I can create a beautiful, custom made document. With Excel I can work with my lists or numbers. With Access, tons of data can be analyzed and collected. And on the back-end of all these is a programming language for the more adventurous. But these tools are designed for a mouse. The question I’d focus the new Microsoft on is what do these tools look like on touch devices and how do we tie them into their Office 365 platform? That’s a question well worth exploring.

Is this a drastic step? Of course, but one I think is required to keep Microsoft relevant in the 21st century. This new Microsoft, the one in my mind anyway, is no small company. It is however repositioned for success in a world where the desktop operating system is only one of many its customers will be using.

Maximum Viable Product

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Allen Pike writes:

We enthusiasts love maximal products because they inspire us and delight us. As such, we support these highly polished apps. We buy them, we write about them, we celebrate them, and we buy the t-shirt. We pay $2.99 each to try two different alternatives to the free Twitter app. These fans love what you’re making so much that they can support your business.

We call these folks prosumers. Consumer enough to care about polish, craftsmanship, and the emotion behind your product, yet still pro enough to put money where their mouth is. They are enthusiasts, either of the task at hand or of apps as a craft.

A prosumer seeks out Maximum Viable Products.

Interesting thought, although maybe more difficult to execute than minimum viable product. After all, spending the time to build out that maximum product before knowing whether anyone will pay for it is dangerous.

Given that, a lot of minimum viable products don’t implement a revenue generator, which means that the MVP isn’t testing the most important piece: will anyone pay for this? While not charging at first might have worked for Dropbox and Twitter and Facebook and a few other big companies, they also all had access to vast amounts of capital. They are the exception to the rule; we are not.

My focus is on minimum viable product to start, one that has enough to charge for so we can see the reaction, but also one that has legs and can become a maximum viable product over time. After all, I don’t want to become someone else’s feature.

Beware The Feature

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There’s a story that’s been around for a couple of years now about how Drew Houston of Dropbox met with Steve Jobs. This from the Forbes article:

In December 2009 Jobs beckoned Houston (pronounced like the New York City street, not the Texas city) and his partner, Arash Ferdowsi, for a meeting at his Cupertino office. “I mean, Steve friggin’ Jobs,” remembers Houston, now 28. “How do you even prepare for that?” When Houston whipped out his laptop for a demo, Jobs, in his signature jeans and black turtleneck, coolly waved him away: “I know what you do.”

What Houston does is Dropbox, the digital storage service that has surged to 50 million users, with another joining every second. Jobs presciently saw this sapling as a strategic asset for Apple. Houston cut Jobs’ pitch short: He was determined to build a big company, he said, and wasn’t selling, no matter the status of the bidder (Houston considered Jobs his hero) or the prospects of a nine-digit price (he and Ferdowsi drove to the meeting in a Zipcar Prius).

Jobs smiled warmly as he told them he was going after their market. “He said we were a feature, not a product,” says Houston.

Houston is doing some amazing things with Dropbox, none of which I’d consider a feature. I’m certain Jobs was negotiating. But all the same, being a feature to a larger product is a recipe for being run over.

Microsoft was a company incredibly good at taking other people’s products and turning them into features. Palm, on the other hand, was horrible at it. For a company known for making personal productivity tools their apps were anything but productive. Year after year I expected Palm to add features and they never did. Many people lauded the company for not wiping out their developer community. I always thought it was just stupid.

Building a company is hard and takes a lot of luck. Some of that luck revolves around timing and partnerships and the right people picking up the product and evangelizing it. But some of that luck is that a bigger company doesn’t just run you over on their way to their next billion.

To College or To Start Up, That Will Be The Question

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Paul Graham writing on investment trends:

When I graduated from college in 1986, there were essentially two options: get a job or go to grad school. Now there’s a third: start your own company. That’s a big change. In principle it was possible to start your own company in 1986 too, but it didn’t seem like a real possibility. It seemed possible to start a consulting company, or a niche product company, but it didn’t seem possible to start a company that would become big.

What do you mean by “graduate from college?” With the price of college education skyrocketing and the costs to start a company shrinking, which will potential students opt for? I sure wouldn’t bet on college.

I started Infinity Softworks while I was a senior in college. When I graduated in 1997 what I did — starting a company right out of school — was very unusual. I was weird. Now people don’t even blink, at least not among the under 50 crowd. Now it strikes me as odd when a smart kid graduating from college opts for a big, established, brand-name company. What? Couldn’t start your own company?

The Sacrificial Lamb

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In 1997 when I started Infinity Softworks, I actually intended to write a personal money tracking application, the first of a suite of finance applications that would include investment tracking, expense tracking and more. Palm OS in those days, though, was hard to work with and I was very inexperienced in the ways of event-based software and record storage. I became very frustrated very quickly and started looking for another project to work on that would be easier to implement and decided to write a financial calculator. I could use the simple storage mechanism (preferences) instead of a database and could focus on understanding event-based programming specifically and Palm OS in general.

It took a while and a number of things happened to slow me down, but eventually I completed the app and started thinking about selling it. To you youngsters you may not realize this but once upon a time how we sold apps was less clear cut. There wasn’t just an app store to upload it to and be done. We could package our own apps on floppy disc or CD selling them directly, we could build and sell off our own websites, we could find a partner to take us into retail, we could sell through a few online locations. We did the obvious stuff, creating a site, uploading to various online resellers, and setting up an 800 number to take orders and mail those out [1].

Retail, though, had the most potential in those days. There were two retail channels we considered: physical stores (like CompUSA and Office Depot) and catalog stores (like MacMall) [2]. There were huge risks and huge rewards but just like the app stores now, every retail outlet was clamoring for things to sell next to those hot selling PalmPilots. We had no money to do it, though, and it took a lot of money.

Lucky for me, my business partner at the time grew up in Silicon Valley and his dad sold software for large companies. He agreed to help us with our first deal and found that Macmillan Digital Publishing was doing Palm shareware packs and selling them through retail stores. Instead of us building our own retail presence, he helped us get our first deal — one of seven apps in the PalmPilot Business Pack.SWBUSPALM

At the time we only had one app, an app that came to be known as FCPlus Professional, a full-featured entry-level financial calculator. I fretted over including the entire application in the Business Plus Pack as it was our only potential source of revenue at the time and, after six months of working on it, I hadn’t made a penny yet.

“You may need a sacrificial lamb,” my partner’s dad told us.

I remember having no clue what he meant so he explained it to us. We may need to consider a version of our app that we could use for promotional purposes. We’d give the app away for free (or make little money off it) with the hope of selling other complementary products. He also thought the potential was there to sell the app to a third-party outright, and then use those proceeds to build other things we wanted to do. So instead of bundling FCPlus Professional, we designed a slightly lesser version called FCPlus and bundled it with Macmillan’s packs. It was a fully working financial calculator, just with less features than the Pro version. We didn’t make that version available for purchase directly from us or anyone else at the time, but we did offer half-price upgrades to those who had it.

Six months after we launched FCPlus with Macmillan, Palm came calling. They were going to put together an add-on pack of software and bundle it with every device. There were two available financial calculators on the market, ours and a competitor. They wanted ours but if we didn’t agree to give it to them (yes, give) they would go to the competitor. We were backed into a corner.

bonus pack

The “sacrificial lamb” comment came right back to me again. We reluctantly agreed to include FCPlus with every Palm sold, feeling like we had no choice. It turned out to be a very smart move on our part and over time we figured out how to make the freemium model work for us. [3]

Fast forward 15 years and Infinity Softworks as a company is in a massive transition. Over the next few months we will release a version of powerOne calculator that looks and feels right on iOS 7, re-designed and developed from the ground up, and a new application that we think is our future, an app that is the culmination of 16 years of learning about how people work with numbers and how we can improve that process.

I can’t help but think about those words once again: “You may need a sacrificial lamb.”

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[1] We didn’t sell electronically off our site, though. In the early days we couldn’t get online credit card processing so the website form came to us via email and then we entered the card manually into the machine in a closet. Very secure!

[2] Almost all of those retail stores are gone now, and the ones that remain don’t sell much software anyway.

[3] Although it wasn’t known by that term for almost another decade.