Microsoft’s Windows Phone Strategy: Fight, Survive, Improve

At  the annual Goldman Sachs Technology and Internet Conference in San Francisco, Microsoft’s CFO Peter Klein  was asked about its mobile strategy. The question revolved around the fact that despite gains from 1.5% to 3% market share, it seemed that Microsoft’s Windows Phone business may need a Plan B. He was asked whether or not the company had such a plan and if yes, what it is. Unsurprisingly, Peter Klein replied that it’s not about having a Plan B, it’s about how to execute Plan A. “We aim to evolve this generation of Windows to make sure we have the right set of experiences at the right price points for all customers.” He replied to Reuters.

“What’s your plan B” is a typical question that companies get every time things don’t seem to go quite fast or right enough. What’s your Plan B often means “shouldn’t you overhaul everything you do” or “you need to start from scratch”. While this may sound like common wisdom, it’s completely unpractical and misguided for a company the size of Microsoft. First of all, there is a need to recognize what the problem is: observers think that Windows Phone isn’t growing fast enough. Fair point.

Secondly, one needs to understand the reason why it’s not growing fast enough: namely, people are still much more attracted to Android and Apple devices. This is partly due to their better eco-system (apps, content, developers), but it is also because both competing platforms have better hardware and design. It is clear to me that Android is the platform that has the most advanced smartphones today. When Apple launches a new iPhone, it can barely keep the performance lead for one month, if not one week. On the other hand, it is also clear that Apple still is an industrial design juggernaut, and that people also buy iPhones because they are nice and classy. Finally, there are more apps, and better apps on both Android and iOS because developers believe that the financial opportunity is there. It’s that simple.

Now, the question is: what can Microsoft do to fix this? First, Microsoft needs to make sure that the top 2000 apps are working great in Windows Phone. To do that, it can do what it does best: throwing money at the problem. If developers are given money to port their apps, this means that there is a guaranteed return on the work. Once they are familiar with the Windows Phone 8 SDK (which is excellent by the way), future projects won’t cost them as much, and they can even plan for a multi-platform release from the get-go. This is Microsoft’s best option if you believe that apps are key to the success of a platform.

In terms of hardware and design, there’s not much that Microsoft can actually do. Of course, it can build its own designs, which it did with the Surface RT and Surface Pro. Both are best-in-class designs in terms of productivity, and we’ve shown it in our Surface RT and Surface Pro tablet reviews. But they are not for everyone either, and Microsoft is counting on its hardware partners to address the larger market. The issue is that right now, partners believe that they can differentiate more with Android. For instance, most of them change Android’s user-interface (UI) elements or try adding services that people often don’t care about. They all end up spending significant resources in software design, which don’t produce a valuable return.

Yet, if the partners believe that they stand a better chance of success with Android, they will use their best hardware for Android designs. Finally, Microsoft does not support enough hardware platforms: only the Snapdragon S4 is currently supported, so powerful chips like the Samsung Exynos 5 Octa or NVIDIA Tegra 4 are currently left out of Windows hardware. Microsoft should make it that every Android designs could also run Windows Phone. We would love to have a Galaxy Note 2 for Windows 8 handset.

Microsoft’s best move was to unify its code base and APIs for Windows 8 and Windows Phone 8. Peter Klein means that Microsoft is playing the long game, and that there is no quick fix. Microsoft needs to fight for every percent of market share, and it has to do so by adding value for its customers, without alienating its partners. Of course, other companies have different strategies to do that, but Microsoft is… well, Microsoft, so it has to find a solution that works for itself. “Plan B” is often a myth which distracts from “Plan A”, and although in the case of BlackBerry it was painful and necessary, Microsoft can still take a number of tweaks to significantly improve its position in the market.

Hubert Nguyen
Categories: Cellphones
Tags: business, Microsoft, Windows Phone