Microsoft Corporation got its start by making operational software for personal computers; as a contractor to IBM who decided to explore the personal computer market after doing well in main frame and mid-sized computing hardware.
IBM then approached Microsoft to also develop the second generation of personal computer operating systems with GUI (Graphical User Interface) screens --- so IBM could sell more personal computers. Rather than obsolete the older personal computer software, Microsoft developed second generation "Windows" software that was also compatible with the older machines as well as new personal computers. A marketing strategy that was similar to running two horses in the same race in order to dominate the personal computer software market for business and personal use.
In 2007, I jumped in the pool with my cell phone in a pocket of my swim suit---causing me to buy a new mobile phone. Although I have always been a Microsoft personal computer software customer, I decided to buy a new mobile smartphone from Apple, called the iPhone, for $650 for one major reason: I no longer had to carry my laptop computer with me when I traveled on short business trips.
Over the years, I have continued to use Windows software in my personal computers (where all my business information is created and stored) but continue to use the non-software compatible Apple iPhone (because Microsoft hadn't yet caught up within the leaders of the mobile software marketplace).
Over the years, Microsoft's corporate leaders have been too preoccupied with maintaining their business software market and found themselves stretched thin – trying to play in too many disparate markets and pursuing multiple strategies and directions that undermined rather than reinforced each other. As a result, they didn't anticipate the rapid growth of the mobile business software needs of their present customers who today use their smartphones, tablets and eReaders when away from the office.
The mobile market winners, on the other hand, defined the fundamental identity of the company by developing a clear idea of what they do best and how they create value for customers. They then honed a distinctive system of capabilities – one competitors can’t match – that enabled their company to deliver on its value promise and sustain lasting competitive advantage.
Today's Wall Street Journal reports that two small market share players, Nokia and Microsoft, in the mobile marketplace may not be a good investment. Juan Alcacer, a Harvard Business School associate professor who has studied Nokia, says "Two bad companies don't make a good company."
And, of course, Jack Welch, former CEO of General Electric has said, "If you don't have a competitive advantage, don't compete." However, Microsoft's competitive advantage is all those companies and individuals who use their personal computer office software and don't want to change software methods when they are away from their workplace. To me, the Microsoft/Nokia combo is a very good bet for investors, employees and end users.
The true source of Microsoft's competitive strength is what the company does, rather than what it sells. Leaders just have to be clear about identifying the company’s differentiating capabilities, and building a strategy around those.
Sources: Paul Leinwand: The Essential Advantage: How to Win with a Capabilities-Driven Strategy