Today, Microsoft announced it would buy LinkedIn in a strong reversal of a mistake it made in the 1990s. It’s fascinating to watch companies make mistakes and then refuse to reverse them, even when they're obvious, because doing so would seemingly validate the mistake. Microsoft CEO Satya Nadella has been on a mission since taking over, reversing an impressive number of mistakes that Microsoft has made since the end of the 1980s. This latest is particularly impressive because it flies in the face of most tech firms that haven’t responded to the rise of Amazon Web Services and the shift in power from IT to line managers and end users.
Let’s talk about that today.
I maintain that Microsoft’s biggest mistake was to pivot away from users and instead focus almost exclusively on IT buyers in the mid ‘90s. Previously, Microsoft had been massively successful focusing on users and letting IBM focus on enterprise buyers, but a combination of things forced Microsoft to fundamentally change its approach and actually become the kind of company it hated. (I can point to a very similar process at Google but will save that for another time.)
What happened was that IBM and Microsoft went to war over OS/2, costing Microsoft its primary enterprise partner. Inside Microsoft, the folks who were hired from the failing Digital Equipment Company helped product quality but helped kill user focus.
The folks responsible for the most desired Microsoft product in history, Windows 95, were forced out and replaced with folks from a firm that didn’t think there was a market for PCs. In effect, after beating IBM, then the most powerful tech firm in the world, with a user-focused offering, Microsoft flipped to a strategy that recreated OS/2 and opened the door for firms like Apple and Google that focused on users. It twice proved that a user-focused strategy is more powerful, first by winning and then by losing.
But things are changing at Microsoft, and LinkedIn is partially the result.
The most visible reason for Microsoft to buy LinkedIn is because it fills out the collaboration portfolio. SharePoint and Yammer work well intra-company, but to move inter-company, you need to pick a tool that is already being used. LinkedIn is the most powerful tool for users who are collaborating with other users in partner firms. Granted, LinkedIn likely isn’t as secure as most would like, but expect Microsoft to enhance that.
But the other part of this is that LinkedIn can connect Microsoft back to the users and line managers who are making technology decisions today. Think of it as a way to have conversations with the people who use Microsoft products at scale and to more effectively understand and market to them. I expect that this communications channel will continue to be available to all firms, but Microsoft will work with partners to make sure that this group of firms will execute with the tool better.
The impact on existing LinkedIn customers will initially be minimal and consist of enhancements, likely showing up in 2017, that begin the integration process. We’ll likely get a better sense of what those enhancements will be at conferences like Microsoft Build in 2017.
There is a simple rule in marketing: Focus on the folks who make the buying decisions and the folks who use the product. This isn’t multiple choice; it’s “all of the above.” Every time a firm pivots from users to IT, it has ended badly. Atari and Commodore did this in the ‘90s and went under; Apple did the same thing a bit later and almost went under; Microsoft, up until then unbeatable, did this and lost to Apple and Google; Palm did this and went under; BlackBerry did this and had to switch models to become more of a software/services company (but still focused back on its users to survive).
If ever a lesson needed to be learned, it is that focusing on IT for products that are largely used by others is a failing strategy. IT does need to be OK with this, but, as we have seen with Amazon, Apple and Google Android, if the user wants it and IT doesn’t, the user wins. So priorities need to be adjusted accordingly.
Microsoft has focused back on developers, efforts like Continuum are focused on users, and now with LinkedIn, it is increasing its ability to connect with users at social network scale. This is a user focus like what first created Windows, and especially Office, and showcases what I think is a major part of Nadella’s strategy to make Microsoft as relevant as it once was.
Focusing back on users and developers is big and, I expect, far from the end. I just hope the lesson is institutionalized this time.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+.