Microsoft has great potential to weather their current difficulties. The trick will be to market what they have effectively.
Microsoft is a good example of a large incumbent being hit by destructive (or at least disruptive innovation). Clayton Christensen published a good book on this theme, The Innovator's Dilemma. His thesis is how disruptive innovation brings down large incumbents. Examples are everywhere, from the pharmaceutical company making obsolete cancer drugs to Kodak, the company who invented digital photography, who went bankrupt when no one wanted to purchase film. Putting the theory succinctly, incumbents have too much invested in infrastructure to be able to change as an organization when they are faced with disruptive change. In the case of Microsoft, tablets using ARM processors are breaking up the Duopoly of Windows and Intel. Desktops are no longer king.
Microsoft is doing some things right. Outlook.com is being touted as a mail service where the postmaster doesn't read your mail. The X-Box gaming system is a fine example of contract fabrication, and an example of millions gaming together via the Internet. The Surface, after a rocky start, looks as though the second version will be a really good piece of hardware, even though it has Windows 8 on board. I think the jury is still out on the Microsoft Windows phones. I almost bought one from Verizon, but balked when Verizon wanted two years of commitment plus $30 per phone. (We went to Sprint and have been very satisfied with our HTC 4g LTE phones that hooked up for free not to mention unlimited data) The specs on the Windows phone were superior to other phones offered by Verizon, and the camera was to die for. I think the Windows Phones will have a lot of life once they get going, although now they look like Microsoft is trying in vain to keep up with Apple. Bing coupled with Yahoo! advertising is a good service, and I like to reach the other 20% of Internet searchers. All in all, Microsoft's businesses outside Windows seem to be doing well.
So what happened with Windows 8? I'm not understanding the causes until I look at an abstract representation, almost a black box approach to what the operating system does. Windows 8 is a great tactile way to interact with computers. The little windows are meant to be touched with one's finger leading to the operation of the software. I think this is a futuristic way to begin the process of displaying computer screen on clear glass the way they did in Minority Report. At the same time, though, Windows 8 is only geared to one way of using computers, that of media consumption.
Media consumption is what we do with tablets and phones. Until voice recognition gets better, we will not create. Creating media for consumption takes a different type of computer, the desktop or laptop. This opens up the box of market segmented operating systems. I think the Surface will work to produce content if purchased with the optional $110 keyboard.
Lets get honest, Windows 8 is a beautiful operating system for those who just want to see the latest Facebook post, or surf the web. Windows 8 should have a touch screen to use the tactile input abilities. However, if a person wants to produce media, then their needs are different. I like Windows 7 because it is modern, and works well. I can get to any place I need to be with fewer clicks than Windows 8. This is important when I sit down to write my exams, or a feasibility report, or some other production effort I need to get into the computer fast, and get producing quickly. I want to produce, not to be always clicking away to get to some place else.
I'm calling on Microsoft to start marketing their Operating Systems differently. Windows 7 should be for professionals engaged in production, and Windows 8 should be for media consumption, entertainment, and home uses. Lets keep both Operating Systems going and recognize they each have a different application. Microsoft tends to want to push the market, and in the case of Windows 8, neither the hardware nor the users are ready to use this system. Lets go back to the days of Windows 98 for homes and small businesses and Windows 2000 or NT for business production uses. Lets not sell Windows 8 on anything that doesn't mount a touch screen, and when a new user turns on a computer for the first time, how about a choice in Operating Systems?