Ray Kroc, founder of McDonald’s, never grew tired of preaching to his executives that McDonald’s was, first and foremost, in the hamburger business. While it was somewhat of a necessity for the company to expand its menu to include non-hamburger sandwiches and other items such as salads and ice cream, Kroc intuitively understood that a company should never lose sight of its main business.
Which brings me back to Microsoft and the Digital Entertainment Lifestyle wars. The combination of Microsoft’s $34 billion in excess cash coupled with Bill Gates’ brain, business acumen, marketing genius, and killer instinct makes it hard to bet against the company, even if it decided to go into the hot dog business. But the problem with Microsoft’s participation in the video-game wars is that it appears Gates’ skills are being bypassed.
Shockingly, he has turned the project over to a younger generation of executives who seem to have somehow convinced Gates that he isn’t hip enough to be closely involved in the Xbox 360 project. If they’re right — and I seriously doubt they are — Gates should pull Microsoft out of the video-game business rather than allowing others to call the shots. I recall Donald Trump once saying that the day he’s not interested or motivated enough to carefully review and challenge a $10,000 invoice, he’ll get out of the real estate business.
Apparently, a group of video-game whiz-kid executives at Microsoft sold Gates on the notion that he’s simply too old to understand the dynamics of the video-game business. And certainly not tuned in enough to be able to understand their larger vision of the “Digital Entertainment Lifestyle” (DEL).
This cavalier dismissal of the skills of the man who built Microsoft from ground zero sounds all too familiar. When Walt Disney’s master of the universe, Michael Eisner, hired his egomaniacal pal, Michael Ovitz, to become president of Disney back in 1995, I told anyone who would listen that it wouldn’t last a year.
I was wrong. It lasted 14 months. And what did Ovitz get for more than a year of trying to upstage Eisner? Would you believe a severance package of $140 million? Which was quickly followed by a mega lawsuit by shareholders against both Ovitz and Eisner, as well as other Disney board members.
Steven Jobs, cofounder of Apple Computer, fared even worse than Eisner when, in 1983, he brought in no-tech John Sculley from Pepsico to run Apple. In 1985, in an impressive display of gratitude, Sculley convinced Apple’s board of director’s to force Jobs himself out of the company. They later regretted their action, gave Sculley the axe, and begged Jobs to come back and straighten things out.
As to Microsoft, there’s a real question as to whether it should even be involved in this strange new digital world called DEL. It all gets back to Ray Kroc’s focus on making the best hamburger you can possibly make. While Microsoft has a bundle tied up in its Xbox venture, its core business is being attacked by a whole new wave of hi-tech upstarts, particularly an enigmatic new force known to all as “Google.”
The search-engine business is a legitimate target for Microsoft, because it’s an integral part of the company’s software business. But Microsoft has never been known for its innovation. Gates’ philosophy has always been that it’s cheaper to buy than to innovate.
It’s even cheaper to crush your competitors, and many industry observers believe that the real key to Microsoft’s success is that it has mastered the art of doing just that. Either way, we’ve all watched in awe as Microsoft surpassed (and virtually destroyed) Lotus 1-2-3 with Excel, WordPerfect with Word, and Netscape with Internet Explorer.
The next logical step for Microsoft is the search-engine business, which these days is pretty much synonymous with Google. Google, however, presents a very different challenge than any of the companies Microsoft has previously annihilated.
It seems like only a few months ago that Steve Ballmer, CEO of Microsoft, was predicting that his Darth Vader staff would catch, then surpass, Google in the search-engine race. Now it’s beginning to resemble a game of Pac-Man, with Google showing ominous and accelerating signs of going after Microsoft’s key business — software.
At present, of course, Google’s most famous piece of software is its search engine, which allows a user to not only search the Internet, but his desktop as well. Google’s e-mail software, Gmail, allows a user to store two gigabytes of e-mail (versus Microsoft’s Hotmail with only 250 megabytes of storage).
Further, Google’s Picassa photo software gives users the capacity to manage, edit, and send digital photographs. And Google’s blogger is perhaps the most threatening, because it allows a user to create, place on the Internet, and print formatted documents without using any Microsoft software — virtual heresy in Microsoft’s monopolistic view of the world.
Gates, who is a big believer in the efficacy of paranoia, is concerned that Google is gaining the knowledge to produce its own operating-system platform as an alternative to Windows. In fact, he is quoted as saying, “…they are more like us than anyone else we have ever competed with.”
Google founders Sergey Brin and Larry Page deny any intent to develop an operating system, but Gates has good reason to remain concerned. For starters, Google has been hiring away software developers from Microsoft, including Marc Lucovsky. What’s significant about Lucovsky is that he was one of the chief architects of Windows, the product that gives Microsoft its near omnipotence in the world of computer software.
The exodus of top talent from Microsoft to Google is one very good reason why Microsoft shouldn’t be fooling around in the video-game business. Instead, it should be sharply focused on improving its main line of products. You don’t need to lose sleep worrying about the competition if your products are clearly superior.
Which gets to the very heart of Microsoft’s problem. Most industry sources agree that the majority of Microsoft’s key products are not, and never have been, superior to those of its competitors. As much as I admire Microsoft as a company, my complaints about its software are many. As a proficient Microsoft Word user, I could easily come up with a long list of annoying items in this massive program that should have been fixed years ago.
If Gates himself took charge of the DEL project, it would be hard to bet against him. But at what cost victory — Microsoft’s losing its operating-system monopoly and the commanding market shares that its other key software products enjoy?
I don’t expect Gates to take my advice, but .. hey … he has a fairly decent track record without any input from me. On the other hand, I seriously doubt that you have Gates’ brainpower, money, talent, or killer instinct to spread yourself too thin.
That being the case, allow me to suggest that your odds of long-term success are much better if you place your bet on Ray Kroc’s philosophy of focusing on your primary business. Never lose sight of what your main product is, because that is your hamburger. It’s what people think of when they see your name.
Take your eye off your hamburger, and you’re inviting the competition to eat it — for breakfast, lunch, and dinner. And, if that’s doesn’t satisfy them, they may just have it for a late snack as well.