Yesterday's New York Times carried an interesting op-ed from former Microsoft veep Dick Brass wondering how and why the world's most successful company lost its way. Excerpt:
Microsoft has become a clumsy, uncompetitive innovator. Its products are lampooned, often unfairly but sometimes with good reason. Its image has never recovered from the antitrust prosecution of the 1990s. Its marketing has been inept for years; remember the 2008 ad in which Bill Gates was somehow persuaded to literally wiggle his behind at the camera?
While Apple continues to gain market share in many products, Microsoft has lost share in Web browsers, high-end laptops and smartphones. Despite billions in investment, its Xbox line is still at best an equal contender in the game console business. It first ignored and then stumbled in personal music players until that business was locked up by Apple.
Microsoft's huge profits — $6.7 billion for the past quarter — come almost entirely from Windows and Office programs first developed decades ago. Like G.M. with its trucks and S.U.V.'s, Microsoft can't count on these venerable products to sustain it forever.
Read the whole thing to sort out analysis from sour grapes, but I'm more interested in a macro fact about monopolies: Namely, unless they're either run or locked into place by government, they do not last. And even government-run monopolies produce mass consumer defections. (A corollary to the Monopoly Rule is the Dictatorship Rule: totalitarianism, because it produces such unhappiness, is inherently unstable.) Companies that grow bloated on profits squeezed from a seemingly captive audience end up panicking when those consumers wriggle free to buy and even create competing products. Meanwhile, corporate cultures in (temporarily) uncompetitive industries are the very definition of non-innovative, even in technology companies.
The same holds true for companies that aren't technically monopolies, but are able to rack up double-digit profit margins while not having to fend off a mirror-image competitor. Trust me, the L.A. Times was called the "velvet coffin" long before the "corporate bean counters" or Evil Sam Zell showed up. Even areas where market consolidation produces noticeably awful product–I'm thinking here of the 1990s wave of radio consolidation–the combination of disgruntled consumers and liberating technology are able to produce innovative workarounds faster than you can say "theme time radio hour."
Something to think about as regulators here and abroad start targeting Google (it's amazing to me how seamlessly Google has replaced Microsoft as the demon sheep of technology companies in the eyes of the French, for example), and as the Obama administration mulls ramping up antitrust prosecutions more generally.