Microsoft’s Lesson in Strategy: Don’t Fight your Competition, Commoditize them

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Love ’em or hate ’em … the monolithic Microsoft has some pretty impressive tactics when it comes to the way they deal with their competitors.  We’re all familiar with stories of their hostility toward open source software initiatives.  But that hostility is actually quite targeted and deliberate.   Microsoft doesn’t hate all things “open source” – Microsoft targets their cross hairs on all things “competitor.”  That’s why they have (for years) been pouring money into various open source projects.  Why?  To commoditize their competition’s product and service offerings; essentially sucking the value out of a market that their competitor dominates.  Whatever your stance on the ethics, you have to admit it’s a clever strategy.  You don’t try take Goliath head-on, you undermine his footing and rob him of his strength.   This is precisely what Microsoft is doing with Google Maps to help bolster it’s Bing Maps product.

Here are two well-known examples of this strategy in action:

  • IBM (and many others) threw their support behind Linux to commoditize the operating system market. The goal was to break Microsoft’s lock on the PC desktop, or at least prevent Microsoft from extending its desktop dominance to the server room.
  • Google is using Android OS to commoditize the smartphone market. Google doesn’t care about making money from smartphones like Apple or RIM — it only wants to make sure that they guide people to Google online services, particularly search. The best way to guarantee that is to flood the market with relatively cheap devices that come with Google services built in.

Source here

The latest episode of Microsoft using this strategy comes with their investment into the OpenStreetMap project.  Interestingly, Apple’s latest iPad and Foursquare have both abandoned Google Maps in favour of the open source OpenStreetMap (read the full story here).   With Microsoft’s funding behind them, OpenStreetMap will help commoditize the Map-app market that Google has long since dominated.  This will help pave the way for Bing to drive a bigger wedge into the Map-app world; albeit, the rules of engagement in a commoditized market will be radically different.
In preparation for our next Executive Technology Exchange (email me if you’re interested in attending), we’ve been talking a lot internally about disruptive technologies and disruptive innovation.  We’re seeing a lot of this happening with the introduction of Cloud technologies, service-delivery models for IT etc…  This competitive strategy of commoditizing a dominated market fits the concept of “disruption” really well.  What is exciting for the rest of us as consumers is that these disruptions are forcing the market participants (Google, Microsoft, open source projects) to innovate and evolve in order to stay relevant and profitable.  And that means cool new technology for us.
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