| I think this article drastically underestimates how hard it is to build and acquire new businesses. It reads like a caricature of a first-year management consultant’s recommendation—step 1, acquire adjacent businesses. Step 2, profit. (Edit: former management consultant) Set aside the culture piece, which is well described in the thread. First, MSFT struggles a lot with keeping innovation going and a big piece of this is that in order to get the full value out of vertical integration with your existing product portfolio (and customer base), you need to build full integration with other products, which often handicaps the new product with old protocols. Teams is a great (organic) example. The concept of slack+zoom+Dropbox is awesome. I think if it was executed well, it would be the market leader (or the other three would consolidate). But my experience doing anything with files in it has been very poor (it eats my files constantly!!!), and I think that is because it’s stuck using SharePoint as the backend, which was great for its time but was not intended for modern use cases. On the flip side, MSFT has also done a great job of acquiring / building _noncore_ products that don’t struggle with this. GitHub is a good example—there aren’t a lot of legacy core dependencies. But I find it hard to believe that if they bought airtable they wouldn’t try to merge it with excel and get stuck with the .xls/xlsx limits. By the way, if you don’t… how do you sell to legacy clients, which is their advantage? Second, Microsoft’s history has made it quite fearful of regulatory intervention. Yes, positioning themselves as “we’re not evil like Amazon, stealing your ideas” is a strategy, but it is also because they are terrified that they will be caught doing something like Amazon because everyone there remembers the ‘90s. It is amazing how often the phrase “we have to stay neutral” comes up in my meetings with my (multi year relationship) Microsoft sales reps. Third, related to this… Microsoft probably would get slammed with antitrust action if they started buying every company with a $100mn market cap! Fourth, I think this article drastically overestimates network effects. Actually, I think it misunderstands them. Zoom does not have network effects. If a client or vendor (or my boss) sends me a WebEx link, I am going to (begrudgingly) download the WebEx client and use it. There is no additional value to having more users (which is the definition of a network effect). This article is conflating scale with network effect. As an aside, I thought some of the advice to startups was funny. Capital may be a nice moat, but it seems hard to action on (“ah, I realized what I was missing… I will go raise $5bn for my series A SaaS business!”) as does the concept of cross-selling, which requires multiple (compelling) products, a large and very capable sales force, and years of trust with the client. I think the core insight here is spot on—it is Microsoft’s sales team that is the special sauce here. Finally, another aside—I think share buybacks are extremely appropriate for large tech companies. I get that people think about them in % terms, but we have _trillion dollar companies_ now. It’s very hard to imagine that the last marginal dollar of profit goes as far in innovation at a trillion dollar company as it does as a billion dollar company. I would much rather a firm like Microsoft return some of that capital to shareholders rather than spending every last penny on innovation, at least in its current form and structure. |