When Hewlett-Packard killed its TouchPad tablet earlier this year, it held a fire sale, pricing the WebOS-based tablets at $99. They flew off the shelves. There are many reasons why the TouchPad failed, but the success of the drastic markdown suggests a strategy that Microsoft should adopt as it launches its Surface tablet this fall: Seed the market by selling it far below cost, or as analyst Trip Chowdhry suggests, simply give it away.
The traditional approach of spending $200 million or $300 million to market the Surface will not succeed, he says. Chowdhry's advice: "Instead, use that money to give them to developers, educators, and users to let them created the buzz," he tells me.
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It's no news that Microsoft is in the midst of a crisis as the world moves further and further away from the traditional desktop-centric model of computing and IT becomes more consumerized. Although Microsoft bashers have long since relegated the software giant to irrelevance, CEO Steve Ballmer isn't about to let his company go quietly into the night.
Ballmer has been breaking all the rules, from ending reliance on the traditional PC makers to push Windows 8 via the Surface tablet to the radically different Windows 8 UI -- and it's about time. I don't know if Windows 8 or the Surface will succeed, but there's no doubt that if Microsoft continued to merely tweak its traditional business model and products, it would gradually fade away.
Let's hope Ballmer finds more rules to break.
Will Surface wake up the hardware makers?
Which PC manufacturer has taken the most radical action in the last 10 years? Easy: IBM, which exited the business and sold it to Lenovo. What a sad statement that is.
Microsoft, Intel, and the hardware makers built an incredible machine over the decades, one that practically fulfilled the dream of Microsoft co-founder Bill Gates to put a PC on every desk in the world. But to stay great, industries have to innovate and change. In the PC market, that has not been happening.
Consider the laptop on my desk, a Lenovo ThinkPad X220. It's the best PC I've ever owned, but in many ways it's no different than computers I used a decade ago. Sure, it's lighter, faster, smarter. But those are incremental changes.
Compare that pace of innovation to the cellphone market. It wasn't too many years ago I was carrying around a soap-bar-size "feature phone" that made calls and told the time, but that was about it. Now I use an iPhone, a pocket-friendly tool that gives me as much computing power as a 20-pound desktop PC did in the not-so-distant past.
What went wrong for PCs? The PC makers opted to leave innovation to Microsoft and Intel. It was a decision that helped make the Windows PC the dominant computing platform for years by ensuring Windows PCs were compatible and, thus, easy and safe to adopt. Indeed, one of the first business trips I ever took as a tech writer was in the mid-1990s to Austin, Texas, then the headquarters of Dell. There, an exec explained to me why his company's research budget was zero: Microsoft and Intel did all the actual platform development. Dell instead focused on manufacturing prowess and, later on, supply-chain efficiency.
That doesn't work anymore. Selling the Surface as a Microsoft-branded hardware is more than an "f-- you" to the PC makers. It's a punch to the gut and a strong message that if they don't start to innovate, Microsoft will find another way to do business.