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1/31/2011
11:23 PM
Dave Methvin
Dave Methvin
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Microsoft Needs More Kinect, Less Kin

The Xbox Kinect shows that Microsoft is still capable of shipping innovative products -- why can't they do the same in other business groups?

There was some really great news for the Xbox group in Microsoft's just-announced quarterly results. The company sold more than 8 million units of its new controller-free Kinect peripheral that lets users control the Xbox simply by moving their bodies.

That fueled a revenue increase of more than 50% for Microsoft's entertainment and devices division, by far the best year-over-year improvement by any Microsoft division this time around. How this happened is a combination of persistence and a bit of a lucky break.

Let's talk about Microsoft's persistence first. This was a market where Microsoft had no presence, no brand affinity, and a strong competitor in the Sony PlayStation when XBox was launched in 2001. It was a complete departure for a company that thrived on its third-party hardware and software developers.

Although the software was derived from Windows, the platform itself was closed like most other game consoles and the hardware was manufactured for Microsoft. It took seven years and a $2 billion investment before the Xbox turned a consistent profit. Once it got that foothold, though, it's been a consistent and growing money maker.

The lucky break is that Microsoft got their hands on Kinect at all. Cultofmac.com reported that the creators of Kinect actually shopped the idea to Apple first, thinking it would be a natural fit for their innovative products and interfaces.

But another thing that Apple is known for is its secrecy, and that seems to have been its undoing as far as Kinect was concerned. According to the Kinect inventors, Apple insisted on lengthy legal documents and non-disclosure agreements before talking at all. So the inventors gave up on Apple and shopped the technology elsewhere, and Microsoft shipped what Apple spurned.

Microsoft hasn't historically been a company to find success through outside ideas. Looking at the list of acquisitions from the past decade, there aren't many that appear in Microsoft's current product offerings in recognizable form. Most of the ones you might be able to recognize have been failures.

Consider the 2007 acquisition of Jellyfish.com, which relaunched as Windows Live Cashback in 2008, changed its name to Bing Cashback in 2009, and was shut down in 2010. Or look at Microsoft's 2008 buyout of Danger, maker of the Sidekick phone, for $500 million. More than two years later Microsoft finally released the Danger-inspired Kin phone, which lasted all of 48 days before they abruptly pulled the plug.

With that kind of history dogging the company, let's give Microsoft's Xbox group the credit they deserve. Sure, they saw the potential in Kinect when Apple's rejection dropped it in their lap. More importantly, they were able to do something that seems rare with Microsoft: take an outside idea and turn it into a successful shipping product.

Perhaps it was easier for Microsoft to see Kinect applications for the Xbox than for Apple to see a use within its current product lines; by that measure the idea ended up exactly where it should have been all along.

How does Microsoft do less Kin and more Kinect? If the Kinect is a model, then the lesson might be to emphasize building successful products over crafting a master company strategy. Kinect had the advantage of needing no "input" from the other business units at Microsoft.

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