Bill Gates Reveals Secret of Microsoft's Success

Hugh Pickens writes "Bill Gates, in a interview with the BBC, revealed the secret of Microsoft's success: 'Most of our competitors were very poorly run. They did not understand how to bring in people with business experience and people with engineering experience and put them together,' said Gates. 'They did not think about software in this broad way. They did not think about tools or efficiency. They would therefore do one product, but would not renew it to get it to the next generation.' Mitch Kapor, founder of the Lotus Corporation, has a different view: 'Claims by Microsoft that people were buying the software because it was good are pretty self-serving. I'd like to smoke what he's smoking.' Gates also said that he took a 'conservative balance sheet approach' to running Microsoft explaining that he wanted 'great financial strength so we would have the flexibility to do software in the new way, or whatever we wanted to do.'"

Secret was scamming, stealing, working hard

It was all three.

Microsoft repeatedly used this tactic.

1) Pretend to work with another company
2) Steal the good ideas from that company
3) For bonus points, if possible make the next product from that company suck.
4) Profit!

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Microsoft outright stole some products (Stac comes to mind)-- after they LOST in court, then they bought the company on the stock market.

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However, they worked like demons on their own stuff too. Microsoft worked hard- very hard. It competed very hard (frequently on the edge of legality and sometimes past it). It cheated, scammed, lied, stole.

But it also polished better than ANYONE. Microsoft made things that were arcane and difficult into automatic and easy things.

And it supported (and supports) its customers extremely well. The two times that I called for customer support, they pulled out all stops to support me (a sound card problem with 5 senior engineers, a level 1 and level 2 support on the line- and by god they figured it out after 3-4 hours on the phone). When my business went through the recent DST thing, we had multiple microsoft people on site verifying everything- holding regular meetings. None of our other vendors did that.

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I've compared M$ to an evil parent that wants the best for you as long as you stay home and never go out on your own.

Multiple Factors

There are two "secrets" to Microsoft's success:
1. Microsoft had the luck to work in an exploding market while it was still in its infancy.
2. Microsoft had the shrewdness (or ruthlessness, perhaps) to continue leveraging the advantage conferred by secret 1 for the decades to follow.

The real secret which he will never admit....

... leveraging and building upon the MS-DOS monopoly is the reason why Microsoft was successful.

Everything else is just Gates' PR people trying to make history be kind to Gates, in spite of the fact that he raped the personal computer industry of profits and innovation during his tenure.

Notes user here...

Mitch Kapor, founder of the Lotus Corporation, has a different view: 'Claims by Microsoft that people were buying the software because it was good are pretty self-serving. I'd like to smoke what he's smoking.

I'd be afraid to smoke what they apparently put in the crack pipes at Lotus, at least in the Notes division.

Software company

Like Steve Jobs said at D5 (http://d5.allthingsd.com/20070531/d5-gates-jobs-transcript/):

"Well, you know, Bill built the first software company in the industry and I think he built the first software company before anybody really in our industry knew what a software company was, except for these guys. And that was huge. That was really huge. And the business model that they ended up pursuing turned out to be the one that worked really well, you know, for the industry..."

So there are two important things, they were focused on software only, and they adapted the correct business model to be focused on software (able to make quick, temporary alliances with many factions).

Basically, it can be summed down to being an agile, nimble competitor. Which has no resemblance to what they've become.

McDonald's

Microsoft succeded the same way McDonald's did---sell a bland, familiar, mediocre product in huge volumes at a low-ish but profitable price (this worked for PCs because it's bundled; home users would not have actually paid for Windows). Really, there's no big secret here. The same model works very well for Wal-Mart and Ikea too. It's hard to get those obnoxiously-high volumes if you try to sell on quality and overall value.

I think this is part of Vista's problem. It's still low to mediocre quality, but no longer bland and familiar. It's like McDonald's suddenly trying to get people to buy $12 steaks.

ctually what MS does is....

First and foremost MS is a marketing company. A company that realized early on, quantity is better then quality as it get you onto the consumers/businesses systems.
Second they are a legal firm that applies a chess strategy of sacrifice the pawn to more the knight forward.
Or in other words, what is the risk vs. payoff of breaking teh law?
Third they are, by the court decisions of court around the world, a trust breaking law breaker, a company run in part with anti-trust law breaking tactics.
Fourth, what development they do, it is with intent to dumb down the users and always leave them coming back for improvements but never really doing a complete job.

"The way to be successful is to make people need you" which is achieved by consumer entrapment abuse.

The reason for concern MS has had over open source and its halloween documents evidence is because Open Source, though not a freeing of the consumers is in fact a big step in that direction.
     

The secret is ...

Most business users confused interoperability with PC-compatibility. By the time the realized the folly of demanding compatibility with a closed proprietary standard instead of an open level playing field standard, MSFT was well entrenched and the vendor lock had been achieved.

Moore's law helped hide how inefficient MSFT coding had become. The marginally legal and outright illegal activities of the business/sales units would not have had this much of success if the vendor lock had not been achieved.

But deep at the core, the dominance of MSFT is because the ignorance of the user base rather than any brilliance of MSFT products.

The view from Lotus

I was a consultant at Lotus at the time Microsoft started winning in desktop applications.

Bill Gates is essentially correct:

1. Lotus did a much worse job of hiring in professional management and bridging the gap between software development and business.

2. Lotus complicated their tools-set and architecture unnecessarily. This is one factor that killed 1-2-3. Lotus went straight from assembly code speedy to bloated and slow. Ironically, as this was happening, Jon Sachs wrote 1-2-3 C, a simple, fast, and very portable reference implementation.

3. Lotus did a bad job with follow up products. Instead of launching and improving, they would launch, get disappointed, give up, do something else. Or, in the case of 1-2-3, they would overcomplicate. They had very innovative products - ones that could have changed spreadsheets in fundamental ways, and that would still be innovative today. But they did not know how to nurture these products.

Microsoft faces a lot of the same problems now. Microsoft can't seem to make regular incremental improvements to key products, for example. But business isn't about being perfect. It is about being less bad than the other guy.

Microsoft's Success

Microsoft's success came from a complete lack of ethics.

While companies tried to compete on a level and ethical playing field, Microsoft was dirty dealing them. Stealing their work, poisoning business relationships, intentionally disrupting their businesses, etc.

I can't think of one, that's right, not one product of theirs that won on its own merit. Their whole office suite wouldn't be anything if they didn't create back doors in Windows and DOS for them. Windows wouldn't be anything if they did not poison relations between the likes of Xerox and DRI. DOS would have had competition from DRI if they didn't embed bogus warning messages in their applications. FUD is the modus operandi of Microsoft and how they "succeed."

They took illegal and unethical advantage of every piece of software they ever sold. Every last piece of their software works against every other software ISV.

Those they couldn't beat, they put out of business by dumping "free" versions on the market. Netscape anyone?

Re:Supplying the OS for PC's probably helped ...

"out flying a plane" is just urban legend. Go find some of Gary's intervies for the truth on the subject.

But i agree, there was a lot of luck involved, and a but of underhanded backroom deals.

Bill was handed a monopoly ... and he learned.

IBM handed Microsoft a monopoly on the OS for their new PC "toy".

Bill Gates & Co then hired people who knew how to exploit that monopoly.

Yes, their competitors made mistakes. So did Microsoft.

Microsoft Bob.
Microsoft Blackbird.
Etc.

The difference being that Microsoft had their monopoly to fall back on when their other attempts failed. Their competitors did not.

Bill is going for the "humble" bit now. But that's not how it happened.

Re:Bill was handed a monopoly ... and he learned.

The difference being that Microsoft had their monopoly to fall back on when their other attempts failed.

I knew this thread would fall into the trap of recursive "reasoning". Repeat after me, "a company cannot exploit its monopoly to become a monopoly". When they started they were a small scrappy company. Yes, there was luck involved, but they also had "the vision thing" going for them. MS viewed software as a viable business. They did not subscribe to the widely believed notion that software was just the necessary evil you bought from your hardware vendor to get your hardware to work. That vision led them to make decisions, like hiring business people and engineers, with the goal of building a long-term, sustainable business selling software that ran on *other* people's hardware. I am not saying they were the only ones to have such a view, nor even that they were the best. But it was somewhat controversial at the time, at least among the big computer hardware makers, and so I admire them for pulling it off and for being a major player in the "re-wiring" of the computer industry.

Re:Bill was handed a monopoly ... and he learned.

You're right that most companies don't choose to engage in those ruthless tactics.

However, the most powerful companies do. And we reward them. And we get what we deserve.

Look around you. This is how powerful companies are built. In every industry, right from food and power on to music and movies on to automobiles and military hardware and anything else you can think of, they are all run this way.

That's not an apology for any behavior. But, you need to recognize, for things to change, you can't just hate the player, and you can't just hate the game. You have to hate them both, and you have to hate them enough to set your own safety and comfort aside and put a stop to it by whatever means are necessary. They've always relied in you being too scared and or lazy to take the necessary steps, and they've always been right.

And we get what we deserve.

"in EVERY case."

But there is no denying that Gates did have this vision of a software company at a time when operating systems and most applications were bought bundled with the hardware in EVERY case.

Here's another history lesson for you.
http://members.fortunecity.com/pcmuseum/dos.htm [fortunecity.com]

Looks like people (and companies) were writing Operating Systems (and apps) without selling hardware for YEARS before that.

Also, in the English language, "every" and "most" are not synonyms.

Re:Thus the "handed" portion

Not to mention that Bill always seems to forget that his mommy was on the board of the UnitedWay with IBM's then CEO. I'm all for using your connections, but this was by far the most significant, and most overlooked, factor in MS getting the IBM PC contract.

Re:Bill was handed a monopoly ... and he learned.

Yes, their competitors made mistakes. So did Microsoft.

Microsoft Bob.
Microsoft Blackbird.
Etc.

And by Etc., you must mean Vista :)

Re:Supplying the OS for PC's probably helped ...

But i agree, there was a lot of luck involved, and a but of underhanded backroom deals.

Right, luck in terms of timing, but this quote really bothers me:

"Most of our competitors were very poorly run"

The initial competitors were IBM and Apple, both are alive and well. Remember, that Microsoft got their start by buying some crap inhouse developed OS called DOS, and convinced IBM to put it on their PCs (before they even bought the software). Round two was when IBM had a deal with MS with the OS/2 project, and Microsoft completely backstabbed them with Windows 95.

Those were the two biggest "successes" of MS.

Re:Supplying the OS for PC's probably helped ...

This is true for a good many businesses - although sometimes "luck" is in the eye of the beholder.

I used to provide engineering consulting services for a specialty repair contractor. Since there were a lot of "big boys" who were already well-established doing what he did, he opted (with my help) to take on more "risky" jobs that the established contractors wouldn't touch because they were, well, "too risky."

He soon got a reputation for being, not just a good contractor who got the work done on time and on budget, but a "go-to guy" who would succeed where others wouldn't even try. And soon, he was getting even the "bread-and-butter" jobs instead of the established firms because of "brand familiarity."

In the end, you gotta deliver. Microsoft might be the Great Satan, but they have a lot of satisfied customers you don't hear from, who got stuck on their stuff, and swore by it.

Like Harry Beckwith says in his book "Selling The Invisible": Your main competition isn't a company or a salesman or a technology, it's the "status quo."

Re:Supplying the OS for PC's probably helped ...

This I think is a good example of where a better SALES organization wins out.
The problem with software is that there are exit barriers. Once you've bought
a system you are somewhat commited to it. This is what leads to grannies to
think that they need msoffice for their old word documents.

That sort of thing doesn't NEED innovation. All you really need to do is to
not eggregiously piss off your captive audience. That is a much lower bar.

He points to Lotus and whines about lack of innovation. I'd really like to
know exactly what innovations that microsoft have made that are relevant
to their customers and Lotus product.

I really don't see it.

I might as well be running a pre-hegemony copy of smartsuite for all the
actual "innovation" that goes on with this stuff.

Ultimately, he's trying to frame non-technical successes in technical
terms to deflect from the fact that his stuff really isn't all that
great from a technology point of view.

Re:Supplying the OS for PC's probably helped ...

Microsoft was so far behind Apple in the GUI business in the late 80s and yet they still own the market.

Let me fix that for you: Apple was so far behind Microsoft in the application business in the late 80s and early 90s that they just limped along while Microsoft snagged the desktop. People buy PCs to run applications, not operating systems.

Most of you don't even remember how hard they had to fight to convince companies to write software for their newfangled windowing system when everyone was perfectly happy with DOS. Gates is being disingenuous when he says his competitors were "poorly run", the real reason is that his competitors (including IBM who saw the PC as a toy) didn't have his vision and drive to (as he said back in the 80s) place a computer in every home. People like Mitch Kapor didn't see any value whatsoever in graphical environments - after all he was selling 1-2-3 hand over fist to companies still running DOS. He paid dearly for that. And once Microsoft controlled the desktop, they could do anything they wanted, which eventually would get them into trouble.

The reality is that no one saw it, except Gates. One could argue that Apple saw it (or wanted it), but they were too busy trying to dick around with the hardware and their OS was always an afterthought. The first "real" PC I ever had was a souped-up Zeos Pantera 486 with 16MB of RAM, a Diamond Stealth64 sporting an amazing 4MB of VRAM, a SCSI card with a 105MB HDD on top and - get this - a gynormous 17-inch monitor. I paid close to $6K back then for that. Today I can put together something that is for all purposes a super computer compared to that, for about $600. The reason for that is and always has been Microsoft Windows.

Re:May the Microsoft Bashing Begin...

Yes to that specific case and I agree with what you are saying, but the general process repeats itself over and over in business and technology.

Facebook? Give me a break -- look at the prior art of Friendster and even Myspace. When Facebook was being started at Harvard I thought it would not take off because of the current dominant players.

Google? Anybody old enough to remember when Altavista was the king of search? We used to always use that engine in college.

AIM? Remember ICQ? Ntalk? Otalk?

Original ideas are few, and even Gates admits he was not very original with his ideas in many, many interviews, but he did implement them well, er... market them well, and protected his monopoly with a vengeance.

Re:It's not a business model

Amiga, ATARI, DecView, GEM, Lisa, MacOS, OS/2, PARC, SunView, X11

Microsoft didn't "bring about" the GUI, they stole the most basic aspects of it and wedged it on top of DOS, which BTW they also stole.

You just couldn't be more wrong.

Re:It's not a business model

Apple actually licensed the GUI patents from Xerox. They didn't steal anything.

Re:Microsoft succeeded because they were smart...

I think you may very well be the only person I have ever seen state that Microsoft Windows "just works," or that Mac is unfriendly.

Windows 9x was a piece of crap. 2000/XP are quite nice, though I am glad I don't administer them professionally.

MacOS confused the shit out of me because it lacked a CLI of any note prior to OSX, but I wouldn't say that it was "unfriendly."

But all the time I spent as a kid trying to get games to work on Windows 95, when they were made for Windows 95, "Just Works" is not something that I would use to label it then.