David Rosenthal: belief

Transcript context

…So why was the pie not growing? We talked a lot about that. There are a lot of reasons. You could argue why it wasn’t, but the culture is an effect of that. There’s a big one I’ve been thinking on, which is how to go about placing your bets for the future as a company. I think in the 2000s, Microsoft was viciously trying to fight against the tide. There was open source, there was the web, there was all these things people wanted to do. Ultimately, over time, you cannot fight what people want to do as a company. You can put up all these barriers, you can steer them back into your ecosystem. But ironically, the playbook that Satya is now running is a return to a classic Microsoft one—embrace and extend. Rather than fight what users are doing—I want to use open source software, whatever. I want to make web apps, I want to host a web app—you just figure out what people want, you embrace it, and then you figure out what product you can build with a business model that extends that existing user behavior. But it does require you to be clever and outcompete a lot of other people to invent that new business model that is created on top of new user behavior. I just want to double underline and highlight this one because I think also this same dynamic played out in the building and evolution of Microsoft’s enterprise business. Really IT just wanted to control the network and prevent users from messing it up. Eventually when the iPhone came out, that dam broke and IT could no longer hold back users within their company from doing what they want and having what they wanted. This is where the shift to the cloud was another reason it was so strategically important. Shifting to the cloud is what enabled IT to say okay and become a partner to their users in a way that they paid lip service too before but they were really antagonistic to their users. And it works exactly with what you’re saying for Microsoft as a company and its products too. You want to use an iPhone? Great. You want to use open source? Great. We can still serve you. The trick is figuring out how to make money when you lean into what people want. Because ultimately, if you just reduce it all to economics, what people want is free value, but you can’t actually build a business on giving away free value. I can give you $1 for 90¢, but ultimately I’m just going to go out of business. I need to figure out some way that you’re happy from value creation and willing to pay me more than it costs me them.…

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