There’s a lot of speculation that Microsoft and Intel didn’t see and haven’t responded to the mobile device revolution fast enough. In the last few days, Intel has merged several biz units into a new mobile and communications group, and Microsoft replaced the head of their Windows Phone unit. It’s a study in escalating commitment.
What’s the psychology of escalating commitment? There’s an easy exercise to show it. Take a room full of people, an ordinary $20 bill, and auction it to the highest bidder starting at $1.
Escalators in San Francisco's Moscone Center
In a room full engineers, or other logical types, there’s a lot of pride in the $1 bid (max return!), and of course bidding will progress in $1 increments until $19. Then there’s a lot of silence. The auctioneer will goad someone into bidding $20 to break the deadlock, and there’ll be some confusion over the point.
Now change the personas involved – sales executives or stock traders, or other competitive types with executive titles. Something quite different happens. Bidding rapidly escalates to $20, then inevitably somebody bids $25, $30, $40, and suddenly bidding is in the $100 range. (Proceeds go to drinks that evening.) Why does this happen? Maybe the bidding comes down to two evenly matched regional rivals, or between a seasoned VP and a younger superstar, but someone has something to prove, and someone has something worth more than a few bucks to protect.
For Microsoft and Intel, it’s not quite the same artificial game with just bragging rights involved, but they are definitely caught in escalating commitment. There’s a very real $50B bill – the smartphone market – and upstarts are driving up the bids.
I read this article over the weekend:
In that piece, Information Week’s Art Wittman makes several attempts to say that Microsoft and Intel didn’t see this smart mobile thing coming.
There can be little doubt that both Microsoft and Intel were caught flatfooted by the boom in smartphones and tablets, but one has to wonder whether there’s more to it than simply being two years late to the party.
Ummmm, no, there’s plenty of doubt. Neither Intel or Microsoft has been caught “flatfooted”. Wittman does make good points about Intel not applying an IP model, and Microsoft having a more expensive royalty model. There’s a lot more to this game, and there’s one ball-and-chain both companies’ mobile units have to deal with: don’t jack up the mainstream business.
Intel is trying to establish the context for “low power”, but at the same time with enough horsepower for video content creation and consumption. Doing the work of a 30W part in a 3W part like the Atom processor is an engineering feat. However, “low power” in the mobile world means <1W. Does anyone for one second think Intel can't design and build that type of part? Ludicrous. It's well within their technological capability. The problem is: shipping those parts in volume lies outside of their business and pricing model.
Microsoft is trying to establish the context for "put people first". Moving from the large, relatively unconstrained Windows desktop and server platform into a consumer-friendly, connected, gaming and socially savvy mobile environment like Windows Phone 8 is an engineering feat. And it's one that according to this InfoWorld article they may be struggling with mightily. But again, the problem isn't the engineering: it's getting the business and pricing model right so it doesn't disrupt everything else going on.
If you're Intel and Microsoft, it's really hard to create an incremental business model for mobile that doesn't disrupt the main line business. Apple, ARM, and Google didn't have that issue and have created new and compelling business models for mobile, and that's forcing an escalating response from Intel and Microsoft.
Back to a question in the Wittman article, which in my mind is the real question here.
So, had Intel and Microsoft been more on their game, would it have made a difference?
He postulates that had they moved earlier, there would truly be a three-horse race in smartphones and tablets. Maybe. But there’s the risk that they could have damaged the mainstream biz, too.
It’s a management miracle that both Intel and Microsoft have held up as well as they have in this disruptive mobile change. They aren’t two years late, and they are completely “on their game”. We have to realize it’s not the same game that Apple, ARM, and Google think they are playing.
With all that said, this game will get to the point where Intel and Microsoft have to make a bid to win in mobile, when they are ready. These latest reorgs aren’t the last bids.
