Sunday, December 18, 2011

Who Cares if a Tablet is a PC?

Ted Levitt identified a central truth in strategy when he wrote that how we define "the business we're in" can create or destroy opportunity.

The drama playing out now is in the personal computer world.  It centers around whether a tablet--like an iPad--is a PC or something else, something entirely new.  

Before his death, Apple’s Steve Jobs said, no, a tablet was not a PC--that, in fact, we were entering a post-PC world.  Microsoft’s Steve Ballmer disagreed, saying that the tablet was absolutely, positively a PC.

On the surface, it seemed like just another Apple-Microsoft spat.

Ironically, if the tablet is measured as part of PC sales, as the British research firm Canalys holds, then sometime next year Apple will knock H-P off its perch as the number one PC-maker in the land.  Conversely, if the tablet remains a separate beast, then the PC industry looks moribund and on the downside of its lifecycle.

Who really cares?  Not Apple, which is going to sell tablets no matter what we call them.  Not Canalys, which has to make the decision once and just be consistent in its reporting.  Not companies that rely on Canalys because they can, presumably, add and subtract columns and total the world anyway they wish.  And not most of us, who will buy what we need based on what it does, not its strategic definition.

But, there is one group who really cares: the employees of Microsoft.  Steve Ballmer undoubtedly knows that, and it explains why he’s taken such a emphatic stand on what seems a secondary issue of product definition.

More than 90,000 Microsoftians arise every morning, part of what is still an immensely powerful, profitable company.  If they choose to believe the tablet is something different from and post-PC, and their business is to optimize Microsoft’s traditional PC profit flows, then employees become one giant milking machine.  Their only goal is to cash in on a 30-year investment.  The PC market may be falling, but there’s a lot of money to be made before the fat lady sings, and there’s nothing ignoble about a milking strategy.

However, by defining the tablet as a PC, Steve Ballmer gives his worldwide team the opportunity not only to optimize the old, traditional platform, but to take everything they’ve learned and apply it to an entirely new platform.

Which kind of morning would you like to arise to, for the next decade, were you working at Microsoft? Which kind of future would you appreciate were you an investor?

Which 90,000 people are going to have more fun?

Defining the tablet as a PC doesn’t mean Microsoft will be successful, just as the railroad wasn’t successful just because it defined its business as “transportation” and competed with cars and planes.  And, it will inevitably mean more investment, riskier investment, and lower margins.  However, without the definition being broad and flexible and opportunistic, there’s no chance to compete in the new world at all.

I’m still of the opinion that when commentators discuss the Big Four--Apple, Amazon, Google and Facebook--they are missing the fifth key player, one that will be around innovating for many years to come.  Defining the tablet as a PC isn’t a Steve Ballmer vs. Steve Jobs spat; it’s an essential element in keeping Microsoft relevant and competitive.