Internet businesses shouldn’t follow Microsoft’s lead

Microsoft boss Steve Balmer announced today something that he believes is “the foundation for a new era of Internet innovation”. We shall have to wait and see if the new tie-up between Microsoft and Yahoo does achieve such a stunning result; but what has happened today is an indication of a business that is focused on the wrong thing.

Could Microsoft be looking in the wrong direction by worrying so much about search?

Could Microsoft be looking in the wrong direction by worrying so much about search?

For the past decade Microsoft has been seething at the success of Google. They clearly detest them. At every twist and turn of the development of Google, Microsoft has been there with something to try and defeat them. Over the years, Microsoft has launched several different search services to try and take on Google – and repeatedly failed to take any market share from them. Indeed, Google just keeps going from strength to strength.

Inside Microsoft that must be really annoying. Every time they try and produce a rival search engine, they see it fail to make any inroads. Meanwhile, Google just keeps on producing more ideas, more technology and gains more users. So it’s no surprise that in spite of the failed takeover of Yahoo, Microsoft has today announced it is joining forces with the company to launch a new search product to rival Google.

Yahoo will use Microsoft Bing as its search engine. Meanwhile, Microsoft’s rival to Google AdWords, will be run by advertising experts at Yahoo. It must seem like a marriage made in heaven to the people at both companies who are thoroughly fed up with the success of Google.

But here’s the problem – and it is one that is all to common for anyone running an online business – Microsoft thinks that Google is competition. Wrong. Often, businesses misunderstand who their true competitors really are – and thereby focus their efforts in the wrong direction. The biggest competitor to Microsoft is Twitter.

Microsoft Office is all about creating and sharing. You can easily do that with free office software and Twitter. No need for a paid-for service. No need for complex corporate licensing systems. No need for vast amounts of storage space. Microsoft’s billions have largely been made through software licensing at big corporates who needed the suites of programs to enable staff to work co-operatively. Twitter blows that Microsoft advantage out of the water – big time.

Starbucks executives could provide a lesson to Microsoft. Starbucks knows that its competitors are not really other coffee shops. The main competition to Starbucks is the humble kettle in your kitchen. More people make coffee at home than ever visit a Starbucks store. And Starbucks knows that – which is why you can buy Starbucks coffee mixes in your local supermarket. It’s also why you can get Starbucks in your works canteen, or in a department store cafeteria. None of these are what might be seen as competitors – but they represent much bigger competition to Starbucks than the likes of Costa.

While Microsoft has been getting its knickers in a twist over Google, the world has moved on. Search itself is becoming less important as we discover new ways of sharing and finding information using social networks and Twitter. While the company’s board and engineers have been looking in the direction of Google, they’ve missed out on an opportunity to take on Twitter and kill it at birth. Microsoft virtually invented instant messaging, yet their Live product and the Microsoft instant messaging system has seemingly been confined to the back room. How many people do you connect with using Microsoft’s instant messaging system? Or do you use Facebook and Twitter instead? Luckily, Microsoft owns a huge slice of Facebook, so perhaps all is not lost.

But the constant struggle to defeat Google shows a company that could well be facing in the wrong direction. And it begs the question – do you know who your real competitors are? Are they the companies that do the same as you, or are there possibly alternative types of competition you should consider?

I always recall a story from the history of Tesco. For years, apparently, they had focused their attention on defeating Sainsbury – the company that Tesco perceived as the “real competition”. But as soon as Tesco focused its mind on the real competitors – shoppers who had received a bad Tesco experience – the company was transformed.

Microsoft needs to stop worrying about Google; when the company histories come to be written in 50 years from now, we may well find that this fascination was what actually killed Microsoft. Don’t let your business go the same way. Work out who your real competitors are and deal with them; don’t waste your time, money and effort on the seemingly obvious competition.

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