Evolution of Microsoft as a Company and Discussion about their Business Model

Read More

We discuss the growth of Microsoft as a business by looking at its core products and features. And we also dive into the evolution of its business model. Learn about business concepts and improve your business vocabulary by tuning into this conversation.

Feel free to follow along with the transcript as you listen to the podcast and watch the video lesson.

And be sure to test your listening comprehension skills by completing the worksheet.


Mary Daphne: Hello, advanced English learners. Welcome back to another Native English speaker conversation. I'm joined by the one and only Greg. Thank you for joining me, Greg.

Greg: Of course. 

Mary Daphne: So this is a topic Greg suggested, and I'm excited to talk about it. We've gotten some suggestions about business topics it seems like that is something that a lot of people are interested in. So today's topic is going to be about the evolution of Microsoft, and we're gonna look into different business strategies. And the reason we're talking about this topic is to give you some business vocabulary and expressions, and maybe even some strategies to apply to your own work.

So let's get into it.

All right. So where do you think we should start with this, Greg? 

Greg: Yeah, I mean, Microsoft is a company that's been around that seems like for ages, right? Depending on how old you are. It was an innovative tech startup. Or it's just something, emerged in the dinosaur era before you were born.

 But suffice to say today, Microsoft is still a dominant tech company right at the very top. And anytime a company has been so successful over so many years, it's worth taking a closer look to figure out maybe what their secret sauce is.

How have they stayed relevant for so long? 

Mary Daphne: So let's define the term secret sauce. Secret sauce is a term that is used a lot in business. It sounds like it's a made up thing, but if you think about it, I think it originates from this idea that let's say one restaurant is making barbecue chicken one way and another restaurant is making barbecue chicken another way, but the The other restaurant is really famous for their barbecue chicken, and it just seems like, oh, regular barbecue chicken, but it must be the barbecue sauce. So it has these overtones of culinary delights and how you, feel about maybe when you eat something that's really delicious.

So that can be applied to business as well. 

Greg: Yeah, I think that's a good example. The idea is certain foods can be very similar, but one just always tastes better than the other. And so it's as if that food had some secret sauce. What does that little secret ingredient. That makes it tick.

And that same concept can apply to a business, right? Sometimes businesses seem very similar. There are a lot of software companies out there. Why is Microsoft such a successful company? What is their secret sauce? . 

Mary Daphne: Yeah. Their longevity is testament to the fact that they must have some secret sauce 

Greg: Yes.

Mary Daphne: In there. 

Greg: Yes. So let's take a look. And sometimes to determine the secret sauce, it's useful to go back in time a little bit, figure out what their origin was and how they've evolved. And so that's what we're gonna do here. Starting with the original form of Microsoft, which was actually an operating system.

Mary Daphne: Right so your os your operating system, for example, on your computer, you might be an Apple operating software or a Microsoft operating system. 

Greg: Exactly. Yeah. Operating system, exactly. And yeah, Microsoft started with MS Dos way back in the day. And for those of you who are our age or older, you'll remember, loading up your system with a command line, right?

You type something in and you. Some information. There wasn't a mouse that you could use.

Mary Daphne: I was gonna say, I remember playing computer games-- educational computer games. I didn't play video games, but I played computer games and thoroughly enjoyed that in my childhood-- there was no mouse. So it was all keyboard. 

Greg: Exactly. Yeah. You entered your selection using numbers or letters and. It was a very different era. But somehow at that age and in that era, we all found that to be an excellent form of entertainment. Nowadays, you would play a game like that or use an operating system like that and be like, "What is going on? Are we in the stone age?" But back then that was, very sophisticated stuff.

Mary Daphne: And this is back in the, like eighties, nineties.

Greg: Yeah. Eighties, nineties, exactly. So I'm trying to remember the first time Microsoft came out with a GUI. A GUI is a graphic user interface, a graphical user interface.

That's an interface where you actually have a mouse can move around. . That was sometime in the nineties. Our audience they have the privilege of Wikipedia so they can figure out the exact history. But there were a couple releases with the mouse and then the real big release that, that changed everything was Windows xp. 

Mary Daphne: Okay. So why was that such a iconic moment for the Microsoft journey? 

Greg: Windows XP was the ultimate manifestation of this graphical user interface. I would call it microsoft as an operating system, right? Okay. At that point Windows XP had the highest penetration of any operating system.

 And it just felt like no other operating system was relevant, right? It was that pervasive particularly in businesses and institutions. Microsoft was everywhere. And one might wonder why were they so successful with business? 

Mary Daphne: Okay. 

Greg: And the answer is not only did they have this great operating system, they also had a really nice productivity suite.

Mary Daphne: Mm-hmm, microsoft Word. Microsoft Excel. Microsoft PowerPoint. 

Greg: Yes. 

Mary Daphne: Microsoft Office. 

Greg: Microsoft Office. So first they had this operating system, then they introduced this incredible productivity suite, which was Microsoft Office. 

Mary Daphne: And so when we say suite, it's several applications that are technically used in synchrony, meaning together to get the job done. For example, someone with the Microsoft Office suite would probably be using Microsoft Word, Microsoft PowerPoint, which we just call PowerPoint. Microsoft,

Greg: Excel. 

Mary Daphne: Excel, 

Greg: my favorite. 

Mary Daphne: Greg's really good at Excel.

Greg: And then of course, Outlook, right? For your email. 

Mary Daphne: And then what's the one that they have for video conferencing? 

Greg: For video conferencing? They purchased Skype. So that was theirs. They also have team conferencing through teams. 

Mary Daphne: That's the one 

Greg: Microsoft Teams, 

Mary Daphne: teams,

Greg: they have a note taking app, Microsoft OneNote,

Mary Daphne: which I really like.

Greg: Yeah. So all of these apps over time emerged to reinforce. This productivity suite. And so companies love that because they have an operating system that came bundled with this productivity suite. Everything worked well together. And so because of that, they're like, "This makes my life easy and it keeps our employees productive. So we're just gonna buy this. We're not even gonna consider any other options." 

And the final I would say arrow in their quiver, that's another term, right? This is a military term. When, archers have a quiver of arrows. And you can think of the company as the Archer. And the various arrows are their competitive weapons.

So the final arrow in their quiver was their web browser. The internet explorer.

Mary Daphne: Which, how do you feel about, do you feel like people are still using Internet Explorer? 

Greg: So Internet Explorer has mirrored Microsoft itself in terms of its development and popularity. 

Mary Daphne: Okay. 

Greg: There was a time when Internet Explorer was so popular, it dominated like over 90% of web browsers used, maybe even higher.

It might have been like in the high nineties.

Mary Daphne: And I think this was in the nineties and two thousands. 

Greg: Yeah, exactly. Definitely in the nineties everyone only used Internet Explorer because everyone only used Microsoft Office or I should say the operating system windows. Because it came bundled.

This idea of bundling the operating system with all the software 

Mary Daphne: And you didn't have to pay extra for those. 

Greg: You didn't, it came free. Very good point. Yeah. That's a huge part of it. The fact that this was all free, Which is crazy. 

Mary Daphne: What a great business strategy. It's a great 

Greg: Exactly.

Mary Daphne: Model for, So you're selling your key product, which is the operating system. Yep. And then you say, Okay, everyone as a perk, we're giving you this amazing productivity suite software for free. 

Greg: Exactly. Well, strictly speaking, the office wasn't free, but it was close to free. Given the amount of value it was providing for these companies the cost was negligible. Because they were buying this operating system and over time they actually started to switch and they started charging less for the operating system and more for the productivity suite. But ultimately Microsoft got busted. 

Mary Daphne: Meaning they got called out for something that, 

Greg: Yeah, 

Mary Daphne: To get in trouble. 

Greg: Yeah. Yeah. A police will bust a criminal they'll bust the robber. 

Mary Daphne: Or like the kindergarten teacher busted the kindergartners for skipping out on lunchtime. Something like that. 

Greg: Yeah. They'll catch 'em playing outside and busted.

So anyways, Microsoft got busted for basically anti-competitive behavior. The argument was that because they were bundling so many things together, there was no way for other software providers to compete with them. 

Mary Daphne: So they were making it impossible to be competitive and they maintained a monopoly.

Greg: That's it. Yeah. They created a monopoly. And when you have a monopoly, the problem is early on in a monopoly, it seems great. It's yeah, of course they have monopoly. This is such a good product, but over time, because they have a monopoly and there's no new entrance to the market, no new competitors

Mary Daphne: , there's no innovation.

Greg: There's no innovation. They get lazy 

Mary Daphne: and that's problematic. So if you've noticed like some of your favorite software and maybe there's like a suite, right? So I'm thinking there's like Microsoft Suite, there's Adobe Suite. There are some Apple suite type things. Yep. If you notice that certain apps start to glitch, you might say, Okay, that's interesting.

I wonder why . It always makes me think that maybe they got a little lazy, they got a little complacent. They're too many bugs here, and no one's fixing them. Yeah. And that turns you off from the product. Cause then you're gonna wanna seek other products that can do the job as well, if not better, as whatever you're using.

If they're not fixing the bugs, the software bugs, right? When things glitch and they act out of sync and out of whack. 

Greg: Totally. And guess what happened? New entrance came for exactly that reason, right? Microsoft started getting. It became notorious for being buggy, right? Freezing a lot, easy to get viruses on.

People started thinking maybe there are alternatives. , right? And you started, Mac OS started becoming more popular. And Mac Os was famous for being very smooth, right? With very few errors. Partly because they create a very controlled experience. So there's less you can do in a Mac in terms of flexibility or it's harder to do the more sort of customized operations but it's also a much more contained experience that ensures it's more smooth. So anyways, suddenly Microsoft had new competitors coming in who could do specific things better than Microsoft. They were also forced to decouple some of their apps from each other. That allowed other software providers to compete.

Mary Daphne: So what does that mean? Decoupling the apps? 

Greg: So we said before that they're bundled. 

Mary Daphne: Yes. 

Greg: When something's bundled, that means they all come together. It's like a bundle of hay, 

Mary Daphne: yeah. 

Greg: Bundle of straw. When you decouple, that's the opposite of bundling. Coupled when something's coupled, they're two things together.

When you decouple it, you're splitting it apart. 

Mary Daphne: So you're offering for them to be sold a la carte sold separately in other ways.

Greg: Exactly. Or at least provided separately, even if they're not sold. But provided separately. So that all started happening. And Microsoft's grip on the operating system and on the productivity suite starts slipping a little bit, but the bigger change was not that.

It was the switch to mobile. 

Mary Daphne: Okay, so now we're talking about switching to getting off of your computer and going more onto phones. 

Greg: Phones. That's the big thing. The smartphone, right? The introduction of the smartphone made it such that. Suddenly we didn't need to be on our computers to do things. 

Mary Daphne: In fact, recent studies are showing that a lot of people, while this is before the pandemic era, when people were not working at home as much, studies were showing that most people no longer owned a computer of their own.

They just used the computer at work, and then they would be on their phone the rest of the day or evening. And of course that changed when people started working remotely, working from home. But before that, it was starting to seem like people didn't really need computers at home because their needs were met at work and through their mobile devices.

So for Microsoft to then switch to that makes a lot of sense, right? 

Greg: They didn't at first, and that was the problem. 

Mary Daphne: Ah 

Greg: they, they were so confident in their sort of choke hold on the industry that they were very slow to migrate to mobile. They didn't take it very seriously. Of course, the first smartphones, you could argue where the Apple smartphones the iPhones, but really, I would argue it's the Blackberry, right? The Blackberry was, in my experience, the first real smartphone that could send emails. You could use Google Maps but it was still kind janky experience. It was the iPhone that came in and made a really nice user experience.

So suddenly now you have these little computers in your hand and that's not what Microsoft Windows. Is good for, It's not what Microsoft Office is good for, right? So those apps couldn't run on this phone and people, so people didn't need computers anymore. They had their phones. So they also means they didn't need anything that Microsoft is providing.

That's what you call an existential threat, right? Your existence is in peril, right? 

Mary Daphne: So now Microsoft has to decide, okay, where do we move from here if no one's using our operating system? No one cares about our apps anymore. How are we gonna get people back into the fold? 

Greg: Exactly. How do we keep people how do we keep people in our system, in our ecosystem?

And that is when they started exploring cloud service offerings. 

Mary Daphne: Okay. So let's define the cloud service offerings, just so that people are on the same page. 

Greg: So cloud service is computer software that's provided remotely, right? Instead of running locally on your system, it used to be you would get a CD or a floppy disc and install a game or , an application using that cd and it would be stored on your computer's local hard drive.

 Instead with cloud software, it's provided remotely. And so when you open up an application, you're opening it up through your web browser. 

Mary Daphne: You have to have a stable internet connection.

Greg: You need a stable internet connection provided that you do, you can do everything using the power of the servers provided by that company instead of your dinky old computer. So it means you can run much more sophisticated applications on a very simple device. Now, what's an example of a very simple device, a smartphone.

So suddenly by moving their software to the cloud Microsoft was able to, regain relevance even on a phone. Yeah, right? Because you could start using the applications. On a phone. 

Mary Daphne: So they discovered a product market fit, right? So they looked at the market, what the market needed, what the way society was evolving, the way technology was evolving, the way our needs were changing.

Suddenly, everyone has a smartphone. Not everyone has a computer at home or cares to have a computer at home, but everyone's on their smartphones and they need access to certain. Which they can get instead of plugging into a hard drive. We don't even have CD ROMs anymore? 

Greg: No. 

Mary Daphne: On the computers.

Greg: Yeah, 

Mary Daphne: they're redundant. Then they decided, okay, let's move to the cloud software. 

Greg: Exactly. And what that enables also is, whether or not you're on your phone, it also can work cross-platform. So it can work on Android, it can work on iOS, it can work on an Apple. All you need is a web browser because the software's running within the web browser.

So that means it can be used on any device. And that is super powerful because suddenly they can operate in a platform agnostic way. It means it doesn't matter what platform it's on. Which means they don't have to worry about hardware compatibility anymore. It's all in the cloud. Yeah. And so it gives them this advantage that they didn't used to have.

It gives them this flexibility. And once again, for businesses, makes it easy for businesses to incorporate this kind of software because it can run on anything that the business has. 

Mary Daphne: And what's really cool too is that, you might be an avid Microsoft user, but that does not exclude you from then also using another, company's software and apps such as Google, right? You might also be a Google Cloud subscriber. So the two are not mutually exclusive. You can be subscribers to both, which is great. 

Greg: So you just hit on the final new arrow in their quiver. Which is subscriptions.

Okay. So what does cloud also unlock? Probably most importantly, it unlocks the subscription model, right? Prior to that, software was sold a la carte. When you buy a new Windows version, you own that Windows version and get some security updates, but it doesn't really change. When you buy Microsoft Office, it used to be called Office 2012 2013.

Mary Daphne: And I remember you'd have to purchase the CD rom. 

Greg: Yeah. 

Mary Daphne: And you would install it and then you would just save the CD ROM somewhere in case you needed to restart or update your computer, rather. You would then to get the next update of the software, you'd then purchase another set of CD ROMs. 

Greg: Yeah. And now that's changed, right? Nowadays you don't buy upgrades most of the time unless you're upgrading a tier of service. Instead you have a subscription which gets continually updated over time. Companies also really like this, right? Yeah. Businesses prefer to pay in smaller increments throughout the year rather than big upfront payments at the start of the year.

And so by switching to the subscription model, they can make it easier for businesses and individuals to pay for their services and also ensured a longer, steady stream of revenue that was harder to pirate, right? That was another thing. Piracy was a big. If you were buying a one off piece of software that could get copied and pirated and you could basically get it illegally for free.

Nowadays with subscription services, it's much harder to pirate because those subscription services are constantly pinging the server and constantly checking that this is, an authentic accountant. That was the final thing that cemented now dominant position in the market once more. 

Mary Daphne: So they're doing really well. Isn't it interesting to see an evolution of something like a mega tech company like Microsoft? And even though there's some dips right to their success, they then looked again to the market. They looked at what the, what users needed and wanted. I'm sure they ran studies and had surveys and all of that.

And then they implemented it so that they could then rise again to a place where they wanna be, which is on top.

Greg: Exactly. The key is that they didn't rest on the laurels. They did, but then they started to slip and they got wise. 

Mary Daphne: So resting on your laurels, I love this expression.

So laurels are, think of them as like bay leaves, Daphne leaves, Laurel leaves. So those are the leaves that are from Apollo, right? The God of he's the God of different things, music, healing, different things. And he was the person, or not the person, the God who popularized the laurel leaf, the wreath, right?

And that Olympians like to use too as their sign of victory. So Laurel leaves and the wreath, so to speak, is a symbol of victory. So resting on your laurels means you're basking in your glory. You're just enjoying your victorious moments, your victorious history, but not thinking about competition. You're not thinking about 

Greg: what's next. 

Mary Daphne: So you're becoming complacent, and that's a problem if you wanna keep, maintaining your status. 

Greg: Exactly. Yeah. Any business when they start to rest on the laurels generally a new competitor comes in and takes their cake. And that's why this is a good lesson in not resting on your laurels.

They did for a little bit and then they quickly got back on and got back on the sort of the wagon, so to speak, and are now performing very well.

Mary Daphne: Yeah, so I think a big lesson there is to stay humble, stay hungry, keep your head down and just keep working. 

Greg: Exactly. 

Mary Daphne: All right, so hopefully you took away some nice business strategies yourself.

You heard some nice business vocabulary expressions some pointers that you can share with your friends. This is great dinner table conversation, Great conversation that you can have in the office or with your friends, maybe at a meal or a coffee time. So hopefully you enjoyed it. Let us know what you think, and we're always open to hearing from you what kinds of other topics you'd like for us to talk about here.

So you can fill out the form that I have. It's linked below, and I'd love for you to share a sentence or two to back it up to elaborate, that would be really helpful. So we look forward to seeing you in the next one.

We're gonna be doing that very soon. Bye for now and happy advanced English Learning everyone.