Understanding Microsoft

Part 73. Dead Man's Curve

Like the old sixties classic "Dead Man's Curve," there are some sudden changes on the Information Highway that cause companies to crash and burn. Changes in technology tend to follow what is known as the "Learning Curve." A learning curve is a cost versus time curve which starts out flat and gradually dips as time goes on. At some point, a sudden reduction in cost occurs, and a high-cost process or product suddenly moves toward a new equilibrium of dramatically lower cost. This is the point at which Microsoft moves in for the kill.

The learning curve principle is the flip side of the old "80/20 Rule." This rule of thumb states that you get 20% of your profits from 80% of your customers, while your "cream" or "elite" 20% customers produce 80% of your profits. The learning curve is this principle in reverse: you give 80% of your development resources in learning how to produce something, and suddenly you stumble onto a solution that opens the way for you to get maximum return on the last 20% of your resources. To put it another way, a business will usually make three or four mistakes before it finally understands and makes the right decision on a new technology.

What Microsoft does, then, is simply wait for a market to develop, grow, and learn. Once this market begins to reach the kink in the learning curve -- the payoff point where costs suddenly drop and many companies jump in to take advantage of the now-recognizable opportunity -- then Microsoft immediately jumps in with both feet, buys one of the top two or three innovators in that field, and uses their operating system and office suite monopoly to flood the market with that particular brand of innovation. All the while Microsoft takes the credit and claims that they "invented" this wonderful new "feature" or capability.

This practice of hijacking an entire market and liquidating the competition by bundled giveaways allows Microsoft to keep software development costs down. Microsoft lets the *real* innovators do the heavy lifting, the 80% of development costs, the mistakes and fumbles. Then, instead of allowing these pioneers to benefit from the payoff period that comes at the end of the curve, Microsoft steps in and appropriates that reward to itself, denying adventurous risk-takers, entrepreneurs, and innovators their rightful windfall for having done the hard work and the deep thinking. In this way, Microsoft sits and waits for unsuspecting travelers on the learning curve, even pretending to be their partner or escort, and then shoves them mercilessly off the road. Microsoft turns the Learning Curve into Dead Man's Curve for truly innovative companies of the world.

Most recent revision: March 6, 1999
Copyright © 1999, Tom Nadeau
All Rights Reserved.

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