The business model of Microsoft.

We dive into the challenges Microsoft has overcome to grow, how leveraging new technologies has helped them stay future-proof, and where it all started. We have all used Word at some point in our lives, many of us even produced an Excel spreadsheet or two. Microsoft has evolved into an international digital powerhouse, a far cry from its humble beginnings. Now the company ventures in cloud computing, with Azure; and Artificial Intelligence, with their billion-dollar investment in OpenAI – the company behind ChatGPT- and the development of CoPilot.

The origins of Microsoft.

In 1975 Bill Gates and Paul Allen founded Microsoft. Their interest in technology and programming brought them together to shake up the tech world of the 70’s. By this time, computers were predominantly used for business purposes, operated by IT specialists. Their user interfaces, nothing like what we are used to today, functioned on Octal or HEX code. The machine that would function as the fire starter for Microsoft would emerge in the early 70’s. The MITS Altair 8800 was sold as the first commercially available personal computer (PC).

Gates and Allen recognized the potential of this machine and saw an opportunity to create a version of the BASIC programming language for it, turning the pc into something average consumers would be able to use. They developed Altair BASIC, which became one of the first programming languages available for personal computers. Commercializing on the success of this language, the two founded Microsoft, in 1975. Their first major deal: Licensing BASIC for the Altair 8800. 

Rise of Windows.

Ten years later, in ‘85, Microsoft was competing with another tech company, founded in ‘76, Apple. Both companies were focusing on bringing the pc to the masses, however Microsoft focused on software alone, while Apple’s focus was on hardware, supported by their proprietary software. Steve Jobs, Apple’s then Chairman, brought this combination to life through project Lisa and the Macintosh. Both projects started development around the early ‘80s and were quick to pop up on Microsoft’s radar. As these machines provided a user-friendly Graphical User Interface (GUI), Apple was to take ground on Microsoft’s market share. To stay future proof, Microsoft started leveraging the emerging technology of GUI. And in 85, Microsoft launched Windows, a GUI for MS-DOS. 

Expansion and evolution.

Over the years, Microsoft developed many services and products, ranging from productivity suites to development tools, and server software. Under the leadership of CEO Satya Nadella, from 2014, Microsoft made a significant push into cloud computing with its Azure platform and Office 365 suite. This shift has been largely successful, with Azure emerging as one of the leading cloud service providers globally. It was Microsoft's early investments in cloud computing and its recognition of the growing importance of cloud services in the technology industry. This provided them with new opportunities and created new revenue streams. With Azure, the company was now able to offer more than Software as a Service (SaaS) as it scaled up to Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

Navigating the shift to cloud computing.

Following the launch of Azure, Microsoft expanded its competitive landscape beyond Apple to engage with the titan of cloud computing, Amazon Web Services, challenging the established dominance of Amazon in the cloud domain. Microsoft strategically focused on its existing enterprise customers and continued to invest in its platform. By prioritizing the end-user and creating a developer-friendly environment, Microsoft managed to secure a noteworthy market share.

“Languages evolve; ideas blend together. In computer technology, we all stand on others' shoulders.”
- Paul Allen.

AI and Research group.

Following the introduction of Azure in 2010, Microsoft marked another significant milestone in 2016 with the launch of its AI and Research Group, aiming to accelerate its AI innovations and integrate AI into all its products, a clear sign of its commitment to the emerging field of artificial intelligence. 

While Microsoft’s journey has been marked by remarkable innovations, it faced competition in the AI space from other tech giants like Google and Amazon, and public scrutiny over ethical concerns with AI deployments. To stay ahead, Microsoft made a one-billion-dollar investment in OpenAI positioning itself as a leader in ethical AI development and collaboration. Read more about the business model of OpenAI in our blog. This strategic move underscores Microsoft’s commitment to responsible AI and enhances its competitive edge by aligning with emerging technology and thought leadership in AI. By embracing this challenge as an opportunity for growth, Microsoft continues to evolve and adapt, ensuring its place at the forefront of the technology landscape. 

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Future-proofing business.

Their strategic partnerships, like the significant investment in OpenAI, showcase a commitment to ethical AI development, keeping them at the forefront of technological advancements. By continuously evolving and adopting forward-thinking technologies, Microsoft not only secures its position but actively shapes the future of the tech industry.

The ability to recognize and exploit the potential of emerging technologies is a critical takeaway from Microsoft's strategy, offering a blueprint for future resilience and growth. As the world is changing below our feet and new technologies emerge daily, it is up to us to recognize and exploit these technologies and further grow our businesses.

Seeing emerging technologies as a business opportunity, exploring their worth and understanding their role in the world and our businesses to leverage them and become future proof is one of the most valuable lessons learned from Microsoft. However, we have learned more from Microsoft.

Three learnings from Microsoft.

  1. Recognize and seize opportunities.
    Identify emerging trends. Act swiftly to innovate and capitalize on them. Microsoft capitalized on the emerging market of cloud computing by launching Azure, positioning itself as a leader in providing cloud solutions. 

  2. Adapt to market trends.
    Stay updated on market shifts. Adjust your strategy to meet evolving demands. Microsoft identified AI as a critical future trend and integrated AI capabilities into Azure, enabling businesses to build intelligent applications, and showcasing foresight into technological advancements. 

  3. Invest in emerging technologies.
    Stay ahead of technology. Invest in and integrate emerging tech for business growth. By transitioning from primarily offering software products to providing cloud services and AI solutions, Microsoft has adapted its business model to align with market demands for more flexible and scalable technology solutions. 

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Jan-Maarten In t Veld