By some important measures, Microsoft's best days are behind it. Once the dominant technology company in the world, it has fallen behind in the market's biggest growth areas: the internet and mobile devices. True, it remains dominant on the desktop and in office suites, but that's not where the growth is these days.
When it comes to the internet, it trails far behind Google. And when it comes to mobile devices, it has fallen far behind both Apple with the iPhone and iPod, and Google with Android-based phones.
In fact, a milestone was passed back in May, when Apple overtook Microsoft in total valuation. Soon, it is expected to pass Microsoft in revenue as well.
Should Microsoft simply give up, and accept that its glory days are over?
Certainly not. The technology market changes quickly, and companies can leapfrog competitors, even seemingly entrenched ones, with the right mix of strategy and products. Here is my modest proposal for two steps Microsoft can take to try and regain its technology dominance.
Step 1: Tear down the walls
Microsoft has become large and unwieldy, bedevilled by red tape, bureaucracy and political infighting. For example, infighting and bureaucracy at Microsoft led to the Kin mobile phone disaster, while Google, using technology from the same engineer who had developed the guts of the Kin, rushed ahead and succeeded with Android.
That's far from the only instance of these kinds of problems. The web-based version of Microsoft Office, for example, was not able to make use of the superb Windows Live Sync technology at its launch, even though it would have given the product a feature that Google couldn't match. Why wasn't Windows Live Sync included? The development cycles of Office and Windows Live Sync didn't match. Microsoft could easily have incorporated the then-existing version of Windows Live Sync into Office. Instead, it has to wait until the development cycle of Windows Live Sync proceeds.
Microsoft should turn its engineers, designers and product managers loose, and make them entrepreneurial. If they need to step on the toes of other Microsoft products and technologies, or even filch them for their own use, so be it. That's the only way Microsoft will be able to develop technologies its competitors can't match. The company has some of the best engineers in the world. Microsoft should use them to their fullest capabilities.
Step 2: Kill the Windows brand
Microsoft's vast wealth and success is built on top of Windows. But Windows is also holding the company back when it comes to the future, both in the eyes of consumers, and in the company's own product development. Microsoft should continue to develop Window as an operating system, and should still call it Windows. But it shouldn't force its other important products to carry the Windows name or even necessarily use Windows technologies.
The Windows Live brand is a perfect example. It is not at all clear what the "Windows Live" brand is supposed to mean. It is an unrelated set of web services and downloadable software, most of which have nothing to do with Windows. What does Windows Live Hotmail, for example, have to do with Windows? Not a thing, given that you can use it with other operating systems, such as Mac OS X. Giving it the Windows name only confuses consumers.
The same holds true for the Windows Phone. In the past, forcing its mobile operating system to be Windows-like has hurt Microsoft; it is one of the reasons the iPhone and Android both leapfrogged Microsoft in smartphones.
Microsoft should reconsider forcing almost everything it does to use the Windows brand and fit into the Windows ecosystem. Dropping that framework would give it a fresh chance with consumers, and allow its designers and developers to take a fresh look at the products they create.