We don't usually think of "boring" as a compelling business strategy. When you think about what makes a successful company, you probably think of one that makes interesting products or introduces the world to something it hasn't seen before. Neither of those is what anyone would consider boring.
For example, Apple isn't boring. It didn't become the most valuable company on earth by being boring, it did it by making the iPhone--a device that changed everything about how we connect and communicate with the people in our lives. It's not hard to draw the line between the iPhone and Apple becoming a $2 trillion company that makes more profit than any other company in history.
It turns out, however, that boring is actually a pretty good strategy.
Look no further than the fact that Microsoft just unseated Apple as the most valuable company in the world by being boring. I don't mean that as an insult, but a quick look at the company's most recent quarterly earnings, released last week, paints the picture:
Microsoft's main revenue drivers come from its cloud computing business and Office productivity software subscriptions. That's not exciting, it's boring. It's also very profitable and reliable as a source of revenue, two things that are very important to investors.
Microsoft has also done a brilliant job of tying together its ecosystem to create lock-in, similar to what Apple has done with services on the iPhone. In Microsoft's case, it isn't music subscriptions, iCloud, and iMessages. It's Microsoft Word, Azure, and Teams.
Sure, Microsoft makes hardware products as well. I happen to think the Surface Pro 8 is really good. And, as a premium Windows device, the Surface Laptop 4 is a great option. But, no one got excited about those devices the way they were when Apple introduced a new MacBook Pro a few weeks ago.
The Xbox is arguably the most non-boring thing the company makes, aside from a few of its strange ideas about laptops and foldable devices. But the Xbox isn't why Microsoft is worth almost $2.5 trillion dollars. Software licensing and subscriptions are.
Of course, Microsoft wasn't always this way. The company has become decidedly more boring (in a good way) under current CEO, Satya Nadella. That's to his credit. While Steve Balmer had a vision to make Windows something exciting--which was never going to happen--Nadella has embraced the parts of the business that perform.
Microsoft Cloud, the division that includes Office and Azure, set a record, growing by 22 percent in the last quarter. As Nadella pointed out during the analyst call, 78 percent of the 500 largest companies in the world use their cloud services in some form or another.
Listening to Nadella is kind of boring until you realize the company is doing everything right, even if it's not exciting. There's actually an irony that many people think Apple has started to get boring during the post-Steve Jobs era.
Tim Cook is a much less charismatic CEO than Jobs. He is an operations guru, not a product designer. He specializes in timing inventory and precision manufacturing. None of that is especially exciting until you look at the bottom line.
The point should be obvious--sometimes the best business strategy is to do the very best job you can at meeting the needs of your users. At the same time, you should leverage your relationships with those users to grow your business. That's what Microsoft does.
I mention it because sometimes the temptation is to go all-in on a crazy idea in hopes that it becomes the next big thing. That might work. You might end up with the next iPhone.
On the other hand, you might not. The good news is, that's okay. Sometimes quietly serving the needs of your customers is more profitable than trying to impress them with a flashy new product. Sometimes boring can be a very good business.
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November 01, 2021 at 06:49AM
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Microsoft Just Dethroned Apple as the World's Most Valuable Company With a Brilliant Strategy: Be Boring - Inc.
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