Why Windows Phone Failed - And How They Could've Saved It

Why Windows Phone Failed - And How They Could've Saved It
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    Windows Phone: a product with so much potential that had everything going for it, and yet
    one that failed spectacularly.
    Despite the billions of dollars and the priceless connections of Microsoft, the Windows Phone
    never took off and would go down in history as one of Microsoft's most expensive mistakes.
    In this video, we're gonna look at the reasons behind its failure and the actions Microsoft
    could've taken to possibly prevent it.
    This video is brought to you by Dashlane.
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    When Steve Jobs announced the iPhone in 2007 he took the smartphone world by storm.
    Well, how do I scroll through my list of artists?
    How do I do this?
    I just take my finger and I scroll.
    Up until then, smartphones had a big problem: they had small screens with interfaces that
    were hard to navigate, and the reason for that was because half of the phone was occupied
    by a keyboard with tiny buttons you could hardly press with any precision at all.
    What Steve Jobs showed to his extatic audience was a game changer, but it wasn't just Apple
    fans there were watching.
    The engineers at Google, which for the past two years had been building a smartphone of
    their own, had to scrap their entire project and to start over with a touchscreen design.
    Their final product, Android, would arrive more than a year later, at which point the
    iPhone had taken the smartphone crown.
    The iPhone's model was built on exclusivity: it was entirely produced by Apple to establish
    maximal control over the user experience and the quality of the product, which allowed
    Apple to charge a premium for their phones.
    To succeed Android would have to adopt a different strategy: instead of going for exclusivity,
    Google tried to be everyone's friend, partnering up with as many phone manufacturers as possible
    with the selling point of their phones being the fact that they were cheap, yet functional.
    For a time, the smartphone world was in balance, with Android and the iPhone occupying very
    distinct segments of the market.
    And yet, this balance would soon be disturbed by another tech giant, Microsoft.
    Now, out of the three companies, it was actually Microsoft that had the most experience with
    mobile devices.
    Back in 1996 Bill Gates unveiled what he called the handheld PC, which was really more of
    a tiny laptop.
    I've asked Tom McGill from the Windows CE group to join me on stage and give us a quick
    glimpse of some of the neat things that are built into the handheld PC.
    For those of you that might not have seen one yet, Bill talked a little bit about the
    handheld PC and this happens to be the Casio unit actually.
    The Casio unit is typical of the handheld PC, so it's got a physical keyboard, a 480x240
    2 bit per pixel screen, IR, PC card, upgradeable RAM, 2 AA batteries.
    So this is a pretty typical handheld PC.
    The operating system it ran was known as Windows CE, which was basically Windows 3 modified
    to function on the lowest specifications possible.
    Over the next decade, Microsoft would add features and develop this product line extensively,
    making another 6 full releases.
    Between 2006 and 2008 Microsoft's mobile devices claimed a 15% market share, greater
    than any of their competitors except Symbian by Nokia.
    But this success is exactly what blinded Microsoft to threat of the iPhone.
    When Steve Ballmer, the CEO of Microsoft at the time was asked about the iPhone his reaction,
    well, let's say it hasn't aged very well.
    Steve let me ask you the iPhone and the Zune if I may.
    Zune was getting some traction and Steve Jobs goes to Macworld and he pulls out this iPhone.
    What was your first reaction when you saw that?
    $500, fully subsidized with a plan!
    I said, 'that is the most expensive phone in the world' and it doesn't appeal to business
    customers because it doesn't have a keyboard, which makes it not a very good email machine.
    What's even more priceless, however, is the frankness of the next question.
    How do you compete with that though?
    He sucked out a lot of the spotlight in the last few weeks because of what happened at
    Macworld, not only with the iPhone, but with the new iPod.
    How do you compete with that, with the Zune?
    Right now, well, let's take phones first.
    Right now we're selling millions and millions and millions of phones a year.
    Apple is selling zero phones a year.
    Notice the stark difference between the two men: the reporter very clearly sees the innovations
    of the iPhone as a threat to the old smartphone establishment, but Microsoft's CEO can barely
    look past the sales numbers.
    And just in case you're thinking he's an exception, the CEOs of Blackberry and Palm
    were equally skeptical of the new iPhone.
    It took Microsoft a full year of declining market share to finally realize that something
    had to be done.
    Unlike Microsoft, Blackberry's sales were still increasing, which gave them a sense
    of confidence they never recovered from.
    Now as they say, it's better late than never and when Microsoft finally got around to it,
    their development was actually pretty fast.
    Microsoft began developing a touchscreen based mobile device in late 2008 and it took them
    only two years to get it ready for market.
    What Steve Ballmer unveiled was indeed a very unique product whose advancement of smartphone
    design isn't really widely recognized, but it should be.
    At a time when the iPhone and Android were stuck with static icons, the Windows Phone
    gave you tiles with live information.
    Overall, critics had much to praise: in terms of design the Windows Phone user experience
    was right up there next to Apple and because Microsoft had very strict requirements for
    the hardware used by phone manufacturers, all of the early Windows Phones were very
    powerful machines for their time.
    And yet, Microsoft ran into a big problem very early on.
    You see, Microsoft was trying to do something very difficult: it was emulating Apple in
    trying to establish strict control over the user experience and hardware, but unlike Apple
    it wasn't actually making its own phones.
    This approach made the Windows Phone a very refined product, but the degree of control
    Microsoft wanted made working with them much more difficult for phone manufacturers compared
    to working with Android.
    Unsurprisingly, most phone manufacturers decided to partner up with Google, which left Microsoft
    in a very bad position: it had a great product and no one to make it.
    The only saving grace for Microsoft was a lucky connection: when Nokia replaced their
    CEO in September 2010, the new guy, Stephen Elop, was a former Microsoft executive and
    the first item on his agenda was to try to restore Nokia's declining market share by
    abandoning Symbian and pivoting towards Windows Phone.
    Now, you can tell that this was a very premeditated plan because this massive transition, during
    which Nokia completely changed their product offerings, happened in the span of a single
    Nokia started selling their first Windows Phone in November 2011 and I can tell you
    right away that this was possible thanks to the billions of dollars Microsoft poured into
    Nokia as "platform support payments".
    Nokia was supposedly paying Microsoft a licensing fee, but in reality it was actually getting
    $250 million back from Microsoft every quarter, which more than made up for their expenses.
    Of course, the other phone manufacturers knew that this was happening, which pushed them
    even farther away from Microsoft.
    After all, why would they fund their own development and pay a licensing fee to Microsoft, when
    Nokia was getting it all for free?
    Effectively, Microsoft had gone all in with Nokia and there was no going back.
    But sadly for Microsoft, it was far too late.
    By the time Microsoft solved its production issue, four years after the introduction of
    the iPhone, it had fallen to a 2% market share.
    Nobody was developing applications for the Windows Phone and why would they, considering
    that Android and iOS were clearly the winners here.
    For its first three years, the Windows Phone App Store was empty: it didn't have Instagram,
    it didn't have YouTube, it barely had anything.
    By 2013 the stock price of Nokia had fallen by 75% at which point angry shareholders were
    threatening to just fire Stephen Elop and get rid of Microsoft altogether.
    In the end, that didn't happen: Microsoft instead just purchased Nokia's mobile phone
    division for $7.2 billion in 2014.
    Here's the funny thing though: the very next year Microsoft wrote off their investment
    for $7.6 billion, and then to top things off they fired almost 8,000 employees.
    Microsoft kept Windows Phone on life support until October 2017, but it was clearly dead
    a long time before that.
    And yet, it's easy to imagine the different path Windows Phone could've taken had it
    only not been as greedy with its original philosophy.
    Had Microsoft been willing to compromise on its control over production, it would've
    easily convinced the big manufacturers to use Windows Phone instead of Android.
    After all back then Google had practically no ecosystem to speak of, while Microsoft
    had been a software titan for decades.
    There's a lesson to be learned here about the importance of compromising in business,
    but there's one sphere in life where you shouldn't compromise and that is keeping
    all your passwords secure.
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    Dashlane is available on every popular desktop and mobile device, and it would've even
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    Anyway, thank you for watching.
    Make sure to like, subscribe, leave a comment, check out both my Skillshare classes (I just
    released a new one) and we're gonna be seeing each other again in two weeks.
    Until then: stay smart.
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