GM Spins a Cautionary Tale For Microsoft and All Marketing Leaders

David Cooperstein [Posted by David Cooperstein]


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Around the dinner table in upstate New York this past weekend, and again during a long bike ride, the same conversation arose amongst some friends regarding the parallels between GM in the 1970s and Microsoft today. I was intrigued, not only because of the great discussion we had, but because we had been driving around in a 1973 Buick Centurion (see me and my Hungarian Vizslas in that great 35 year old beauty, below). It was built the same year as the Arab oil embargo that led Congress to mandate fuel economy standards. GM's market share was still a dominant 40+ %, and imports were small and noisy or unreliable.


Buick2

The analogy is poignant as Microsoft announced in July that revenues fell for the first time since their 1986 debut as a public company. This is a cautionary tale for Microsoft -- and all marketers at large companies, regardless of industry - that is foreshadowed in GM's decades of woe and how to avoid them. In the context of the perception of Microsoft today versus GM in the 1970s, marketers should remember that:

  • Competition starts small, so watch all comers. From a competitive perspective, Microsoft faces some of the same competitive pressure that GM missed in the past. Apple is to Microsoft what BMW was to GM: a premium priced product with an intensely loyal following. Google and Zoho today present the same challenge Toyota and Honda did in the 70s: they present a more nimble, iterative approach to the mass market. Perceptions relative to these competitors are critical to marketplace success. Whether you market software, hand soap or apparel, the hot competitor to worry about is probably already invading your space, but not in a way that you have yet anticipated. Look for them, learn about them, and prepare to act.
  • Products should be reinvented, not iterated. GM barely iterated their engines and designs, letting other companies lead the charge on SUVs, sports sedans and minivans. Only recently has Cadillac invested the money to completely reinvent their image. Why is Apple, like Cadillac, a design leader in the computing world today? Because they broke their own, buggy mold to create a consumer friendly offering when they released OS X and the iPod. Conversely, Microsoft let the competition drive feature creep, which resulted in the issues with Vista. Windows 7 promises to be a reinvention, and should be presented as such. Marketers should always include the customer in their discovery, design, and deployment of new offerings to minimize the likelihood that they will introduce one of the 80% of new products that fail (for clients: "CDI: Defined But Not Adopted").
  • Put customer perspective into the product.The Pontiac Aztek was a great example of a car that had corporate dysfunction designed right into it.  For most companies, customer experience is highly correlated with loyalty, something Microsoft - and all marketers - need to stay on top of (for clients: "Customer Experience Boosts Revenue"). In theory, Windows 7 will fix what broke in the Vista effort. But Microsoft marketers should have insisted on easy upgrades from XP, which 86% of corporations stuck to with when Vista proved to hard to use (Forrester clients, see "Corporate Desktop Operating System Trends, Q3 2008 To Q2 2009"). The upgrade path to Windows 7 is so daunting, even Walt Mossberg says to just buy a new computer (WSJ: "For Some, Move To Windows 7 Will Be Tough" -- subscription may be required).
  • Expand channels clearly and carefully. GM is starting to break down its monolithic and intransigent channel -- dealers -- with shut downs and partnerships like their new eBay Store in California. Putting Bing on the Yahoo! network is a step in the right direction for Microsoft in the fight for share with Google (see our Interactive Marketing blog, no subscription required!). Will it run the risk of GM's "badge engineering" (marketing the same car under different nameplates) that began in the late 70s and early 80s, and eroded rather than grew their market share? Microsoft will benefit from usage of Bing as an additional channel, and not cannibalize its own potential. As marketers should know, distribution channels are expensive to replicate, but must provide additional market share to be worthwhile.

Do you see commonalities between your business and the trajectory GM blazed starting in the 70s? Comment here, or email me at dcooperstein [at] forrester.com.