How Microsoft competes with startups

As a new CS grad at MIT, I was interviewed by Microsoft, Oracle, and IBM. Microsoft stack-ranked my C code. IBM (actually) said they gave preference to US citizens. Oracle flew me to California, put me up in a hotel, and my to-be-boss took me to dinner. Oracle won me over, proving that great sales can beat the better product, and I moved westward for my first job.

But Microsoft was the one I kept a careful eye on, as a competitor for years. Oracle won the database wars against IBM (DB2, anyone?) and held Microsoft to a draw (SQL Server, anyone?) – that felt good! Then my next startup built a fast database that ran on cheap Windows NT servers, called SQLBase – we zoomed to an IPO, and then got crushed by Microsoft (SQL Server, gripe, gripe) and flamed out. That one hurt, bad.

I still remember the hundreds of millions of dollars Microsoft offered us, in that room up in Bellevue where I was a privileged but junior spectator in the high-stakes M&A negotiation and our CEO turned it down. That was before Microsoft crushed us.

To learn about Microsoft’s ruthless competitiveness, read “The Microsoft Way” or just know that Satya Nadella asked Gurdeep Singh Pall, the head of Skype, to build Teams after Slack would not sell to them (Slack, anyone?). Microsoft knows a thing or two about competition. It’s gunning for video conferencing competitors like Zoom. Microsoft announced that the number of daily minutes spent in Teams went up from 900 million to 2.7 billion minutes/day in 2 weeks (Zoom, anyone?).

Those high-intensity years at Oracle taught me a thing or two about Microsoft’s competitiveness and competing in general. At Oracle, I soon found out, all employees were stack-ranked against all your team members once a year, with Larry asking his managers to rank his employees in “reverse order of fireability” and hand out bonuses accordingly. I got a paltry 3% bonus the first year, and 30% the next year – you learn that competition can be your friend if you use its strength.

Back to Microsoft’s competitiveness: the secret lies in its Product Managers – of course, you think, he’d say that – don’t believe me? Talk to Gurdeep Singh Pal, whose engineers stymied the rise of Slack with an amazing catapult, building Teams in 13 months, launching it in 2016, and overtaking Slack with 13 million daily active users in 2019, and now at 20 million daily users (Slack, anyone?). 

Or, talk to someone who worked with the Product Manager for Microsoft Business Solutions–Satya Nadella, now CEO of the giant. In 2003, Satya said “That person who runs the $1 million business is our target. There are millions of them, and they are not ready to spend a quarter million on an integration solution.” Or, S. Somasegar, who was a Product Manager for Outlook and later ran Windows Engineering Services. Microsoft clearly understands the markets it plans to take on. “Over 90 percent of the world’s businesses are less than $10 million in size. If we build robust solutions for this market alone, we will be in business for some years to come.”

Now here’s the thing about Product Managers at Microsoft – they are like the mini-CEOs of the businesses they run, which doesn’t mean they give all the orders and everybody is expected to fall in line. CEOs of startups – including Larry Ellison who I saw leading us at Oracle on the front-lines against IBM – don’t lead like that, despite the vaunted stories about Larry zooming up to a home in San Francisco in his red Ferrari Testarossa, waking up the owner at midnight and offering him a handsome sum for his mansion.

Larry, Bill, Steve, and Satya — understood (a) product (b) competition, and (c) customers. This is what legends are made of.

Competing is actually simple if you ignore everything else that drowns out the core:

1. Know your product well, and say why.

2. Know your competitor’s product better!

3. Know your customer’s needs, and give them features.

No matter whether you’re in sales, product, support, engineering, design, research, marketing, start with your own product. Know it insanely well: its strengths, its flaws, and how it’s used.

Photo by Abed Ismail on Unsplash

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