Value Creation by Windows

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Soumenjit Mitra
Value Creation Paper
MBUS 627
The history of Microsoft is a textbook case of the power of broad vision. In the early days, Microsoft's MS-DOS competed head to head with IBM's OS/2. Where IBM was myopically fixated on large customers as the only part of the market, Microsoft saw the market more broadly as every person in the world. This allowed them to take market share and become the monolithic corporation they are today by making their operating systems cheaply available to everyone. This was an early example of their value creation, since that time they have taken to a different method, but they still continue to create value for their customers. Value Creation Methods

Microsoft uses a very simple method of designing products. This starts with reverse innovation, or starting with what the customer wants. They simply ask customers what is missing from previous operating systems and attempting to incorporate the ideas in new products. This is one part of the empathic design process which they employ. The second part is to make heavy use of prosumption. For example, the typical way a software company operates is to develop an “alpha” version of the software, work it over in house until it is mostly stable, then release to select members of the market a “beta” version for further testing. This allows the remaining bugs to be worked out of the program so that the final version requires little if any patching. When Microsoft released Windows ME, they took a different approach. They released for sale what most companies would have considered the alpha version of Windows ME, which resulted in numerous technical difficulties and complaints, which they took and worked the fixes into Windows XP, which was released in its beta version. In this way, Microsoft saved the cost of alpha and beta testing, beat the competition to market, and had the general public pay for the privilege of finding all the bugs in the program (Tynan). They used the same technique with Windows Vista.

This process is also closely related to their use of mass collaboration. This combines with the experience of their employees the needs of the consumer. Microsoft also has various applications which are modifiable with their .net programming language, which allows end users to create their own applications. They also partner with other companies such as IBM, Dell, Hewlett-Packard, and others to have Microsoft operating systems come standard in many product bundles. In this way, the development team for their products extends far beyond the limits of Microsoft.

It is this very process which has allowed them to be in more contact with the market than the competition. When the personal computer market was just beginning to grow, Digital Research was far larger than Microsoft in both number of employees and market share. Yet while that company was focusing on developing the best operating systems and assuming everyone would be able to see how good they were, Microsoft was agreeing to work with IBM to produce an operating system which would interface with just about every piece of hardware IBM could build. This was then offered to a new market, the personal computer market, a market comprised of customers who knew little about computers and just wanted them to work without effort. Microsoft's product provided that flexibility to accommodate virtually everything an average customer could want to do with a computer. This attention to what the market desired, combined with a dash of anti-competitive behavior, allowed Microsoft to bring a product to market which better matched the needs of most consumers and thus dominate the personal computer industry early on. Since then, their attention to the customer needs has allowed them to continue to provide the level of value seen early on. The Value of Microsoft's Operating Systems: Benefits

Value is benefit minus cost. As previously stated, the main benefit of...
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