Grey Zone

2009.11.12   prev     next

Imagine a three-band scale: black, grey, and white. The black zone represents the situation where your product will easily blow away your competitor’s product. The white zone represents the situation where your product can’t possibly upset your competitor’s dominant position.

The grey zone is the area in-between, where it’s not entirely clear what will happen.

What do you do when you find your product in that grey zone? A common strategy is to hyper-confidently predict the strong success of your product, in the hopes that such confidence will convince people to start buying your product, and thus nudge it into the black zone. The hyper-confident prediction is what is commonly known as a “self-fulfilling prophecy.”

The danger with that strategy, however, is that if it doesn’t succeed, and your product slides into the white zone, then you look foolish for so confidently predicting the opposite of what actually happened, and your ability to use this strategy successfully in the future is greatly weakened.

Microsoft, I think, has blinded itself to the downside of this strategy, because they believe it can’t happen to them. They think that if one of their products is even plausibly near the grey zone (though still very much in the white), then a little hyper-confidence is all that’s needed to shoo the product deep into the black.

Unable to see how badly the above-described downside is affecting their reputation, they are painting themselves further and further into a corner where they will be unable to use this strategy at all. All that will be left of their not-long-ago invincible empire will be: Windows on desktops and laptops.

Comparing Apples To...

Desktop/laptop Windows still has an apparently strong position at something like 90% of that market. But if you see that percentage slowly drop over the next few years, keep in mind that unlike Mac OS X, Windows cannot survive with 50% market share. If Windows had 50% market share today, then the qualitative differences between Mac and Windows would quickly take over, and Windows would plummet rapidly to a small minority of the market. Windows needs that 90% share, just to stay in the game. Windows’s grey zone is probably somewhere around 75% — not very far under 90%.

Update 2010.01.06 — A fine example from Ballmer’s CES 2010 keynote speech:

And if we don’t...