097. A Plan for a Changing World [Ch. XIV]

Welcome to Chapter XIV. This is the first of two chapters and about a dozen remaining posts that cover the context, development, and release of Windows 8. Many reading this will bring their own vivid recollections and perspectives to this “memorable” product cycle. As with the previous 13 chapters and 96 posts about 9 major multi-year projects, my goal remains to share the story as I experienced it. I suspect with this product there will be even more debate in comments and on twitter about the experiences with Windows 8. I look forward to that. This chapter is the work and context leading up to the plan. Even the planning process was exciting.

Back to 096. Ultraseven (Launching Windows 7)

In the summer of 2012, I was sitting across from BillG at the tiny table in the anteroom of his private office on the water in Kirkland. The sun was beaming into my eyes. In front of me was one of the first boxes of Microsoft Surface RT, the first end-to-end personal computer, general-purpose operating system, and set of applications and services designed, engineered, and built by Microsoft. In that box sat the culmination of work that had begun in 2009—three years of sweat and angst. After opening it and demonstrating, I looked at him and said with the deepest sincerity that this was the greatest effort and most amazing accomplishment Microsoft had ever pulled off.

Later that same week, I had a chance to visit with Microsoft’s co-founder, Paul Allen (PaulA), at his offices at the Vulcan Technology headquarters across from what was then Safeco field. I showed him Surface RT. I previously showed him Windows 8 running on desktop using an external touch monitor. At that 2011 meeting he gave me a copy of his book Idea Man: A Memoir by the Cofounder of Microsoft and signed it. Paul was always the more hardware savvy co-founder, having championed the first mouse and Z80 softcard, and had been pushing me the whole release of Windows 8 on how difficult it would be to get performance using an ARM chipset and on the challenges of hitting a low-cost price point. Years earlier, Vulcan built a remarkably fun PC called FlipStart, which was a full PC the size of a paperback novel. Surface RT with its estimated price of $499, $599 with a keyboard cover, and a fast and fluid experience, resulted in the meeting ending on a high note. I cherished those meetings with Paul. I also shared with Paul, proudly, my view of just how much we should all value the amazing work of the team.

What I showed them both was the biggest of all bets. While not “stick a fork in it” done, by mid-2012 Microsoft seemed to have missed the mobile revolution that it was among the first to enter 15 years ago. In many ways Surface RT set out to make a new kind of bet for Microsoft—a fresh look at the assumptions that by all accounts were directly responsible for the success of the company. Rethinking each of those pillars—compatibility, partnerships, first-party hardware, client-computing, Windows user-interface, and even Intel—would make this bet far bigger and more uncomfortable than even betting the company on the graphical interface in the early 1980s. Why? Because now Microsoft had everything to lose, even though it also had much to gain.

With Windows 7, we knew we had a traditional release of Windows that could easily thrive through the full 10-year support lifecycle as we had seen with Windows XP. Windows 7 would offer a way to sustain the platform as it continued to decline in relevance to developers and consumers, while extracting value from business customers with little incentive to change.

Microsoft needed a new platform and a new business model for PC makers, developers, and consumers. The only rub? Any solution we might propose wasn’t something we could A/B test or release pieces at a time experimentally. Windows was the standard and wildly successful. It wasn’t something to experiment on.

While the company was 100 percent (or more) focused on Windows 7, we had started (drumroll for the codename please) Windows 8 planning five months earlier. We had the next step, a framing memo from me first. Then we had a planning memo from JulieLar, ready to go as soon as we all caught our collective breath after the release—no real time to celebrate more, and certainly no downtime.

Technology disruption is often thought of at a high level along a single dimension, but it is far more complex. Consider Kodak’s encounter with digital photography, Blockbuster’s battle with DVD-by-mail, or the news business’s struggle with the web. Great memes, sure, but one layer down each is a story of a company facing challenges in every attribute of their business, and that is what is interesting and so challenging.

Digital photos were more convenient for consumers, that was true. But also, the whole of Kodak was based on a virtuous cycle of innovation developed by chemical and mechanical engineers, products sold through a tightly controlled channel, and an experience relying on a 100-year-old tradition of memorialized births, graduations, weddings, and more. At each step of technology change to digital images, another major pillar of Kodak was transformed, sliced, and diced in a way Kodak could not respond. The magical machinery of Kodak was stuck because not one part of its system was strong enough to provide a foundation. Kodak didn’t need to also enter the digital market. The only market that would come to exist was digital. The only thing that made it even more difficult was that it would take a decade or more to materialize as a problem, and that during that time, many said, “Don’t worry. Kodak has time.”

While figuring out what to do next for Windows, we saw Blackberry facing a “Kodak moment.” Blackberry was not just a smartphone, but a stack of innovations around radios, a software operating system optimized for a network designed for small amounts of data consuming little power, a business model tuned to ceding control to carriers, and a keyboard loved by so many. In 2009, Blackberry still commanded almost 45 percent of the smartphone market, even though the iPhone had been out since 2007. That led many to find a false comfort in the near term and to conclude Blackberry would continue to dominate. Apple’s iPhone delivered a product that touched every pillar of Blackberry, not only Blackberry the product but Blackberry the company. Sure, Apple also had radio engineers, but they also had computer scientists. Sure, Apple also worked with AT&T, but Apple was in control of the device. And Apple was, at its heart, an operating system company. Blackberry had some similar elements up and down the entire product stack, but it wasn’t competitive. At its heart, Blackberry was a radio company. Blackberry seemed to have momentum, but market share was declining by almost 1 percentage point per month.

The smartphone, iPhone and Android in particular, was disrupting Windows. Though, not everyone thought that to be the case. Some said that phones did not support “real work” or “quality games.” The biggest risk to a company facing disruption is to attempt to dissect disruptive forces and manage each one—like add touch or apps to a Blackberry with a keyboard. The different assumptions and approaches new companies take only strengthen over time, even if eventually they take on characteristics of what they supplant. The iPhone might never be as good as the PC at running popular PC games, but that also probably won’t matter.

I’d lived through graphical operating systems winning over character mode, PC servers taking over workloads once thought only mainframes could handle, and now I found myself facing the reality that browsers could do the work of Windows, relegating Windows to a place to launch a browser and not even Microsoft’s.

Every aspect of the Windows business faced structural challenges brought on by smartphones. Compounding the challenge, Apple was competing from above with luxurious and premium products vertically integrated from hardware to software. Google, with Android and Chrome, was competing from below with free software to a new generation of device makers. The PC and the struggling Windows phone were caught in the middle, powerless to muster premium PCs and unable to compete with a free open-source operating system.

The browser had already shifted all new enterprise software development away from the hard-fought victory of client-server computing. Anyone who previously thought of building a new “rich client” application with Visual Basic or some other tool was now years into the transition to “thin client” browser software. The Windows operating system was in no way competitive with smartphone operating systems. The way to develop and sell apps had been reinvented by Apple. The Win32 platform was a legacy platform by 2009, the only debate was how long that had been the case. A legacy platform does not mean zero activity, but it does mean declining and second or third-priority efforts.

The partnership between the Windows operating system and hardware builders had fundamental assumptions questioned by Android. OEMs supporting Android not only received the source code but were free to modify it and customize it to suit their business needs. That was exactly what Microsoft fought so hard against in the DOJ trial. The touch-based human interaction model developed by Apple and the large and elegant touchpad on Mac were far more approachable and usable than what was increasingly a clunky mouse and keyboard or poor trackpad on Windows. The expectations for a computer were reset—a computer should always be on, always connected, never break or even reboot, free from viruses and malware, have access to one-click apps, while easy to carry around without a second thought. That supercomputer in your pocket is connected to built-in operating system services providing storage, backup, privacy, security, and more. Like Kodak, many said to slow down, that change would not happen so quickly. Many said we could “add this” or “change that.” But it was not that simple, nor was it going to be that easy. The market was moving quickly.

The march to the next billion shifted, in the blink of an eye, to smartphones and soon non-Windows tablets, entirely skipping the PC. The entrenched PC customers were as excited as ever to upgrade to Windows 7 by buying a new PC or upgrading their existing PC. Everything new in Windows 7 was viewed through the lens of the past. How did we used to do that and did Windows 7 make it easier? Those skipping the PC didn’t concern themselves with improvements in a new version of Windows because they didn’t know about the old version. PC enthusiasts were still asking for features to handle managing files and keeping multiple PCs in sync while phone or browser users were seamlessly connected to a cloud and gave no thought at all to where files were stored. Buying a second iPhone or replacing a broken one proved astonishingly simple, because of the integration with services.

Microsoft’s answer to iPhone and Android 1.0 was still being developed. Windows Phone 7, originally codenamed Photon, would be released a year after Windows 7. The mobile team was heads down trying to get that release done, which had been in the works since Windows Mobile 6.0 shipped in early 2007. By the time Windows Phone 7 shipped, the Windows 8 team would have completed the first of three milestones. The next full chapter will detail the challenges this lack of synchronization created. We had Windows Phone 7 on a mission to get to market and compete and in doing so was pre-booking the next release; Windows 8 attempted to plan a major release that in theory would lend support to the mission of modernizing the codebase which was desperately needed by Windows Phone 7 competing with the modern Linux kernel and OS X.

Meanwhile, there were few new customers being brought to the cash-producing business of the Windows PC. There we were with the metaphorical Sword of Damocles hanging above us. The best days of the PC were behind us. It wasn’t just obvious technically—the value propositions of mobile devices were in no way compatible with the Win32 and PC architectures. The only question was when things would truly turn for the worst.

The risks were infinitely high. We could do something radically different, potentially choosing wrong and heading right into failure even accelerating what was inevitable. Or we could slow walk as long as possible, releasing incremental features for as long as possible hoping to find some future solution to our quagmire. Doing both is a classic upper management answer that with near certainty results in a combination of a bloated and confused near term that keeps trying to pull features from the new, and a brand new product that develops a major case of second-system syndrome. The latter is a classic defined in the standard developer book Mythical Man-Month, and what we experienced with numerous Microsoft projects from Cairo to Longhorn when the next generation attempts to solve all known problems at once.

It is why so many default to preserving the cash cow as the most logical strategy, maintaining the success already achieved. Usually this comes with raising prices along the way for existing customers, who are by and large captive. In the short term, things continue to look great, and a crisis will be averted while the crisis is left to a future team. In fact, in the short term our most ardent fans would continue to carry on as though everything is normal. They are part of the same bubble as us.

Either way, the world outside of the Windows PC shifted to mobile. We were at a fork in the road and had to pick a direction.

The thing about disruption when it is happening is that you alternate between over-confidence and paranoia. Financially, the Windows PC was secure. Emotionally, the Windows PC was fragile. From a product perspective, not only was there little left to do on the current path but doing anything would annoy both the disinterested customers and ardent fans more than it would encourage them or any new buyers. Over-confidence leads one to incremental plans, assuming the existing business is so strong as to not worry. Paranoia makes it difficult to identify the precise nature of disruption and to calibrate a response.

For all the insights that Innovator’s Dilemma captured, the one thing it did not seem to predict was that even after disruptions companies can continue to make vast sums of money for years to come from those disrupted products. Technologists tend to think disruption causes products to sort of go away, but as any private equity investor will tell you, that is not the case. That’s why a misplaced confidence in incrementalism almost always wins out over a bold, risky bet, at least for a while.

We were determined to find a way to do better than to slowly lose relevancy as we’d seen happen to IBM.

Planning Windows 8

We kicked off a planning process just as had been done for all the other releases described in this work—from Office 2000 all through Windows 7. By now this team had fifteen years of product planning and results that had transformed a set of bundled applications into a suite of interconnected products and then to a platform of products, servers, and services, and then reinvented the user experience setting these tools up for at least another decade. We then aimed this same process at the challenges of the Windows business, and by all accounts set that product up for another decade.

About three months before Windows 7 released to manufacturing, I sent out the first step in planning Windows 8, the obvious name. “Building on Windows 7” outlined the state of the business and product, suggested where we would invest for the next project, detailed competitive threats, and defined what success would look like.

As with all the other framing memos I wrote, this one began upbeat. How could it not? The release of Windows 7 was a super positive experience for the team, the company, and the broad ecosystem. The memo celebrated all we accomplished as a team and with Jon DeVaan’s leadership significantly improving our engineering capabilities and productivity. Promise and deliver.

Then the reality. The recession had slowed the growth of PC sales and analysts were taking forecasts down. The damage netbooks had done to pricing leverage was significant, resurrecting the Linux desktop and lengthening Windows XP in market. Netbooks also masked the secular weakness in PCs that was also seeing as lengthening of the PC refresh cycle in large companies. PCs were being tasked to last longer without loading a new version of Windows or Office. Emerging markets and software piracy were proving highly resistant to most every effort. The sabbatical I took living in China in 2004 taught me firsthand just how impossible it was going to be to thwart piracy of desktop Windows and Office, our primary sources of revenue. Windows Live was, as we say, making progress, but Google was making much more progress much faster, and our marquee products, Hotmail and Messenger, were losing share and fast. Releasing SkyDrive (now OneDrive) with excellent integration of the new Office Web Applications (Word, Excel, PowerPoint running in the browser with compatibility with desktop Office) was a significant bright spot, but it came with very high operational costs and immense pushback from Office that feared cannibalization. There were even changes in how PCs were being sold that were proving highly problematic. OEMs were increasingly relying on nagware or trial products, bloating the PC user interface, and putting a ton of pressure on the overall experience of Windows. The retail channel, struggling from the recession, was anxious because they had not yet mastered selling smart phones, the hot category, which increasingly looked like a carrier-specific play. This in turn caused retailers to become part of the equation of pre-loaded software, thus further eroding the experience.

Competitively, all I asked us to focus on was Apple and Google. Most would see Apple as a competitor through OS X, but as discussed OS X was now powering iPhone. The framing memo was not a plan nor was it even a plan for a plan, rather it serves to bound the release and help encourage the team to focus on specific technologies, competitors, and challenges. There was much for the team to collectively learn. At the time, I summarized Apple competition as follows:

Apple.  Apple OS X is a very strong product coupled with amazing hardware.  The transition Apple has made from OS 9 to a modern OS architecture on Intel hardware is on par with the transition we made to both the NT code base and to 64-bits.  From an OS technology perspective we see the strength of OS X among universities and administrators who find the Mac (Mach-based) kernel and associated shell, tools and techniques “comforting”.  From a user experience perspective, we cannot be defensive about the reality that Mac hardware + OS X + iLife continues to be the standard by which a PC + Windows 7 + Windows Live will be judged in terms of technology, and then [sic, how] the purchase experience, post-sales experience, and ecosystem have grown to be considerable strengths.  While we have only some details, the hygiene work being done on Snow Leopard is likely to generate significant positive views as the OS becomes “leaner and more streamlined” and likely claims about being more modern with respect to graphics, 64-bits, and user-interface.  As we describe below, the sharing of code and architecture, particularly for important strategic elements of the OS, between the iPhone OS and Leopard is technically interesting and certainly responsible for some elements of the platform success.  Apple is not without blemishes, but in planning Windows 8 we must focus on their strengths and assume they will continue to execute well on those.  Being deliberate and informed about competing with Snow Leopard and, relative to iPhone, making sure we build on the assets of Windows for our Windows Phones should be strongly considered.

Rather than describe Android directly, I chose to consider Android as another variant of Linux. At the time, the only Android phone was the convertible Blackberry-like device, the HTC Dream. Android 2.0 with full support for multitouch would not release until Windows 7 launched to market about three months later. Note the caution about Google control of Android expressed even then—it was obvious this would be a tension point down the road. In this context the competition with Linux also included desktop Linux:

Linux.  Like so many competitors we have faced as a technology company, just as we thought “this one won’t reach critical mass” we saw two events provide a breath of life into “Linux on the desktop”.  First, the rise of Ubuntu, both the technology/packaging and the “movement”, has created a rallying cry for OEMs and for the Linux community.  Second, the low-cost PCs that initially came with Linux (due to the footprint “requirements”) created a new incentive for OEMs/ODMs to find a way to make it work.  While we were effective in establishing a value proposition for Windows XP on these PCs, the seed that was planted will continue to be revisited by PC makers and designers.  They appreciate the potential for business model innovation, componentization, tailoring, and also the opportunities to differentiate using the open source aspects of the OS.  It is worth noting the reality that Linux on the server continues to dominate in many important workloads and the server plans are going to inform the planning of the base OS work such that we are extremely focused on defining specific scenarios where we make significant competitive progress with Windows 8 against Linux on the server.  Within the context of Linux it is especially important to call out Google Android which will likely be funded by Google for some time and represents an OS choice for mobile phones and phone architectures encroaching on the PC “from below.”  Android can provide OEMs with the opportunities similar to Ubuntu, however Google is walking a careful line in providing Android where they can possibly lower costs for OEMs, or even subsidize the bill of materials for a device, counterbalanced by OEM wariness that Google will take too much control of additional revenue streams.

Perhaps most importantly were the two “non-traditional” competitors: “Browsers” and “Phones/Alternative Architectures.” The rise of Google Chrome was proving highly problematic, not just because of the loss of share, but because of Google’s determination to add anything and everything from a PC to a cross-platform browser runtime, which is still going on to this day.

The view of the phone is much more interesting considering how the world evolved. Speculating about Android would prove accurate in just a few short months. I was deeply concerned about the PC ecosystem and the potentially rapid convergence of PC and phone hardware in the direction of phones, as well as Apple’s unified OS strategy. This was in stark contrast to where Microsoft began its mobile journey a dozen silicon-years earlier and where it was today.

Phones and alternate architectures.  The iPhone is referred to by many as a new form of portable computer—“it has a real OS” many have said in reviews.  The Google G1 phone running Android is likely to be made available in more PC or “handheld” form factors beyond the single-handed in-your-pocket screen.  The desire for the ultimate device that has the power and capabilities of a PC along with the convenience of always on wireless connectivity is beyond alluring.  It is what we all want as consumers.  To deliver on such a vision many might say that Windows can never power such devices—perhaps that is a statement about “business model” or a statement about technology.  Sometimes it is just competitors declaring “[Big] Windows will never be on a phone”.  The reality is there was a time in the history of Windows phones (CE, PocketPC, etc.) where the synergy between “little” Windows and “big” Windows was technically robust in reasonable ways.  For a variety of reasons we diverged.  Today we have hardware designers and phone company customers facing a choice between the OS that supports phone networks, voice, and other “phone” scenarios super well, but does not have the rich ecosystem support of Windows 7 and runs on a small set of hardware chassis, and Windows 7 running on a mainstream hardware platform with broad ecosystem support and openness.  These platforms differ in bill of material costs, power consumption, and so on.  Much like the “browser is all I need” statement there is a significant amount of extrapolation that both excludes Windows and assumes the Windows platform cannot compete.  Our chip partners for Windows are working hard on bringing the x86 architecture “down” and we need to be there with Windows software.  And at the same time we will strongly consider how to run Windows on alternate hardware platforms and learn what that would entail—we will work to bring “big” Windows to mobile chipsets, but we have significant groundwork to do before we know the practicality of such an investment.  Our Windows 8 planning will most certainly take into account the role of sharing new code across Windows and Windows Phones, starting with the latest Internet Explorer as we are already working on.

There were several technology bets in the framing memo, putting stakes in the ground for how we would think about significant efforts on the deeper technical challenges of the release including a big effort to evolve the PC. While I don’t want to fast-forward, these abstract definitions are what will lead to the work on ARM processors (see emphasis above), a new application model, and ultimately first-party hardware.

The technology bets on evolving the PC included:

* Mobile Devices

* Converged OS between Windows PCs and phones

* Mainstream PCs and the market turn to laptops

* High-end PC form factors such as meeting room PCs

* Shared computing PCs such as we were seeing with remote desktop and cloud computing

Taken together with the work on cloud, the memo defined the “Modern Windows Experience” as including the following (the original even included a fancy Office Art depiction). The use of “modern” will become a touchstone of the release and how we describe Windows 8:

* Base operating system: the OS kernel, device management, connectivity, and storage

* Graphics, Presentation, and Interaction: the visual aspects of Windows including the APIs used by applications and the end-user experience

* Browsing: the technologies required for browsing the web, but also how those will be reused across the platform to build rich applications

* Windows “Form Factor” Experience: tuning the experience for different types and sizes of computers from handheld through laptops and desktops to servers and alternate form factors such as tablets and wall computers

* Windows Live: the broad set of cloud-based services that complete the Windows experience including identity, communications and messaging, storage, and sharing

As with past releases the framing memo went out to the whole Windows team. The bulk of the team was super focused on shipping Windows 7 and mostly appreciated the informational aspect of the memo. The real work for program management began with JulieLar’s “Windows 8 Planning Memo” which she sent to the entire team just after Windows 7 RTM for most worldwide markets. The purpose of the framing memo was to establish the “bounding box” for Windows 8 and bring together the best of top-down, bottom-up, and middle-out planning. The framing memo was the top-down step. The planning memo develops potential themes for the release and explores those.

Julie outlined the following planning themes which would then be the structure used to facilitate brainstorming, prototyping, and then ultimately the product vision:

Blending the Best of the Web and the Rich Client. Recognizing the declining role of Win32 development and the increasing dominance of web development and associated tooling, this area asked to develop solutions to building an engaging and useful platform for developers. What kinds of apps do they want and how would they be distributed? How could the capabilities of Windows enhance what we see as limited web applications?

Defining a Modern PC Experience. Julie wrote, “The basic elements of today’s Windows user experience—the Desktop, Taskbar, Start menu, and Explorer—were introduced in Windows 95, and their success has made Windows the world’s most familiar computing environment. But today’s modern world is in many ways different from the mid-1990s world in which Windows 95 was designed.” This area asked nothing less than to bring the Windows user experience up to a level that would support existing scenarios and provide a better solution for the next billion customers who see the smartphone as their first and potentially primary computing experience.

Extending the Reach Of Windows. The Windows model of licensing and OEMs served us extraordinarily well, but with the rise of smartphones there were new revenue opportunities and sales models for Windows that can be supportive of reaching the next billion customers. Key among these was the role of mobile operators (“telcos”) in the sales process.

Connecting to Windows From Anywhere. Typically, the PC of 2010 operated in a world where everything is on the PC except what is viewed through a web-browser. PCs could be greatly improved by making use of cloud services available with Windows Live to make all your files, settings, communication, and collaboration easy from any PC or device. What role could the cloud play? Synchronization across devices was something the company has tried many times before though we had limited success. How could it work this time?

Helping IT to Deliver Work Anywhere Infrastructure. Most of Microsoft’s revenue and much of the upside opportunity came from doing a fantastic job for enterprise IT. This theme asked questions about deployment, security, encryption, and even the mundane such as how to easily replace a lost, stolen, or broken PC.

Showcasing Quality the First 30 Days and Over Time. This area asked what have historically been the most intractable of questions about Windows. “The burden of ensuring that a new PC is running as well as it should is placed on the customer who purchased it.  As a result, the first days of usage, rather than being a period of exploration and fun, were often prove to be labor intensive and exasperating.” Julie added, “Making matters worse, Windows itself is not running at its best during the first days of ownership.  …Windows performs all of its initial self-tuning and post-out-of-box-experience tasks during this critical time.”  When compared to what customers were starting to see with smartphones, Windows looked downright archaic.

Synthesizing these together into the vision was the next step. While most of the planning team were brainstorming and prototyping, we had some significant engineering work going, the success of which would prove crucial in enabling our ability to achieve a breakthrough Windows 8, such as working out the feasibility of Windows on ARM.

A bigger worry, did we set out to do too much? We knew that the team would naturally gravitate to ideas that made the PC better in incremental ways. We also knew some people would push hard on extremely bold ideas. The risk for any large organization is obvious…trying to do too much. The less obvious risk…ending up with a plan that is a too much of the old and a little bit, but not enough, of the new. Inertia is one of the most powerful forces in a large company.

I was worried. We only wanted to spend a few months “just” planning, still an enormous undertaking. Windows 7 shipped in August, with this planning memo and associated work taking most of the Fall. It was looking like we would start the project in the Spring of 2010, which meant an aggressive RTM of Windows 8 in the summer of 2012. Still, that would be exactly three years between releases, something never accomplished before. Promise and deliver.

On to 098. A Sea of Worry at the Consumer Electronics Show

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit hardcoresoftware.learningbyshipping.com