🔮 Navigating the AI Odyssey: How Microsoft Outwitted Google 🔮
How Microsoft, under the transformative leadership of Satya Nadella, outmaneuvered Google in the Generative AI revolution despite Google's superior technical capabilities.
“Seeking truth” sounds more like a spiritual odyssey than a corporate journey. But here, the truth we're seeking is a corporate one - the core of successful product strategy in the age of AI.
The central character of the story is Satya Nadella, the CEO of Microsoft. In Sanskrit, 'Satya' translates to 'truth'. I would argue that this a concept that has been the guiding star of his transformative leadership.In February 2014, Satya assumed the helm at Microsoft, and for nearly a decade, he has navigated the stormy seas of corporate change, altering not just the company's course but reshaping its cultural compass and brand identity.
Let's consider some milestones on this journey.
In 2019, under Satya's guidance, Microsoft planted its flag as the third American and fifth global entity to cross the summit of a trillion-dollar market valuation, and a 300% growth.
Unimpressed? Let me try again - With Satya at the wheel, Microsoft shares, originally sailing at $36.56 on February 4th, 2014, have surged to $335.4 today - an impressive nine-fold increase - especially considering it was one of the largest companies in the world even in 2014.
Yet, in this article, I would argue that the best is yet to come - that Satya's strategic investment in the new world order with OpenAI and its swift integration into Microsoft's fleet of products is going to pay even more dividends for Microsoft for the future, and that this strategy charted a course that beat Google in the Generative AI revolution that’s underway, despite Google being more technically advanced in terms of AI capabilities.
Tough Love in the Tech Room
A compelling narrative unfolds in this article titled "How Microsoft Swallowed Its Pride to Make a Massive Bet on OpenAI." It shows the sea change that occurred when Satya perceived the limitations of his research team, the untapped potential of OpenAI, and devised a strategic map to stake a massive claim on this uncharted island of opportunity. The end goal? Positioning Microsoft with an unbeatable product line in the Generative AI race.
The month was December 2022 - ChatGPT had already hit a million subscribers by then and captured the imagination of the world. Satya Nadella was in a boardroom review with Peter Lee, the executive vice president and head of Microsoft Research. By this juncture, Microsoft had already anchored a $1B investment into OpenAI (July 2019), becoming the exclusive provider of cloud computing services to OpenAI. In the meeting, Lee described the researchers' awe at GPT-4's mastery of conversational language and its ability to generate humanlike responses - flashes of artificial general intelligence on par with the human mind. Yet, Satya was far from impressed. He posed a piercing, existential question to Lee:
"OpenAI built this with 250 people, why do we have Microsoft Research at all?"
A question that should have sent ripples across the room, given that Microsoft Research was a crew of 1500 people at the time.
With the truth seeking lens focused sharply, Satya steered the Microsoft ship towards a bold new horizon. He sanctioned another massive $10B investment in OpenAI in January. Simultaneously, an unexpected storm hit the crew, one of Microsoft's biggest layoffs - impacting over 10,000 employees. The aftermath saw Microsoft getting 49% of OpenAI, becoming its single largest investor. (I am not claiming there were targeted layoffs only for Microsoft Research, just that the $10B investment contrasted with the 10K layoffs in the same month).
From Hype to Flop: The High Cost of Neglecting Product Strategy
Does anyone recall Google Glass? It was nominated for Time Magazine's "Best Inventions of the Year 2012". Imagine donning a mini-computer, capturing images and videos, navigating with Google Maps, and accessing the web while wandering. It was a tantalizing vision of augmented reality in 2014 when the product was launched.
Unfortunately, despite that great buildup, Google Glass met with a spectacular downfall. Its legacy? An exhibit in the museum of failures.
The culprit? A sea of concerns, one being the invasive nature of a device capable of recording and photographing without permission, earning its wearers the moniker "glassholes." But the biggest iceberg that sunk this ship was the absence of a clear product strategy. A $1500 device, it offered no defined use-cases besides basic filming and data access.
It’s not over yet though, Google unveiled another rendition of this device in 2022, this time with a clear direction - real-time language translation. Let see if they’ll have the last laugh.
But why just blame Google? To keep it fair, I am going to choose two where Apple and Micsosoft respectively lost:
Apple's Newton vs. the Palm Pilot in the early 1990s: The Newton boasted multiple features, including handwriting recognition. However, the Palm Pilot focused on doing a few things well - smaller, affordable, and hence conquered the market.
The HD DVD vs. Blu-Ray duel in the mid-2000s: Each had its unique strengths, but Sony's strategic decision to bundle Blu-Ray as a standard feature in their PS3 console while Microsoft offered HD DVD as a $199 option for Xbox 360 turned the tide. Blu-Ray's sheer install base ultimately overwhelmed HD DVDs.
It’s a stark reminder that, in the voyage towards tech success, 'Great Technology ≠ Great Product.' Success is not just about having the fastest ship but knowing where to sail and how to navigate. The right product strategy is the compass that guides us towards the truth of success.
Data-First Innovators
In my leadership roles, I have encountered a recurring pitfall (and admittedly fell for it a few times). It’s the siren's song of “technology first” thinking can beguile us into believing that possessing stellar technology is an assured ticket to product-market fit and success. It may work, but more often than not, we end up shipwrecked somewhere.
As I espouse the growing focus on data and AI, it's important to remember that they were important navigational aids even before they became the current AI craze. The navigational chart of business success necessitates contemplation of how AI products integrate into their overall course, how they contribute to a competitive advantage, and eventually, how they can fill the coffers.
In fact, many successful products of yore have been data products, charting their course successfully even before data became the official sextant of the industry.
Here’s a few for good measure:
Google was born as a stellar data product. Its PageRank algorithm outmaneuvered Yahoo's search (anyone remember Yahoo search?) offerings, and Google's unswerving strategy of refining this algorithm based on user data set it on an unparalleled course.
Spotify's saga is a tale of leveraging a consistent data strategy to outflank formidable adversaries like Apple Music. Despite fierce competition from Google and Apple, Spotify holds the crow's nest position in terms of users, attributing its success to its personalization algorithms, making the service unique to every user.
More recently, TikTok is the quintessential data product. Beneath its veneer of a simple social media app lies its true compass - a sophisticated data product that is its algorithm. In fact, TikTok's parent company, ByteDance, defines itself as an artificial intelligence company, not a social media company.
So there we are: The secret to finding the truth of success lies not merely in the ship or the crew but in the art of navigation – the 'Data-First' approach.
CoPilot + OpenAI: Microsoft's Dynamic Duo
Microsoft has swiftly staked its claim in the new territory of AI and leveraged its investment in OpenAI. There’s been a flurry of announcements in the last few months, each proclaiming Microsoft's CoPilot - their embodiment of Generative AI capabilities - integrated into every frame of their product tableau. From the hallowed halls of Office Suite to the expansive Azure skies of Microsoft Cloud Services, from the bustling cityscape of Windows 11 to the analytical powerhouse of PowerBI - CoPilot's influence permeates it all.
Consider the latest announcement on Microsoft Fabric and One Lake. It empowers one to summon data from any database,on any public cloud (AWS, GCP, …), into one unified place. Once that’s done, you are magically empowered with low code and Generative AI to easily make your data driven decisions.
Now, to the twist in our magical tale: Google, with all its technical prowess in AI, its arsenal stocked with DeepMind, VertexAI, PaLM, and much more, may indeed be the more skilled sorcerer to create that magic. It laid the groundwork for the Large Language Models (LLM) realm with the Transformer architecture from Google Brain in 2017. Microsoft, in contrast, appeared more like a clever squire, partnering with OpenAI instead of forging its own magic. Build vs Buy, anyone?
And yet, Microsoft emerged victorious. It outmaneuvered Google with a strategic blueprint so compelling, it served as a vivid reminder of the essentiality of a well-crafted strategy, even when faced with a technically superior adversary.
Monetization, productization, and commercialization need to be the starting line, not the finish. Businesses require maps and compasses in the form of playbooks and frameworks to navigate these crucial components without hindering the pace of their journey. Many businesses label it the 'AI last mile' problem. But in truth, it's more akin to a 'first mile' issue.
It's a Marathon, not a Race
Even if a laurel wreath graces Microsoft's brow in this early stage, let us not forget that the pioneers often don't craft the tale of enduring triumph. The ghosts of Blackberry, MySpace, and Netscape echo this cautionary tale. The AI product landscape is a stage in its infancy. It would be a folly to prematurely hail a victor based on the opening sprint in this grand marathon.
In the quest for AI supremacy, Satya's journey reminds us that seeking the truth requires not just the right map but also a strategy that understands the terrain.
Until we meet again on these virtual pages, Godspeed on your journey. Let the quest for truth illuminate your path.
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