06
Mar 14

Microsoft vs. Apple: the strategy gap

Microsoft’s newly minted Chief Strategy Officer, Mark Penn

Most people judge ads by what they see. Good ad, bad ad, end of story.

Of course, it’s a little deeper than that.

As is often pointed out around these parts, there’s a little thing called “strategy” — which is hashed out before creative teams start creating.

Historically, Apple has been very smart about strategy, while Microsoft has been very … shall we say … un-smart.

Now that Microsoft’s new CEO Satya Nadella has appointed Mark Penn to the position of Chief Strategy Officer, it’s a whole new ballgame, right?

Not so fast.

From what we know of Mark Penn, the gap between the quality of strategy at Apple and Microsoft isn’t about to shrink.

For starters, Penn has actually been Microsoft’s Executive VP, Advertising and Strategy, since mid-2012. He’s the architect of the company’s tasteless, cutesy and much-maligned “Don’t Get Scroogled” campaign.

Penn has been quoted as saying that this campaign was a success. Not terribly surprising, given his background. To people like Penn, success is determined only by the numbers — with little appreciation for how great brands are built.

Penn was a major player in Hillary Clinton’s 2008 presidential campaign, ultimately “resigning” mid-primary season. A New York Times article in 2008 described him as “a sometimes brusque number cruncher with centrist corporate sensibilities [and] few friends inside the campaign.”

Penn was also CEO of ad agency Burson-Marsteller. According to a 2008 Time Magazine article, Penn’s former clients include “drug companies, a tuna industry group, a tobacco firm and the controversial military contractor Blackwater USA.”

I can assure you, those who work on strategy at Apple and its agency TBWA\Chiat\Day have strikingly different credentials.

To be fair, Penn offers one glimmer of hope for Microsoft fans. It is reported that Penn was behind the Microsoft ad that ran on the Super Bowl, which was actually one of my favorites during the game. (Though many felt it borrowed way too much from Apple’s latest ad style.)

What I’ve learned in my meager career is that strategic decisions have a scientific and emotional component. Apple’s wild success came largely from the fact that Steve Jobs used his head and his heart. He wasn’t oblivious to numbers, but he had a innate understanding of human behavior and made some of his best decisions by instinct.

The world of political strategy is different. It’s all about polls, research and numbers. It’s calculated. It’s about attacks and counter-attacks. It’s all head and precious little heart. This is the world that spawned Mark Penn. And it doesn’t offer a lot of hope to those who’d like to see the quality of Microsoft ads move in a positive direction.

My eyebrows went up when I read of Penn’s appointment, because in researching my book, Insanely Simple, Penn was a featured player in a story I’d heard from a former Microsoft marketer.

So I’ll just end this article by offering up an excerpt from the book. In this chapter, I was talking about branding in general — how Apple expressed its brand perfectly while Microsoft continued to flounder.

 
The Search for Microsoft’s Values

Just about every company has a mission statement of some sort—an official set of words that describes who it is, what it does, and its reason for existing. Most agencies would consider having this document to be an essential first step toward creating an effective brand campaign.

Yet no one ever bothered to ask Steve for a mission statement before we created the Think different campaign. That’s because he had already given us a briefing from the heart, and even though the company was in serious trouble, its brand essence was well known. If anyone had asked him to hand over such a document, Steve would probably have considered it big-company behavior anyway. We might even have been fortunate enough to see his “rotating turret” in action. [Explained earlier in book.]

Working with Dell was a different story. This was a company that wasn’t very good at describing itself. Had it been able to articulate its brand essence, we could have begun working on a brand campaign immediately. Instead, we had to spend the first few weeks of our brand project figuring out who Dell wanted to be—because who it was at the moment wasn’t working too well.

Microsoft is another company that’s done its share of floundering over the years. Like Dell, it started out setting the world on fire, then somehow lost its direction. It’s still huge and highly profitable, but many of its customers would probably find it difficult to define the Microsoft brand today. While it was once the innovator and setter of standards, Microsoft has lagged behind as revolutions have swept both the smartphone and tablet categories. This sad state is reflected in its stock price, which has been stagnant for over a decade.

Microsoft’s marketing has been spotty for at least as long. Once in a while it manages to strike a chord, then before you know it, it embarrasses itself with something like the “legendary” pairing of Bill Gates and Jerry Seinfeld in a series of TV commercials. Efforts like these fall flat and leave people scratching their heads.

Microsoft didn’t sprout these marketing problems overnight. It’s been battling them for years. A former marketing manager for Microsoft tells a story about a critical time in the company’s past, when new layers of complexity caused it to drift. For the sake of our tale, let’s call him Brian.

When he joined the company, Brian truly loved his job. What he liked most about Microsoft was that “they did things.” That is, the company understood that it was part of a fast-moving industry and didn’t waste valuable time getting hung up on debate. Like Apple, Microsoft understood the value of staying in motion. It was brash too. The executive team knew it could execute faster and smarter than its competitors and considered this one of their great strategic advantages.

Brian loved this aspect of life at Microsoft because it was in such direct contrast to his experience with HP when he worked with its ad agency. He had observed that at HP, process had become more important than progress. “It was all about when the next meeting was going to take place and what kind of muffins might be served with the coffee. There seemed to be more concern about HP than what was going on in its customers’ world,” he said.

It was the Department of Justice investigation of Microsoft that sucked the life out of the company over a two-year period starting in 1999. Fearful that it might run afoul of government investigators, the company became listless in its marketing efforts, with no clear direction forward.

After Attorney General Janet Reno took Microsoft to court, Bob Herbold, then Microsoft’s COO, called a meeting of the minds to calm people down and get everybody on the same page.

The attendee list was a who’s who of Microsoft communications, including the company’s chief counsel and its head of PR. At one point, an executive with responsibilities in community affairs stood up to speak her mind. She painted a picture of a great company unfairly tarnished by the press. Microsoft was doing many good things in this world, she said, and the government simply didn’t appreciate this. The situation was frustrating to all of those who believed in the goodness of Microsoft and the value this company brought to the world.

Her speech built to a crescendo. “They think we’re up to no good,” she said. “They don’t realize that Microsoft is about positive things. We need to help them understand what our values are.”

She paused briefly, allowing that thought to resonate in the room. Then she looked straight at the communications team and said: “What are our values? Are they written somewhere? Does anyone have them?”

In other words, the way forward was for Microsoft to express its values to the world—but even as a Microsoft executive, she wasn’t aware of what those values might be. There was no magic document hidden on anyone’s computer either. The company’s values had never been codified.

From that point, it took Microsoft eighteen months to study itself, crystallize its values and decide what it stood for.

It might have been because of the DOJ legal action, or it might have been because of Microsoft’s inability to maintain its focus—whatever the cause, Microsoft had devolved. It had changed from a company that moved at light speed to a corporate behemoth that had somehow lost the ability to turn words into action.

It was a frustrating time for Brian and his team. But things were looking up for complexity, which saw its opening and went for it.

Suddenly lacking confidence in Microsoft’s internal marketing team, Steve Ballmer looked outside the company to meet this marketing challenge. He turned to polling expert Mark Penn in Washington DC to develop a positioning that would counter the growing public image of Microsoft as a dangerous monopoly. Penn was given the authority to develop a softer image for Microsoft and directed the marketing team to move in a whole new direction: The Microsoft brand would be about “kids, puppies and small businesses.”

Inaccurate as the image was, it did follow a certain logic. If Microsoft wished to be seen as a softer, friendlier company, Penn knew that kids and puppies were slam dunks. A new emphasis on small business would logically counter Microsoft’s image as a dark, dominating force.

Brian’s marketing team was stunned. As far as they could tell, they didn’t have the stories to support the new positioning. Small business, yes. But kids and puppies, no. The closest thing they had to a youth story was Microsoft’s K–12 education software marketing program, which represented only a tiny fraction of Microsoft’s market. Brian was responsible for the messaging to all of Microsoft’s customers, and the warm/fuzzy approach seemed terribly out of place. However, the marketing group had now been expanded by one—an outsider whose expertise was not in marketing—and things would never be simple again.

Brian’s experience continued to spiral. He found himself having to represent ideas he didn’t believe in, which, as we know, is a gross violation of the principles of simplicity. Brian found himself presenting Microsoft’s new kids-and-puppies brand to a meeting of DC lobbyists summoned to Microsoft’s headquarters. It was an all-star cast of extremists on both sides of the political spectrum, including Ralph Reed from the Christian Coalition and Victor Fazio from the left. Under pressure, Microsoft was forced to become an “equal opportunity” kind of company, offending no one. Brian was dispatched to stand up and say, “Here are our new technologies, here’s why they’re good for America, here’s how we’re communicating our ideas to everyone.”

When he left that meeting, Brian felt lost. He actually called his dad to say, “I feel like I’m working for a tobacco company.” He didn’t feel good about himself or his situation.

It’s always shocking to learn that a company as successful or influential as Microsoft or Dell can run into trouble trying to define itself. But that’s the kind of confusion that results when big organizations get bigger—and people lose sight of what makes things simple.

[Reprinted from Insanely Simple: The Obsession That Drives Apple's Success.]

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  • Andrew F

    Great post. Fun to read that part of the book again too. I’ve actually had a little argument with the great Apple analyst Horace Dediu over something along these lines, though not specifically about marketing strategy.

    He read the new Jony Ive biography and found it a “revelation” that something such as the Apple New Product Process exists, a development process that literally features a giant list of checkboxes for different stages of development. He called Apple’s “process of innovation” its most important asset.

    My argument was that creativity and innovation aren’t about the process of it, but in the contrast and conflict of ideas between smart people who earned their good instincts over years of living and sweating their craft.

    As your post illustrates, what happens to some big companies sometimes is that they try to discover and implement processes that drive them forward. They have little art or culture in them, and end up seeking out literal-minded, earthbound explanations for success, for innovation, for strategy, for marketing. It’s no wonder there is often such communication problems between company executives and marketing teams, who are essentially storytellers. How does a storyteller create with the constraints of “puppies, kids, and small businesses”. It’s been corrupted from the word go.

  • Jeff W.

    I saw Penn’s move to Strategy as a way of limiting his marketing influence. In other words, he can recommend a negative ad strategy all day long, but Chris Capossela, the now single CMO, will have final say. The issue before may be less about Penn’s strategy and ideas, more about his sloppy execution and direct control?

  • ksegall

    Well said. Processes can be both a blessing and a curse. I think all processes are created with the best of intentions. They’re an attempt to replicate and institutionalize something that worked well before. You need processes to ensure that things keep going well as people come and go in the company. It’s just that at the bigger companies, processes often get out of control over time. People start to behave like it’s their job to enforce the process rather than do something great. In fact, most are specifically told that their job is to enforce the process. That was the big difference I saw between the way Apple worked and the way other companies worked. (Like Dell and Intel.)

    Steve Jobs created something special because he didn’t believe innovation could be born in organizations bogged down in processes. I always tell people that he was “naive” in that sense. Without formal business training, he frowned on the things many are trained to do. He paid attention to all available data, and of course he believed in adhering to some basic processes. But, as important, he always listened to his heart. To me, he proved that without both head and heart, a company will never have much of a soul.

  • Daniel Landy

    Ken I am very interested to hear what you think of this (what I consider strange) isee5c marketing campaign on tumblr. I just find it doesn’t convey anything or have a purpose. It almost seems desperate.

  • http://twitter.com/matthewwanderer matthew

    This is a great read.

    Any chance you’d consider a similar analysis of Google vs. Apple?

  • Andrew F

    *Very* well said. I love that last sentence lol.

    Like the above comment, I was wondering what you thought of the isee5c tumblr. Not sure what their plan is, but I think a few of them are cute. I don’t think Apple is gonna give up on the 5c during this iPhone cycle.

    The mainstream tech media took a lot of ammo from your 5c piece, if you haven’t already noticed haha.

  • Andrew F

    *Very* well said. I love that last sentence lol.

    Like the above comment, I was wondering what you thought of the isee5c tumblr. Not sure what their plan is, but I think a few of them are cute. I don’t think Apple is gonna give up on the 5c during this iPhone cycle.

    The mainstream tech media took a lot of ammo from your 5c piece, if you haven’t already noticed haha.

  • Prof. Peabody

    I think you have the situation 100% wrong here. It’s an article about how “Mark Penn has been given the responsibilities for strategy,” but as you yourself mention, he already *had* those responsibilities, and had them for a long time. What has happened here is that his second portfolio has been removed.

    I see this more as a “sink or swim” test for him from Nutella. He is Steve Balmer’s friend and Steve Balmer’s appointment. Nutella is just giving him enough rope to hang himself so that he can be removed more easily after his first ideas fall as flat as we know they will.

  • ksegall

    I might have it 50% wrong. Some say this is a promotion, some say it’s a demotion. Penn no longer controls the advertising budget, but he controls the strategy — which in theory allows him to control the advertising messaging.

    If this was merely a “test” from Nadella, my respect for him and Microsoft would ratchet down a few more notches. You don’t launch a new administration by testing people’s strengths and removing them when they fail. I have to believe Nadella wants to start by winning. I can only assume he believes Penn is the Strategy King, and that good things lie ahead with his chosen one at the rudder.

  • Pingback: The Value Of Genuine Brand Values | CURATIO Magazine()

  • ksegall

    I’m sort of ambivalent, to be honest. I don’t get “desperate” from it. It adds to the “color” idea in different media than Apple typically uses. In general, I just think the 5c advertising hasn’t been all that compelling or buzz-worthy. I attribute that mostly to the strategy: “color and plastic.”

    Apparently the 5c is selling about the same as the iPhone 4 sold when it was the lower-cost alternative to the 4s. Some use this fact to argue that the 5c is therefore doing just fine, thanks.

    But that’s a pretty weak argument. Apple invested a ton of money in a 5c marketing campaign, while the iPhone 4 got virtually no support when it was playing backup to the 4s. Which means that the 5c didn’t create any more lust than the idea of buying last year’s device.

    So, the Tumblr effort is one more way to say “look at the cool colors,” augmenting the 5c billboards, posters and magazine ads. That strategy hasn’t exactly set the world on fire to this point, but it does help maintain a degree of visibility.

  • ksegall

    It may well be a matter of having Penn do what he does well (or what Nadella thinks he does well), and taking away the things he does not do well.

    Not so sure about that “final say” thing. Can a CMO run an ad that’s contrary to the CSO’s strategy? I assume it would fall upon Nadella to pick a side in the event of a dispute.

  • sparky3

    Tim Cook seemed very much the personification of process. It is interesting to see him evolve as he tries to put his heart into the challenge. His attack on the profit purists in the Annual Meeting was a good indication of him following his heart. A good sign I think, along with some of his recent hires.

  • Andrew F

    I think that’s a matter of perception rather than reality. He did a long interview with businessweek in 2012 where he laughed off the idea of process-as-innovation. He said you could put a for-sale sign up on companies with innovation departments. “You can’t flowchart out innovation”.

    Generally speaking, I think there’s a gap in logic between the people who worship Steve Jobs and think he was everything that made Apple great, but also completely miss the fact that Tim Cook was not selected by a committee. He was selected by Steve Jobs. Jobs knew Tim Cook better than any of these conventional-wisdom-media types like Yukari Kane who claim Tim Cook is some kind of corporate stooge.

    As Ken Segall has said, Jobs despised the big company attitude. It seems unlikely Tim Cook embodies things that Steve Jobs hated.

  • N

    Normally I’d agree with you but Nutella (funny) has to operate under the auspices of Bill and Steve on the board.

  • ScrittoreSabino

    There is nothing wrong with process in its true meaning. Process itself, is a rough guide. Where the problem resides, over and over, no matter how big the company, is when you have people who don’t understand 1) what process is 2) what its purpose is and 3) where its priority is within the scheme of things. This is the root of the problem. It is rarely process itself that is the problem, as for the most part, process is a way to get you through the routines of vetting feasibility etc etc and move quicker into the creative. Repeatedly it is people in power positions who don’t understand it, and see it as the end goal, instead of the helper it is supposed to be

  • Tatil_S

    Well, definition of a product’s success sometimes should not be measured by how well it sells on its own. It could be bringing in customers who are lured by a new, rather than last year’s model, at the low price point and who then can be swayed to splurge for the next level up.

    Still, I personally do not find 5c all that appealing, as the plastic exterior does not have the same classy look that 3G/GS series used to have. It looks fine, well made and all that, but still ordinary. I am not sure whether it succeeded in bringing in shoppers that would not drop by otherwise.

  • aardman

    Let’s not gloss over the US vs Microsoft antitrust case lest people think that it was over some benign, harmless actions that Microsoft undertook. If that case was the root cause of Microsoft losing its mojo, then it has only itself to blame. Microsoft committed some very grievous criminal anti-competitive acts that held back innovation in the personal computer market for at least a decade, not to mention crushing the dreams of countless entrepreneurs who may well have succeeded if not for Microsoft’s ruthless and illegal monopolistic behavior. Furthermore, if this ‘mojo’ that Microsoft possessed was based on its ability to batter and bully it’s competitors and partners into submission, than well and good that they lost it after they were convicted by the courts.

  • Andrew F

    According to Tim Cook, the 5c did actually grow the middle tier, yoy. 5s is also growing at the high end yoy. Tim Cook, who seems fairly artless, also doesn’t strike me as a BS artist. I think he was being straightforward when he said on the earnings call that the 5c didn’t hit their projections. But here’s the thing: Apple’s revenue was exactly at the high end of their guidance, meaning whatever projection the 5c missed internally, it didn’t miss by much.

    Whatever the case, I think the 5c is a very desirable phone — at the $0/$449 bracket. I think Apple figured out how to segment on iPad line: two identical products differentiated only by size. I this that’s what they’ll do with iPhone this year, but who knows.

  • UpperLeftCoast

    All you have to do is go to University Village in Seattle. On side of a mall square is an Apple Store. On the other side is Microsoft store. The MS store is laid out exactly the same as the Apple Store. The exteriors are virtually identical – you have to look closely to realize that the MS store is MS and not another Apple store. I had to go to the Apple store 5 times to deal with a problem. Every time, the Apple store was crowded with people. And I do mean crowded, so much that every time I felt claustrophobic. But the copycat MS store was virtually empty. While passing by, I’d look inside and there were less than a half-dozen potential customers inside. Every time.

    The reality is that MS has never been particularly creative. It basically stole the original MS-DOS from IBM through clever contract writing. And then it later stole using a GUI from Apple and the few others that had implemented it. MS creativity has mainly been about using its monopolistic power to steal, crush, or otherwise prevent any possible challenge to its power. That worked for a while, but could not oppress actual creativity – not mention providing products that worked – forever.

  • UpperLeftCoast

    What difference does it make? Advertising sh**t is still trying to sell turds in a world where coprophiles are rare.

  • UpperLeftCoast

    No to mention that Apple’s becoming tainted by Free Market Fundamentalist Fascists just might have adverse impacts to the brand!

  • Woochifer

    With the 5c, I think the angle that most analysts miss is that Tim Cook is a supply chain guru, and in that respect, the 5c could well be the ultimate supply chain play. Recall that the iPhone 5 had severe shortages at launch that took a longer-than-average time to sort out. One of the major production bottlenecks was the CNC-machined aluminum shell used on the 5 and now also used for the 5s. Its manufacture purportedly requires a lot more time than the outer shells for any other iPhone model.

    Ramping up for the 5s launch alone required a large increase in production capacity. Keeping the iPhone 5 in production at the same time would have necessitated even more CNC-machining capacity, and potentially forced Apple into short-supplying the 5 in order to meet the demand for the 5s, which would have left thousands (if not millions) of potential sales on the table due to lack of availability for the midtier model.

    Going to the 5c allowed Apple to use less time (and cost) intensive plastic shells and stamped steel frames. With few changes to the internal components from the 5, Apple did not have to worry about any shortages of their midtier model. That they could market the 5c as a new model, even though it was functionally identical to the year-old iPhone 5, was just another bonus.

  • KUNAL ARORA

    Well no matter what happens , apple would have the upper hand each time !!
    http://www.techtoq.com