The Hidden Power of VBE Models: Microsoft and Market Domination

Understanding the VBE Model in the Tech Industry

The concept of a Value-Based Enterprise (VBE) model offers a critical lens through which we can analyze the competitive strategies of leading technology companies. In our ongoing series titled, “Ignorance of a Supporting VBE Model is Bliss,” we delve into the intriguing development of Microsoft's market dominance prior to the year 2000. A closer inspection reveals that, unbeknownst to Microsoft at the time, its operations were underpinned by a robust VBE model, allowing it to achieve unparalleled success in the computer software domain.

The Rise of Microsoft: A Case Study of Ignorance and Dominance

During the late 1990s, Microsoft emerged as an uncontested leader in the software industry, largely due to its innovative practices and strong VBE model. This model, while not explicitly recognized by Microsoft, played an essential role in shaping its strategic initiatives. The firm’s ability to deliver value while continuously innovating positioned it favorably against its competitors. Interestingly, Microsoft’s lack of awareness regarding this foundational model allowed it to operate without the constraints that often accompany such recognition.

Lessons for Modern Tech Companies

As we navigate the ever-evolving landscape of technology, the lessons drawn from Microsoft’s experience are relevant to contemporary firms. The transition from market leader to potential bankruptcy can often hinge on the strength of a company's VBE model. Just as Microsoft thrived under a strong model, companies such as Apple have exemplified the importance of adaptation and innovation post-2007, solidifying their presence in the mobile market. The prevailing takeaway is that an acute awareness of one’s VBE model can enable companies to not only sustain but flourish in competitive environments.

In conclusion, for technology firms seeking to ensure longevity and mitigate the risk of decline, prioritizing the assessment and enhancement of their VBE model is imperative. Companies that recognize the value of a strong VBE model are better positioned to navigate market challenges and remain leaders in their respective fields. As we continue this series, we will explore various aspects of VBE models that impact market dynamics, preparing organizations for the future.

I would first like to speak about the background which Microsoft’s competitors tried to create like Apple. They thrashed Microsoft products as poorly designed while their products were better designed as they designed both the hardware and the software.

It has always intrigued me as to why Microsoft had a 98% marketshare of the Computer software market and I have never seen a case like this in Human history where a company had such a strangle hold over the market, so I set out to understand why and there I found Steve Jobs https://youtu.be/XAfTXYa36f4?si=zrRsM62kLp7wFtvr Here he quotes Alan Kay saying that people who are serious about software sould make their own hardware . https://youtu.be/7eC8u3_bBDg?si=h466nla-Corb2bnk

While I do see Apples vision versus Microsoft having lesser vision in the computer software area, I found it hard to understand why Microsoft commanded a 98% market share and try whatever it did Apple could not go beyond the 2% market share against Microsoft’s 98% even if they made better products than Microsoft as they claimed.

So, I started to explore Microsoft’s VBE model and was surprised to find that I was also one of the stakeholders who helped build Microsoft’s strong VBE model. And my next line of thinking was if Microsoft had succeeded in building such a strong VBE model with the computer software then why did they fail in the mobile area. I always thought that with such a strangle hold on the software market on computers, Microsoft would easily extend their dominance to the mobile software market but that did not happen and Microsoft was forced to abandon the mobile software market as they did not understand the VBE model at play in the mobile market area, but they unwittingly had a strong VBE model in the computer software area. And that same logic of strong VBE models would extend to the cloud services area and later the metaverse. In the cloud Amazon has a strong VBE model and dominates 55% of the cloud Market of 120 BUSD while google and Microsoft and IBM are marginal players in this area.

This story starts when Microsoft and Apple started making computers and computer software. Somewhere around 1975-76 when the companies were established. Apple started making computers and built both computer hardware and software and introduced their first products called Apple 1 and later Apple 2 and then graduated to making Lisa and then the Macintosh, while Microsoft started by supporting IBM Hardware with MS DOS and then later to window and they had the existing IBM Ecosystem that got their computer software accepted in the market. IBM had copyrighted the IBM PC BIOS, so other companies had to reverse engineer it for non-IBM hardware to run as IBM PC compatibles, but no such restriction applied to the operating systems. While the story started, the computers started being accepted by users across the world, While in the 1960s and 1970s Computers were massively expensive the costs for different areas of the computer started falling and a number of companies came up which made computer hardware, many among them making different parts of the computer hardware were in Japan and Taiwan and the cost of computer hardware started falling down in all areas . The most common configuration a Desktop computer had was a power supply, a Mother board which was a circuit board with a microprocessor, a memory stack, and peripherals like a hard disk storage unit which was a floppy disk drive, and a keyboard and mouse for input and a monitor to see the computer data and speakers for sound and a printer to print. This was followed up with a 28.8KBPS modem and later they were upgraded to 56KBPS modems which connected to the internet through the existing phone ecosystem. This configuration once established helped users to use computers for their personal work and office work and later when the Internet started being used, they could use it to connect to the internet to get information and visit sites. The VBE model which Microsoft stumbled on was now, when people who were assemblers, made deals to assemble a working computer for people at the lowest cost, there was this urge in people to buy computers but getting a Assembled Personal desktop computer was cost efficient as it did the job and you got a shiny computer people could show off to their friends with a mouse and a floppy disk where they could store their personal data and be organised. These assemblers quoted prices for a desktop computer and the prices were standardized. I got my first Desktop assembled computer with 2GB hard disk drive and 128 MB RAM and floppy drive and computer CD drive and a mouse and a keyboard for 52000 Rupees and he said that this would have a Microsoft software windows 95 and he would load it in front of me. I still, remember he brought in the assembled PC in my house and spent 2 hours loading the windows 95 software on to my PC. I was seeing my personal computer getting built up before me and I remember the drums which first appeared when the Microsoft CD started loading. That Microsoft software was loaded for free on our PCs and I remember asking him is it licenced one and he said yes, it is perfectly legal and licenced. SO, the ideology was you took one Microsoft software CD and loaded the software on 200 desktops all which ran Microsoft software for free. If there was a problem, he would come with the Microsoft CD, reload the software and the Microsoft PC worked fine. Imagine the number of users in India and China who used these assembled laptops in their millions and once I had a PC, I had recommended my assembler friend to a number of my friends who also got their PCs from him for 52000 Indian rupees with free working Microsoft software.

Microsoft had stumbled on a VBE model that would support them against Apple. And anyway I could not buy an Apple laptop in Mumbai India as Apple had no retailer selling an apple computer and even if brought, the apple computer would cost 1500 USD in 1998 would cost around 60000 Indian rupees at an exchange rate of 40 INR to 1 USD and on top of it I had no support mechanism if the computer did not work or any warranty and with the Microsoft ecosystem I had my friend one phone call away who would fix my problem. The other stake holders in addition to my friend were the mother board manufacturer based somewhere in Taiwan or China, and other hardware suppliers for the computer power supply, floppy disk drivers, Mouse, Computer screens who benefitted if Microsoft PC was sold. Microsoft had mounted a strong VBE horse and was not aware of it. While Apple was shouting at the top of its voice that it was a better engineered product, but the market shares never went up more than 2% globally. But in India and China Apples position must have been much more acute. The market share of Apple would be lower than 0.5% share of the computer market and 99.5 would be a Microsoft’s share. However, the tables were turned in the year 1997 when Steve Jobs came back to Apple.

The Tables turned and Apple was in the commanding seat sitting on a VBE model chair it had engineered with the iTunes platform. Apple by the time Steve Jobs came back to Apple had been through many product failures and knew the market pulse. Steve Jobs ran a Think Different campaign at Apple in 1997 when Steve Jobs returned to apple after the acquisition of his company NeXT. What he built with iTunes was a VBE model with which he connected different unconnected segments to solve the piracy problem which had plagued music companies. He negotiated for 4 years with the music companies to release their songs on the iTunes Digital platform. The background being that the music companies were losing sales because of music Piracy, which was rampant with platforms like Napster, Kaaza, LimeWire etc. And he offered a legal way to buy music for his iPod customers. Also, the owners of iPods would like to have music in their pockets to play anytime. Thus, he connected unconnected segments to create a legal MP3 driven business with iPods. And suddenly he had enabled a VBE model that started bringing in revenues for Apple. This was the same VBE model he used when he launched the iPhone in 2007. Now Apple had enabled a strong VBE model with which they first dominated the MP3 Player Industry with iPods and later the Mobile phone Industry with iPhones.

The tables had turned in the Industry, the Earlier VBE model Giant Microsoft was ousted from the Mobile market by a competitor who now sat in a VBE model chair.