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Microsoft and the duo user Part I: Microsoft is building a "phone" for consumers

As Android and iPhone fans have eagerly indulged in yearly upgrades to finely crafted, powerful, broadly distributed, high-end smartphones many Windows phone fans have observed from the sidelines. Some have watched with patience, envy, and even anger as Android phone and iPhone users have had their pick of new devices — sometimes even satisfying their lust by replacing a perfectly fine year-old device that didn't need replacing.

Conversely, the last first-party high-end smartphones released to Windows phone "consumers", or the fans as the company's retrenchment strategy frames the phone's target demographic, were the expensive and not widely distributed Lumia's 950 and 950XL. Moreover, with no marketing (understandably) to the masses and what we are currently observing to be an undeniable effort to reach the business sector, Microsoft is seemingly enamored with the enterprise. So if Redmond really is targeting consumers, why does their business look like, well, all business?

Getting their business straight

Let's first revisit what looks to be the decline of Microsoft's consumer-focused mobile efforts. The limited distribution of the Windows fan-focused Lumia 950 didn't get a good response from consumers, nor did the "immature" OS powering the devices. It is probably an understatement to say that Windows phone enthusiasts, industry watchers and Microsoft themselves have endured a roller coaster ride of emotional ups and downs as Redmond's mobile platform has struggled for relevance.

Moreover, after several waves of layoffs, Microsoft has virtually shed all of the valuable human capital of what seemed to be a perpetually unprofitable investment in the Nokia mobile phone division purchase. This reduction in its mobile division has been compounded by withdrawals from emerging markets like India and Brazil (markets seen as the next billion).

It is worth noting that emerging markets as a target for its first-party smartphones had been previously acknowledged as a strategic investment for the company. Moreover, the sale of the company's feature phone division to Foxconn, also a product of the ill-fated Nokia purchase, provoked further doubts regarding the company's commitment to phone consumers.

If that were not enough, the release of the next high-end first-party "phone", or "Surface Phone" as it is popularly called, is not expected until around the first quarter of 2017. In addition to the months-long wait for the device the Surface Phone, like the incredible HP Elite x3, will be targeted at business customers.

The combination of all of these factors may indeed make it appear as if Microsoft has left Windows phone consumers flapping in the wind as the company has retreated to the familiar and secure bastion of the enterprise. In a superficial sense, this is true. But as is usually the case, the picture is a bit more complicated than what it appears to be on the surface.

End of the low-end

Microsoft's mobile strategy is in a state of retrenchment. This retrenchment is in fact a strategic move by the company. It allows them to continue to develop a unified platform across form factors while keeping the most vulnerable component of that platform, phone, safe from the devouring jaws of dominant smartphone rivals.

This retreat, as it were, positions the company to hone the cohesion within, and enhance the breadth and depth of the Windows ecosystem. It also allowed the firm to target three specific markets while excluding the company from the competitive rigors it would continue to face as a major underdog in the general consumer space. Nadella summed it up this way in a July 8, 2015, memo (opens in new tab):

"I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention. We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family....We plan to narrow our focus to three customer segments where we can make unique contributions and… differentiate through the combination of our hardware and software. We'll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they'll love.

It is interesting to note that a mere two months after Nadella's statement, Microsoft's Chief Marketing Officer and Senior Leadership Team member, Chris Capossela, omitted the value segment from the listed targeted demographics in his statements about Microsoft's retrenchment strategy. On September 8th, 2015 Capossela had this to say:

Yeah, we've definitely retrenched...we've massively retrenched...For us in the next couple of years we're really going to focus on building phones that obviously showcase Windows 10, but we're going to try to build phones for two audiences. We're going to build phones for our Windows fans.We're also going to build phones for businesses. We know business customers want a very, very secure phone that's incredibly good at calendar management, at e-mail, at productivity, and Skype for Business, et cetera.And so we think those two segments are segments we can focus on and build a much, much better solution and much better business than we have today.

Focusing mobile like a boss

I believe Capossela's references to those two targets (Windows fans and enterprise) was indeed reflective of a decision the company had made by Q3 2015, to forego targeting the value segment, a decision which wasn't officially communicated until several months later. I believe this point was further reinforced by Panos Panay one month after Capossela's statements during Microsoft's October 6, 2015 Windows 10 Devices event.

Panay tacked a 68 second, lackluster introduction of the low-end Lumia 550 onto the tail end of an 18 minute and 46-second push of the Lumia's 950 and 950 XL and Windows Mobile's key differentiator: Continuum.

By the end of 2015 Microsoft had already shifted to targeting only the enterprise and Windows fans.

Yes, even after Roper presented Lumia and Continuum "like a boss", that Microsoft's making way for OEM partners by pulling back from the low-end was evident. This withdrawal, of course, left Microsoft with the identified target audiences of the enterprise and "Windows fans".

Those of you watching closely may have noticed that those audiences are the same targets of Microsoft's category-creating, industry-inspiring Surface personal and professional line of personal computers.

The surfacing of the Surface Phone strategy

Based upon Nadella's and Capossela's 2015 statements, it is clear that Microsoft's focus on the enterprise with a commitment to security, management and productivity is something that they had been firmly devoted to long before this year's recent layoffs and increased focus. As a matter of fact Terry Myerson's recent email which officially communicated a more focused phone hardware strategy reiterated that point:

Yet our phone success has been limited to companies valuing our commitment to security, manageability, and Continuum, and with consumers who value the same. Thus, we need to be more focused in our phone hardware efforts… I used the words "be more focused" above. This, in fact, describes what we are doing (we're scaling back, but we're not out!)

This more focused phone hardware effort is borne out primarily in the companies withdrawal of first-party Lumias from emerging markets like India and Brazil, which is a reflection of the firm's departure from the low-end.

Microsoft's "more focused" phone hardware efforts are reflected in their withdrawal from the low-end.

Of course, Microsoft's mobile partners, as we've talked about in the past are part of Redmond's strategy to bring a range of Windows 10 Mobile phones to regions and price points where first-party devices are not offered.

Rather than a major shift in strategy, this pulling out of the low-end and trusting OEMs to fill the gap is actually Microsoft bringing it's phone strategy in line with its Surface strategy as Nadella communicated was the goal back in 2014{.nofollow}:

"We will do everything we have to do to make sure we're making progress on phones...We are committed...Our first-party devices will light up digital work and life. Surface Pro 3 is a great example – it is the world's best productivity tablet… we will build first-party hardware to stimulate more demand for the entire Windows ecosystem… we will responsibly make the market for Windows Phone..."

This strategy is of course in line with Terry's deliberate wording "thus we need to be more focused in our phone hardware efforts".

Microsoft leaving the low-end brings phones in line with the Surface strategy per Nadella's stated goal in 2014.

The Surface, as a hardware component of Microsoft's personal computing strategy, has limited but intentionally focused reach in comparison to what inspired OEM partners have achieved with 2-in-1s in the industry. Microsoft's "phone" strategy, will clearly follow the same pattern.

To further this point, it is important to note that nowhere does Microsoft intimate that their phone software efforts will be more focused. As a matter of fact, Windows 10 is for everyone.

Microsoft is targeting Windows fans not Windows phone fans

It is worth noting that Microsoft is not betting the success of its mobile efforts on a single, breakout flagship hardware device, but rather the unified weight of the Windows ecosystem and the combined force of a cohesive family of Windows 10 first-party and OEM devices.

Believe it or not consumers are part of Microsoft's strategy for mobile phones.

This vast and cohesive ecosystem is being wielded by Redmond as a synergistic unified front of services and first- and third-party hardware devices that serve both enterprise and consumers. Believe it or not consumers are part of Microsoft's strategy for mobile phones.

As a matter of fact Nadella's and Caposella's exact words regarding Microsoft's target demographic for Windows 10 phones was not "Windows phone fans", but "Windows fans". Capossela expounded on that target audience this way:

We're going to build phones for our Windows fans. If you love Windows 10, if you love your Windows 10 tablet, or Surface, or laptop, we want to have a beautiful phone for you, something you'd be incredibly proud of that's going to have the same experience across your devices, the same apps will run on the phone as run on your Windows 10 laptop or tablet. And it's going to feel incredibly natural. And we really think the Windows fans really want a wonderful Windows Phone that will be a premium flagship phone.

Nadella summed up the phones target audience like this:

We'll bring…Windows fans the flagship devices they'll love."

One thing is made clear by these statements from Microsoft's CEO and marketing head: Redmond's duo user investments in the more popular aspects of the Windows 10 ecosystem will be strategically leveraged to target enterprise and consumer users of Windows 10 devices with a phone that fits seamlessly within the ecosystem that they use and love. This strategy fits in line with the notoriously misinterpreted words Terry Myerson spoke earlier this year:

"We're fully committed to that 4-inch screen, there will be a time for it to be our focus, but right now it's part of the family, but it's not the core of where I hope to generate developer interest [or encourage developers to invest in Windows] over the next year…There's no lack of recognition to realize how important that form factor is, but for Microsoft with Windows and for our platform it's the wrong place for us to lead.""We're going to do some cool things with phones, but this year phones are an important part of our family but not the tip of the spear."

When we look at these statements in conjunction with Redmond's expressed retrenched focus on business users and Windows fans we can see a path being forged to phone consumers from the broader Windows ecosystem and enterprise targets of Windows phones.

Microsoft's personal computing efforts have always transcended the boundaries between the enterprise and personal user environments. Popular tools such as Windows and Office, as well as hardware such as PC's and now Surface-inspired 2-in-1s have easily served a user at work and at home equally well. Microsoft's phone strategy is no different as seen in this excerpt from an email Microsoft sent to partners in May of this year:

We'll continue to adapt Windows 10 for small screens. We'll continue to invest in key areas – security, management, and Continuum capabilities – that we know are important to commercial accounts and to consumers who want greater productivity. And we'll help drive demand for Lumia devices.

More than one way to skin a cat, or reach the consumer

Due to a failure to garner meaningful market share via the traditional strategy of a head-to-head battle with entrenched rivals, Microsoft's phone strategy required an adjustment. These shifts were communicated by Nadella and began back in 2014{.nofollow}.

Microsoft is targeting the duo user in all of us.

Via the strength of a duo user strategy, a core business philosophy that permeates the firm's range of software, services and devices Microsoft has a valid and viable, though very difficult path, back to the phone consumer.

In essence, Microsoft is strategically forging a methodic, indirect path back to the phone consumer by targeting the duo user in all of us. With a Continuum powered category-defining Windows device that will likely be positioned more like a Windows PC with telephony rather than a phone, Microsoft aims to showcase Windows 10 on the small screen and target professional and personal productivity.

Will this "differentiation through the combination of our hardware and software", as Nadella put it, work? It will be a challenging, slow and fragile trek through the enterprise, the appeal of the broader Windows 10 ecosystem and partnerships rather than a strictly direct route to the consumer. Still, I'm optimistic. But time will tell.

While we wait, what are your thoughts? Sound off in comments and on Twitter, and meet us back here in part two as we delve deeper into Microsoft's duo-user strategy!

Jason L Ward is a columnist at Windows Central. He provides unique big picture analysis of the complex world of Microsoft. Jason takes the small clues and gives you an insightful big picture perspective through storytelling that you won't find *anywhere* else. Seriously, this dude thinks outside the box. Follow him on Twitter at @JLTechWord. He's doing the "write" thing!

  • Thanks for reading folks!!! Microsoft's duo user strategy, via its depth and breadth of services that provide a range of both professional and personal productivity tools has proven successful for the company historically and in its present personal computing offerings. As the company is evolving its universal platform and portfolio of Windows 10 devices Redmond is attempting to apply that same core philosophy in this current environment. Due to a number of factors (some of its own devising) that prevented the company from gaining a solid footing in mobile phones, the application of the duo user strategy in phones is a challenging, slow and fragile trek through the enterprise and the appeal of the broader Windows 10 ecosystem rather than a direct route to the consumer. But make no mistake, Microsoft is after consumers! :-) Well folks, you know the drill, LET'S TALK!!!
  • Great read! +10-points for not starting a single sentence with "Indeed,"!!!
  • Indeed ;-) lol Thanks!
  • You're an eternal optimist, Jason, and I love you for it! Makes keeping the faith a little bit easier...   :-)
  • They need an amazing phone, and they need to start marketing. Many people feel surprised that Microsoft even has a phone when they see my 640. Many people don't even know! That's sad. It's sad because it's such a great OS. One more problem Microsoft must face is the app gap. People might take a look at Windows Phones and show initial interest, but when they discover there is no Pokemon Go or Snapchat or even Amazon app, they'll drop the phone and move on.
  • Agreed but not at the low end - I interpret the retrenching as Microsoft only wanting to play in a specific section of the market, as they do with the Surface line and stay away from the low end so that OEMs can do their own thing without having to compete. It's the same line of thought that would explaing why they cancelled the Surface Mini, it would likely have hurt OEMs at the low end of the market too much. There's still some interesting options on both phone and laptop/tablet that are 3rd party at a good price and it makes sense for Microsoft to stay away from that end of the market. At the high end of the market, only the Acer Jade Primo and the HP Elite X3 have appeared with no alternative to the 950 series. That's where Microsoft need to play, since without a flagship device it would be tricky to sell the platform to new users.
  • @skydiverian  I don’t agree with you. Look at the Blackberry. There is many people around the world who don’t have money for L950, but they want a WP from MS. Regards
  • Yeah !! Great to see the optimistic spirit !! Helps me to stick to the platform with a happy face !!, :)
  • Jason, great article! One minor nipick: shouldn't the comma in the tilte be after "consumers" instead of "Hey"?
  • You're half right. There should be a comma after "consumers", but the comma after "Hey" still belongs there.
  • If they pull this off it will be interesting how this process is studied in future business schools. When Microsoft set out on the Windows Phone venture they strayed from their core competencies' and pursued consumer devices vs enterprise software. Should be a cautionary case study of really knowing your company and if you want to pursue new markets know what you are getting into. While Microsoft is getting all the flack, Google made the same mistake when they bought Motorola.
  • Google never intended to buy Motorola devices. It was just a package attached to the patents they wanted. They kept patents and sold the rest.
  • Excellent article! When is part 2? Can't wait!
  • I'm a huge long time fan but it will take some convincing for me to believe MS has any serious interest in the WP consumer market.
    Many of their actions towards mobile consumers have bordered on contemptuous, and I have personally felt the burn on numerous occasions.
    If they have indeed refocused they must stop the rot now, not leave it into 2017
  • TL;DR: As consumer, I'm left without most popular games and next Windows mobile device ;) I've been thinking about this lately, and my understanding is: Microsoft may be after consumers, but in mobile, only if some OEM makes the devices and takes the risks. And that is the part where strategy fails. There exists 2 high-end devices tailored for enterprise (enthusiasts may also be interested), Lumia 550 copies with SD21x, and one midrange device in Japan. Attractive consumer windows phones do not exist. In enterprise, the landscape is completely different. Companies do not care so much about Pokémon Go or social circles (though if workers are given W10M phones, they do care about them and may not adopt those phones for personal use). If there is not an app for the task, companies can make it internally or contract from external developers. Maybe Office is enough to run most of the tasks. Remote machines work well in intranet and plausibly in 4G. Companies may have long and economical contracts for hardware, software and support. How laptop-replacing phone fits into this remains to be seen. Productivity does not sell many consumer phones. PC world is totally different. Many millions of existing users, many millions of existing x86 Windows PCs, huge variety of software available. OEMs can more safely manufacture standard desktops and laptops, custom computers and copies of Surface tablets (or 2-in-1 devices) because existing and coming apps, games and productivity tools will work in almost every device.
  • I agree... PCs and Tablets...  Microsoft wins.  When I want to get stuff done, I always use my Surface Pro 4 or my PC.  I take my SP4 with me everywhere.  My iPad is only for trivial couch surfing.  But phones, I am sorry to say is another story.  I have had Windows Phone 7, 8, 8.1, and 10.  I find I don't want my phone to just be an extension of my Surface.  Nobody really wants to do productivity work on a tiny screen anyway.  That's what the easy-to-carry very portable Surface Pro is for.  I want my phone to be more personal and have all the apps, even the silly ones like Pokemon Go (but also the not-so-silly apps like Robin Hood).  But that has never happened and I can't see it happening in the forseeable future.  For consumer phones, I just do not see a future with WP any longer.
  • Very true, the little bit of productive work that can be done on sub 6in devices is checking mails etc, can be done on android and ios too, thanks to MS laser sharp focus on those platforms.
  • Hands down, best author on this site.
  • Agreed -- excellent article, save for this minor slip-up:
    September 8th, 2016 Capossela had this to say:
  • Appreciate the support missionsparta and I amSpartan! September 8, 2016 huh, maybe it wasn't a slip up. Maybe I have time hopping Delorean. Lol j/k Thanks for the pointer. Fixed!
  • If you go spelt by word count, yeah. Too much droning on when it could be amazed in half the words, though, and I'm not a fan of the "series" articles that basically act as months-long summaries of the obvious.
  • Don't read it then.
  • I'll read whatever I please. If you don't like my opinion, don't read it. Really, that philosophy is so dumb, though. How do I don't like it if I don't read it? Why are people so scared of criticism and dissention that they want all of those who don't agree to hide in a hole? It's laughably insecure thinking.
  • If you don't like my opinion, then don't read it? Me saying don't read it if you dont like the guys work is my opinion.... Don't read it then. Its also one thing to say you disagree with what he is just pretty much bashed his entire style and writing.
  • Yes, and you praised his writing style. Why can't constructive criticism be present? I read it because the topics can be interesting, I'm just starting that the spring content could be better and, more importantly, I'm saying HOW it can be better. If you can't take dissenting opinions, that's a YOU problem, and I'm not interested in eating my time discussing your problems with you.
  • boringgg!
  • He didn't really seem to bash it, it's just not his cup of tea. He never called Jason a bad writer as far as I can see? Look, you like Jason's writing. Keith gave his opinion and you gave a kneejerk reaction in response, because he didn't agree with you. Doesn't make him wrong though. It's the same as saying "this car is awesome" and somebody tells you it sucks. Different opinions, no need to get personal - let's just agree to disagree!
  • @Keith You're here. You're engaged. Thanks for reading! :-)
  • Keep in mind that this is probably a better way for a lot of people to understand whats going on. Not everybody has English as a native language (myself included) and misinterpretations are easily made. Heck, I don't always understand whats written in articles and have to look it up: I could write up a killer article with fewer, more expensive words but, not everybody would understand the context. Just look at some of Daniel's articles. Nice and short but a lot of people don't seem to get it (usually from outside the US). Jason is just hammering on certain points that reinforce his article and removes any room for self-made conclusions. Personally, I prefer the "less is more" approach like you, but its definitly refreshing to sit down and enjoy a coffee reading a lengty article of good quality from time to time, haha. And most of what Jason writes could be summerized as "obvious" yeah. *if* you follow Windows Central daily and bothered to do some research. No offense intended towards others. There's a lot of people that don't find this as obvious as we might and start filling in their own conclusions on subjects that were told a few weeks/months ago. Just look at some of the reactions on articles. So coming from that perspective, I think his articles are great for the readers that pop in from time to time to catch up. Come to think of it, maybe its interesting to have Jason write a monthly "series" on whats going on behind the scenes and explaining why the choice was made. It's a bit like his current articles, but these usually pop up after a major outrage happened. I think it would be an interesting idea to have somebody cover everything thats noteworthy and try to explain in more in-depth articles as of why. Take Skype for example. Yeah, I get it, but tons of people herald the end because they don't seem to understand.
  • LMAO. The original guy bashes his writing for having to long of articles and should shorten it up. So the guy that comes to his defense writes and entire novel. Hahahaha
  • I wish the upcoming startup companies got more help,The thing I quite don't get and it's sad is that there isn't much support for Nuans Neo (it's great phone), if you read the KickStarer FAQ , you only get charged once they meet that goal and they also let you know when you'll be charged, I think kickstarter is a great fundraising website for projects, I backed the project with few others, just with much more people would, and the options you get when choosing how to back the project are great
  • You only get charged if they succeed, but you get nothing back if the product is delayed or junk. I almost supported the Wearhaus Arc headphones Kickstarter. They ended up being almost six months late. DayZ had one of its project/development leads bail. Mighty No. 9 was horribly delayed amd ended up downgraded trash. You get nothing refunded in those cases. That's why some don't like to touch crowdfunding.
  • Crowdfunding is basically like making a donation where you might get something cool in the mail after a while.
  • I see it more like buying a car based on a TV ad and hoping the transmission isn't trash or buying a shirt because it looked good in the window, without knowing if it fits. It's basically putting the burden of investment on the buyers, without the typical business model of reading the investors with the opportunity to make a profit. Kickstarter and the producers gets the profits without the risk of the investment instead. Only the customers are at risk in the business model. They managed to create a setup a business model where the people with the money don't have the power (once they agree to find something, that is).
  • In case of the Neo it is already a successful product in Japan. It's proven they have built the thing. As a startup, they need help to pay for the certifications in other markets. These certs are hugely expensive and they want assurance that there is interest from those markets before they expand. Not unreasonable and very low risk to pledge, IMHO.
  • wonder why Microsoft doesn't provide the money that Nuans needs to finish the KickStarter -- it is chump change for them and would pay dividends by creating an innovative w10 phone