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Now compare that to a company like Amazon, the giant Net retailer with which Microsoft shares the state of Washington. You want changes in strategy? Well, in 1997, Amazon, then still just a bookseller, started selling music and videotapes. You could maybe, if you insist, count that as a strategy change. Then Amazon started toys and games. Then electronics. On Thursday, Amazon added still another wing to its emporium, opening up an online mini-mall of specialty shops.

OK, so none of those are big shifts in strategy, and that's the point. When Amazon's Jeff Bezos changes his mind, it's usually about something so deep in the bowels of the company that hardly anyone even notices. (Did you know that Amazon has now moved to keeping more inventory on hand? Well, it did, but it sure isn't news of the caliber of the regular Microsoft "reorgs.") Why is that? Simple: Microsoft has a Net strategy; Amazon (or Yahoo for that matter) is a Net strategy.

Microsoft is not organized around strategies, it's organized around technological know-how. This means, in essence, that Microsoft can barrel into new businesses without a definite idea of how they will work. Often Microsoft knows the technology, but, -- precisely because it is a big company that might be able to build a consumer Net business alone -- it often doesn't establish the partnerships that make it work. (In business-to-business enterprises, like legal services, Microsoft is readier to make key alliances.)

For instance, Microsoft has for two years been trying to enter the bill-payment business through a venture called TransPoint. Bill-payment technology is something that is buried deep in the back offices of financial institutions, but it's important. Bill payment is at the core of a lot of lucrative consumer banking business that Microsoft and a lot of other companies want to get their hands on. But it took a year and a half for Microsoft even to partner with one bank (Citicorp) and most banks are still shying away from cooperating with Microsoft's plans, fearful that Gates, who has singled out banks for criticism as slow and lumbering businesses, wants to take away their paychecks.

Sums up one Microsoft competitor, Ron Martinez, CEO of Brodia.com, a company that has developed an Internet wallet (shorthand for a one-click Internet payment system, something that Microsoft has now set squarely in its sites): "What the Net enables from a technological standpoint doesn't necessarily map to developing a business. Being able to create a Web site that can provide financial services isn't the same as being a financial services company."

There is one Microsoft, and there are lots of start-ups. The start-ups that have ill-conceived strategies go out of business. Microsoft can afford to make lots of mistakes, while new Net businesses can't. Generally, they only get one shot. This survival of the fittest leaves only those businesses that are built around a Net strategy that works.

None of this, of course, means that Microsoft will fail to dominate Internet commerce in the way that many analysts have predicted it would. Think of it as a war of attrition: Microsoft can lose a lot of times, but eventually it will hit on the right path. When that happens, its competitors will not only have to remain nimbler than Microsoft, but they'll have to be big enough to take on the colossus without being outspent, outmarketed and outflanked by Microsoft's dominance in the software world.
salon.com | Oct. 1, 1999

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