A Look Through Microsoft's Windows: What led this company to achieve enormous market domination?

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Welcome to today’s “Return Driven Strategy (RDS)!”

A Look Through Microsoft's Windows: What led this company to achieve enormous market domination?

Having a strong foundation is important in any building or structure.

Why?

• It supports the entire structure so it can remain upright.
• It functions as a stabilizer to minimize lateral movement as well as other adverse weather conditions.
• It helps keep moisture out and offers insulating properties.

These are just some of the functions of a strong foundation. Clearly, this part of a building or structure is not something to be taken too lightly.

Now, let’s apply that in the context of business strategy…

Did you know that every business also needs to have a strong foundation for them to achieve high returns in the long term?

We call this foundation the Genuine Assets of a firm.

In the book, “Driven,” Professor Joel Litman and Dr. Mark L. Frigo say Genuine Assets are the “nouns” of business strategy. They are the building blocks (foundations) for creating walls to protect against competition.

In their words:

“Unique, Genuine Assets, when leveraged appropriately, can be used to create offerings in ways no one else can. This results in sustained returns for decades or more and creates a foundation for unparalleled growth.”

Genuine Assets are a means for resisting the natural fade in performance that firms experience whenever competition arises.

After all, unique assets make for unique activities and are thereby genuine in nature.

In other words, they CANNOT be copied by competitors.

BUT!

Even so, businesses should always keep in mind that uniqueness in and of itself is NOT inherently valuable.

Think about this: The formula always requires a noun and a verb .

Of what value is an asset if it does not have the potential to generate future returns?

None.

This means whether or not it has been explicitly stated, Genuine Assets must lead to wealth creation and fortify a business’ returns .

For the next few weeks of “Return Driven Strategy,” we’ll highlight several businesses with Genuine Assets that enable them to stand out in a crowded marketplace.

For today, we’ll put the spotlight on Microsoft …

Microsoft created a Genuine Asset with its Windows operating system (OS), which serves as a platform for competitive advantage for different kinds of offerings.

In and of itself, the OS was unique for fulfilling otherwise unmet needs. This is evident in the enormous market domination of Windows on computers all across the globe.

There are other several factors as to why the Windows OS is a significant Genuine Asset of the tech company:

• Brand Recognition: Windows is one of the most recognizable brands globally. Its strong brand equity reinforces customer trust and loyalty, making it a preferred choice for many consumers and businesses.
• Ecosystem Integration: Windows serves as the core of a broader ecosystem, including software (Microsoft Office), hardware (Surface devices), and cloud services (Azure). This integration creates a seamless user experience and encourages the adoption of other Microsoft products and services.

What else?

Early in its strategy, Microsoft utilized a unique, non-copyable OS and its large user base to push through applications, which could “talk” to each other relatively easily, and many commands like “cut-and-paste” were identical keystrokes across the systems.

As a result, Word overtook WordPerfect in word processing software. Excel overtook Lotus 123 in the spreadsheet market. PowerPoint replaced other previously used graphic presentation apps. The Access database software became dominant in its category.

In all of these areas, the first movers lost . Customers were willing to forego the bleeding edge of functionality of WordPerfect, Lotus 123, and others in exchange for more basic functionality that could be seamlessly used together in the Windows ecosystem.

• Enterprise Adoption: Windows is widely adopted in the enterprise sector, providing essential business tools and support for corporate environments. Its compatibility with various business applications and robust security features makes it a preferred choice for organizations.
• Revenue Streams: Windows generates multiple revenue streams, including direct sales, licensing fees from original equipment manufacturers (OEMs), and enterprise contracts. Additionally, the Windows Store and services like Microsoft 365 contribute to ongoing revenue.
• User Base Data and Insights: The widespread use of Windows provides Microsoft with valuable data and insights into user behavior and preferences. This information guides product development, marketing strategies, and customer support initiatives.
• Network Effects: The popularity of Windows creates an effect where the value of the OS increases as more people use it. This attracts more users, developers, and businesses, thereby reinforcing Windows’ position in the market.

See?

In the case of Microsoft, the development, management, and leveraging of its Genuine Assets have formed the foundation of its success.

In fact, the company’s history of cash flows is one of the best ever seen in the industry!

That’s why Microsoft is one of the “Marvels” of Return Driven Strategy. Through its unique and legally non-copyable OS, the company succeeded in fulfilling the otherwise unmet needs of more and more targeted customer groups.

What about you? Do you already know your business’ Genuine Assets?

If you don’t know yet, now is the time to figure it out!

You’ll see, with such assets, you’ll also be able to achieve success like Microsoft—gaining a competitive edge, leveraging an effective ecosystem, innovating constantly, and maintaining a dominant position in the industry.

—

If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo.

Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm.

Hope you found this week’s insights interesting and helpful.

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