Should We Be Worried About Surface? (Premium)

Two years later, Microsoft is still unable to make its Surface Hub 2X dreams a reality. Does it matter? Or is this just a minor glitch in the matrix that is Microsoft’s hardware business?

It’s reasonable to at least ask. Ever since Microsoft announced its first-ever PCs back in 2012, the software giant has been both competing and partnering with the very companies that established it has the one-time leader of the personal computing market. Since then, its relationships with PC makers seem to have normalized, and it’s been years since bitter PC executives have lobbed passive-aggressive complaints about the Surface business. At least publicly.

Privately, I’ve heard some conflicting opinions of Microsoft’s efforts in the PC space, which range from mild respect to mild amusement. The PC market is a tough market, one that’s fraught with low margins and high risk. And there’s a feeling that Microsoft might have better helped the industry simply by lowering the licensing cost of Windows. And that its failures may have done more harm than its successes have done good.

Let’s talk about both.

As Brad detailed in his book Beneath a Surface, Microsoft’s PC efforts got off to a tough start when it tried to mimic the iPad with Surface RT and Windows RT. The result was a $900 million write-down that almost scuttled the business entirely. But after seeing some interest in the more traditional Surface Pro and its more traditional Windows, Microsoft got busy. And the result, the third-generation Surface Pro 3, formalized the tablet 2-in-1 detachable PC as a form factor so well that virtually every PC maker mimicked it with their own me-too products. (Oh the irony.)

Lost in the relative success of Surface Pro 3, of course, is the fact that it was supposed to be minor news compared to the blockbuster launch of Surface Mini, an 8-inch tablet that would run Windows RT. But it was canceled by then-new Microsoft CEO Satya Nadella and his Senior Leadership Team (SLT) at the last second---literally, as manufacturing had already begun---because the mini-tablet mini-boom had already ended and because, well, Windows RT was pointlessly hobbled.

The Surface Mini bears more on this conversation than does Surface Pro, I think, because it points at the real problem we should be examining here: How on earth did such an obviously flawed product make it all the way to production? What kind of decision making would ever lead to such an outcome? Had Nadella and the SLT not stepped in, Surface Mini would have been another very public failure. And each of these failures---there were more coming---weigh heavily on this business.

Fortunately for Surface and its fans, that didn’t happen, and Surface Pro 3 established the form factor we’re still today after four more generations of Surface Pro models.

Thanks to this success---and despite the failure of Surface Mini---Microsoft kept trying with new form factors, convinced that it somehow ...