Microsoft’s Surface Strategy, Explained?

I've been closely watching Microsoft's strategy of positioning its Surface lineup as premium, aspirational devices. And I think I can explain the ever-escalating prices.

Microsoft formally unveiled its revised vision for Surface at last year's hardware event, when it announced Surface Book and Surface Pro 4 in October 2015. At that time, I wrote that in "shooting for the high-end of the market, Microsoft is providing a much-missed sense of leadership" in the PC industry.

But one thing has always nagged at me when I think about what I had described then as Microsoft's "fantastic idea." By positioning new Surface devices as premium devices with ever-higher prices, it shuts out most potential customers, most traditional PC buyers. Few people can---or would---spend $1200 or more for a Surface Pro 4, let alone $1500 or more for Surface Book.

That Surface Pro 4 and Surface Book subsequently succumbed to almost an entire year of reliability issues is beside the point, though it's fair to say that it impacted my opinion of these products, and my ability to recommend them to others. Whether you believe or not that Microsoft finally got ahead of these issues is likewise beside the point: The strategy is what it is. And that's what I'd like to discuss here.

At the $1200-$1500 and up price point, Microsoft has few non-Mac competitors. There are some high-end ThinkPads, of course. And companies like HP are likewise pushing their own successful premium PC strategies as they look for growth sub-markets in an otherwise falling, or at least stagnant, PC industry.

I believe this to be the point, the real reason that Microsoft is pushing Surface ever-higher. And Microsoft Chief Marketing Officer Chris Capossela bolstered this belief when he appeared on Windows Weekly this past week.

I'll get to that in a moment. But let's step back in time again for a reminder of how Microsoft's Surface positioning has evolved over the years.

When Microsoft introduced Surface in mid-2012, it didn't just surprise us, as users or customers, it surprised its partners as well. And in the wake of the news that Microsoft would now compete directly with its own hardware partners, harming relationships built up over decades, those PC makers pushed back. Today, all major PC makers sell Chromebooks in a direct and obvious case of cause and effect.

Microsoft heard the complaints. More to the point, it realized that its unilateral desire to get PC makers to do what it wanted--build great modern PCs, not me-too beige boxes---it had perhaps overstepped its bounds. So it recalibrated.

Part of that recalibration is what I asked Mr. Capossela about this week, and what he confirmed: That in building aspirational devices that created or at least formalized new device form factors, Microsoft was explicitly telling PC makers that it was OK to copy those designs. We see this most clearly with Surface Pro: Virtually every PC maker has a Surface Pro clone today, and som...