Sunday, March 2, 2008

Microsoft Needs a Blue Ocean Strategy

by Dr Sarah Layton,

“What is Microsoft thinking?” asks Florida-based corporate strategist Dr. Sarah Layton of the software titan's hostile bid for Yahoo. Layton advocates the cutting-edge business approach known as Blue Ocean Strategy, which creates brand-new market space where no competition yet exists based on creating value innovation for customers.Some think Microsoft's acquisition of aQuantive might be Phase 1 of a Blue Ocean Strategy and its hostile bid for Yahoo the Phase 2 of a Blue Ocean Strategy, but Layton disagrees. “While these acquisitions may increase share of the on-line advertising market and make Microsoft more competitive, competitors already exist and will be hot on their heels,” she says. “They are simply buying more space in the already bloody red ocean of competition.” The acquisition of aQuantive appears a perfect fit for Microsoft if they want to be more competitive in their current market. Layton explains, “aQuantive's technology targets ads based on Web surfers' habits. That opens large swaths of new customers to Microsoft, but the markets will soon be flooded with competitors after the same business.” So, what is the benefit of getting Yahoo? “The basic job of any Web site is finding things online,” Layton continues. “Both Microsoft's Windows LiveSearch and Yahoo handle many searches as well as Google or Ask. But once people are used to one search engine, it's very hard to get them to change.” Both companies have important sites. Microsoft has a portfolio of sites, but none of them has attracted the consistent use of Yahoo's Flickr. “Yahoo's acquired sites - specifically, and Flickr -- have had only minor upgrades over the years,” Layton adds. “In the blog arena, Yahoo cancelled its 360 site last year. Both companies have managed to have their instant messaging networks work seamlessly for the past 18 months. If that model has worked, why buy Yahoo?” So, the question remains for Layton: “Where are the new Blue Ocean customers that the combined Microsoft-Yahoo will bring to the table? My answer to that question is there aren't any -- and the lead which the new companies might enjoy will be hard fought and short lived.” “The Red Ocean just got more bloody,” she concludes.

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