Last week, two major technology companies did things that they vowed they would not do. Apple launched a small iPad in order to attack similar-sized devices marketed by its rivals Samsung, Google and Amazon. At the same time, Microsoft was launching its first ever computer it in the form of its Surface tablet, suggesting that the software giant has finally concluded that Steve Jobs was right all along: that in order to make consumer-friendly computers it is necessary to control both the hardware and the software.

Microsoft timed the launch of its first tablet to coincide with the unveiling of its Windows 8 operating system; what it calls a “re-imagining” of the personal computer market’s dominant operating system. In recent years, Microsoft has become a slumbering giant outpaced and outmanoeuvred by the agile and innovative Apple, which recognised early on that mobile was the future. However, earlier this month Steve Ballmer, Microsoft’s CEO sent a letter to shareholders stating that the company is now officially a ‘devices and services company’; hence the joint launch of its first tablet and the updated version of its operating system.

Windows 8 is a potential game changer for Microsoft and it’s likely that within six months there will be a radically different marketplace as a result. This exciting news for the technology industry should inspire a new round of innovations for apps, advertising and cross-device marketing.  Windows 8 works consistently across desktop, tablet and mobile and injects an element of “cool” into the Microsoft brand. Its colourful, fresh and user-friendly interface is designed to connect the PC and post-PC worlds. Windows 8 represents Microsoft’s attempt to adapt to a technological shift that is empowering more people to use smartphones and tablets to surf the Web and handle other simple computing tasks. However, Microsoft designed Windows 8 so it can still be switched into a desktop mode, that relies on a keyboard and mouse for commands.

Microsoft has enjoyed huge success over the years with its software, including Windows operating systems and Office. However, Microsoft’s late arrival in the tablet market means that few programmers have created content for the Windows 8 interface with under 4,000 apps worldwide, compared to 275,000 for the iPad – Facebook, Instagram, Spotify and Angry Birds are all missing, although this is a situation that is likely to change rapidly.

Meanwhile, Apple’s market share continues to grow, but it still has only 13% of the U.S. market and a minority player, even if it is a very highly profitable minority player. Although, the traditional personal computer market is declining, Steve Ballmer said there are now “670 million Windows PCs just waiting to be upgraded to Windows 8”. Indeed, analysts are predicting sales of another 400 million new PCs in the next year, most of those running Windows 8.

Microsoft is late to the mobile game. In 2008, Windows was running on 70% of all personal computing devices, according to Forrester Research. In 2012, after the smartphone and tablet revolution, it was on just 30% of devices. Windows 8 was released to solve this problem. It is designed for phones and tablets being touch-based, low-power, actively streaming information and compatible with thousands of peripherals.

Microsoft has not said how much it’s spending on advertising and marketing for Windows 8, but estimates have placed the figure at more than $1 billion.

IB-style questions

1. Distinguish between new product development and innovation.

2. Explain why Microsoft has decided to reposition itself as a ‘devices and services company’.

3. Analyse the factors affecting innovation in the mobile technology market.

4. Examine how Apple managed to differentiate itself and its products from its competitors, and consider to what extent it can continue to increase market share following the launch of  new products and services from major rivals, such as Samsung and Microsoft.