Turning bitter rivals into partners

Among a host of interesting features in the book is also a section where he speaks about working with rivals, which he says could be uneasy yet essential for a healthy culture. Here is an excerpt of the same. 

“A few years back, Apple had a concept they felt would benefit from a renewed partnership with our capabilities and culture. Shortly after becoming CEO I decided we needed to get Office everywhere, including iOS and Android. We had these versions in the works for some time, just waiting for the right moment to launch. I wanted unambiguously to declare, both internally and externally, that the strategy would be to centre our innovation agenda around users’ needs and not simply their device. We announced that we would bring Office to iOS in March 2014, two months into my new role. 

Soon, Apple sent a cryptic note to our Office team asking for an engineer to sign a nondisclosure agreement and come to Cupertino for a meeting. This is standard operating procedure in our secretive industry where intellectual property must be guarded. After a few meetings, it became clear that what Apple wanted was for Microsoft to work with them to optimise Office 365 for their new iPad Pro. Apple told us that they felt there was a new openness at Microsoft. They trusted us and wanted us to be part of their launch event. 

There was passionate debate internally about whether this was a good idea. At first, some product-line leaders within Microsoft felt uneasy about partnering with their competitor; I definitely heard some resistance behind closed doors. One way to explain the logic is by turning to game theory, which uses mathematical models to explain cooperation and conflict. Partnering is too often seen as a zero-sum game — whatever is gained by one participant is lost by another. I don’t see it that way. When done right, partnering grows the pie for everyone — for customers, yes, but also for each of the partners. Ultimately, the consensus was that this partnership with Apple would help to ensure Office’s value was available to everyone, and Apple was committing to make its iOS really show off the great things Office can do, which would further solidify Microsoft as the top developer for Apple. 

On launch day, Apple’s Senior Vice President for Worldwide Marketing, Phil Schiller, teased the audience as he set up the next demo at the iPad Pro launch. “We’ve been lucky to have some developers come in to work with us on professional productivity. Who knows productivity more than Microsoft?” Nervous laughter filled the room. “Yeah, these guys know productivity.” 

Kirk Koenigsbauer, the head of Office marketing, took the stage to proclaim that more than ever we are doing great work for the iPad. But the publicity value of working with old rivals was far down on my list of motivations for pursuing them. Sure, people like to hear about competitors getting along. But forging great business partnerships is too difficult if PR is the sole purpose. For me, partnerships — particularly with competitors — have to be about strengthening a company’s core businesses, which ultimately centres on creating additional value for the customer. For a platform company, that means doing new things with competitors that can accrue value back to one of the platforms. 

Sometimes that means working with old rivals and sometimes it means forging surprising new partnerships. We work with Google, for example, to make it possible for Office to work on their Android platform. We partner with Facebook to make all of their applications work universally across Windows products and, likewise, to help them make our Minecraft gaming applications work on their Oculus Rift, a virtual reality device that competes for attention with our own HoloLens. Similarly, we’re working with Apple to enable customers to better manage their iPhones within an enterprise. And we’re working with Red Hat, a Linux platform that competes with Windows, so that enterprises built on Red Hat can use our Azure cloud to scale up globally by taking advantage of investments we’ve made in local data centres around the world. Our partnership with Red Hat may not be as surprising to some as our work with Apple and Google, but when I stood onstage with a slide just over my shoulder proclaiming “Microsoft <3 Linux,” one analyst concluded that hell must have frozen over. 

Partnerships like these can exist, at times uneasily, with competitors in specific product or service categories. We compete vigorously with Amazon in the cloud market; there’s no ambiguity about that. But why can’t Microsoft and Amazon partner in other areas? For example, Bing powers the search experience on Amazon Fire tablets.”