SURFACE JOURNEY TAKES MICROSOFT TO NEXT LEVEL
Tech giant gains consumer hardware swagger by designing, refining premium products
REDMOND, WASH. Something different has been brewing in Redmond, Wash., recently.
Microsoft Corp., the tech giant known for its software offerings, is doubling down on hardware by designing and refining its premium tier of products called Surface in a way that is similar to competitors such as Apple Inc. and now Google Inc.
As a result, the company is gaining some consumer hardware swagger and brand loyalists, while also encouraging partners to step up their design game. It’s taken a team of passionate employees and strategy tweaks to get there, but Surface is finally cresting in a crowded market for Windowsbased machines.
“We realized that in order to build new things, you have to do it end to end and then grow the entire market for our partners,” Satya Nadella, Microsoft’s chief executive, said in an interview in Toronto. “We are now silicon-tocloud capable and how we express it is by picking and choosing things that Microsoft can uniquely do in the world.”
Microsoft has experimented with hardware in the past, with failed devices such as its Zune MP3 player and wearable MSN Watch, and successful ones like the Xbox gaming console and recently released mixed-reality headsets.
But Surface marks a significant strategy shift for the company since it’s competing with highpriced premium devices from both partners and traditional Windows foes, while also intertwining with its flagship operating system. With little room for error, Microsoft is taking a centre-stage gamble on hardware that seems to be paying off.
The Surface got its start in October 2012 as the Surface RT — a hybrid tablet and the first computer designed by Microsoft, but it had a modified version of Windows 8 that could only run specific apps from the Windows Store. The limitations didn’t resonate with customers, and the company ended up taking a US$900 million writedown, which raised eyebrows externally, but didn’t prevent Microsoft from sticking with the idea.
Panos Panay, Microsoft’s corporate vice-president of devices and the creator of Surface, said the tipping point came just prior to the 2014 launch of Surface Pro 3, a proper two-in-one laptop with a detachable screen, fully functional Windows operating system and premium design.
“We believed it was the product that would help change the way people worked between a tablet at that time and a laptop,” he said in a phone interview. “There were a few moments where Satya (Nadella) was somewhat new to the role at the time and we were really clearly looking at that product saying, ‘This is what Microsoft needs to be in the hardware business.’ We got behind it pretty heavily as a team, literally as a family and as a company. I don’t think we’ve looked back since.”
The Surface lineup has since expanded from the original twoin-one concept to include an allin-one desktop (Surface Studio), a dedicated laptop (Surface Laptop) and a professional-focused hybrid option with more power (Surface Book), which was updated in midNovember with beefier specs and a refined design.
Surface has had an evolutionary journey during a revolutionary period of time in technology, Panay said, since the definition of software keeps widening to include everything from artificial intelligence and machine learning to mixed reality and cloud services. This creates a greater need for hardware to be intimately designed with the software to ensure there is less room for error.
“In this day and age, you cannot make great software without great hardware. It’s so many things coming together,” he said. “We need hardware to be the stage.”
Microsoft has also been ramping up its marketing efforts for its Surface devices as a way to build its brand presence. Its commercials feel trendy and energetic, similar to those from competing companies that make hardware aimed at consumers and creatives — not necessarily something you’d expect from Microsoft.
Cinematic product unveiling commercials have devices slowly moving across the screen as modern, haunting renditions of songs from classic films set the tone: Surface Studio gets a darker version of Pure Imagination from Willy Wonka & the Chocolate Factory; a melancholy filled rendition of You’re the One that I Want from Grease is used for Surface Laptop; and, most recently, a futuristic bass-driven Fly Me To the Moon by Frank Sinatra is the soundtrack for Surface Book 2.
“One of the most important things Satya has ever said as CEO, about a year and a half ago, was, ‘We want people to love our products; we don’t want people to just buy them because they feel they have to,’ ” said J.P. Gownder, vicepresident and principal analyst at Forrester Research. “That has been the ethos that Panos (Panay) has certainly been pushing forward, and you’ll find that it has been successful.”
Microsoft doesn’t break out specific numbers for Surface products during quarterly reports, but Gownder said the products have been successful overall and the line continues to grow in sales and market share.
“It’s been very important for branding, because it said that you can make a high-end Windows machine that people will love and lust after, and it’s been a practical move, because they have made billions of dollars,” he said. “These devices are definitely finding niches among what Microsoft calls creators ... people who are architects, designers, engineers, product designers and people who do art.”
Behind the scenes, Microsoft recently created a prototyping facility for its hardware division inside an unassuming place called Building 87 on the company’s main campus in Redmond. Large open areas are filled with laser and water jet machines to cut all sorts of materials to help nail down a new device’s look and size. Giant rolls of fabric sit next to a table that has pieces randomly strewn about as designers decide on the next keyboard colour; and 3D printers sit near hundreds of buckets of paint, allowing employees to print, feel and see products to get the right shade or texture.
“The energy on campus is awesome. People take pride when they can hold the device in hand,” Panay said. “Satya talks about ‘one Microsoft’ and this sits right in the middle of that culture, because people want to be energized about products that they use.”
Building 87’s on-campus location means various company leaders and software teams can drop by to see the products, understand design details and learn how far the Surface team wants to take the device’s elegance and features, Panay said.
“When you get people energized around it, it’s amazing what they can create and how inspired they get,” he said.
The design team has also noticed that Surface is catching the attention of creative customers and that more and more of their products are being used by various demographics.
Panay said one thing he does as a way to anecdotally measure Surface’s success is walk the length of an airplane when travelling to see how many of the devices are on board.
“I will check every single seat,” he said. “My kids hate it. We get on a plane and I go do a count and then I ask my boy to do it or I ask my daughter to double-check.”
Nadella said there is a “cool factor” attached to the Surface, but that’s not a goal unto itself.
“I want the artist who uses the Surface Book and some of the new tools we put into the Windows 10 Fall Creators update to feel cool, because we want to always be celebrating the people who use our products, whether it is the hardware products in the computer space or the cloud computing,” Nadella said. “In there, our own image changes, but it’s not that we have a goal to say, ‘Let’s change it.’ ”
There has also been a secondary benefit for Microsoft in creating the Surface product line. Other brands running Windows have been forced to step up their design game and many partners — such as Hewlett-Packard Co., Lenovo Group Ltd. and Dell Inc. — are innovating to compete in a higher price tier.
“The direct revenue is important, of course, and now we are looking at somewhere between a $4- and $5-billion runway,” Forrester’s Gownder said. “But Microsoft is trying to do both: have an independently successful product and also inspire a better design among OEM partners.”
Two-in-one devices largely didn’t exist prior to Surface, he added, and “you can kind of smell the impact” Microsoft had on the form factor of devices such as the Dell’s XPS 13. “It’s been about showing the other OEMs what Windows can do when it is at its best.”
Microsoft has been open about this strategy, too. The rising tide lifts all boats in the Windows ecosystem, Panay said, and both the company and its partners gain from Surface.
“Creating the next generation of technology or next bet on our products — the next screen or the next chipset in our pen — these are all opportunities for how we empower our partners to take that technology, use it with that integration of Windows, and bring more to customers around the world,” he said.
Part of the process of bringing Surface to more people has been listening to existing customer feedback and tracking what users are saying.
In the early days, there was no data, just a “paper and a pen,” Panay said. Now Microsoft can track anything customers say about Surface, the positive and negative, both in person or online — including some heavier reading of social networks such as Reddit, Twitter and even Instagram.
“From how the products are being used, how much they are being used, how much they are being pushed, what is being created on it ... We look at everything customers will tell us,” he said. “There are so many indicators and so much data now.”
Panay said the goal for Surface’s product team is to design premium devices that allow users to connect their thoughts and create.
“The product needs to disappear into the background and get out of the way, but it needs to be so beautiful and an object of desire that people want, are proud of and hold,” he said.
In this day and age, you cannot make great software without great hardware . ... We need hardware to be the stage.