Why did Microsoft miss the internet so badly on search, on cloud applications, etc.? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.
I am not sure I agree with the premise completely. Microsoft did fall behind, and it would be fair to say that it has failed, on search. I am not sure I would conclude the same about cloud computing. That part of their business is growing and is profitable. It is also to remember that in the first generation of Internet technologies Microsoft had strong positions. For example at one point Microsoft had dominant market share with IE on the browser market, but that has eroded.
That said, if I were to respond to the general view that Microsoft was not as successful in the Internet as the desktop era before that, I'd say that the Clay Christensen of disruptive innovation has a lot to do with it. Without going in to all the details of that theory, the basic idea is that incumbents find it hard to respond to new entrants, especially in new markets, because their existing business models are profitable and the business logic of trying to chase new entrants and new markets can often be less profitable and so against their natural and best inclinations. This asymmetric willingness to pursue new opportunities with vigor is rational - in some sense - and real. I think Microsoft had a lot of reason to hang back on the Internet opportunities and they may have suffered the innovators dilemma fate as a result.