How Microsoft Works

A GUI Opportunity

Apple's world-changing Macintosh hit the market in 1984 and was the first commercially successful PC to use a graphical user interface (GUI), making it user friendly. We use GUIs to interact with computers and networks today.

Bill Gates immediately saw the Mac as both a danger and an opportunity. The GUI could popularize computing on a level beyond the mass market created by the IBM PC and its clones, making it a threat to Microsoft's franchise. It also presented an opportunity to help Microsoft finish off its current opponent, IBM, and ensure its supremacy for years to come.

IBM and Microsoft had been embroiled in a battle over the PC's next operating system. IBM was collaborating with Microsoft on O/S2, a successor to DOS. IBM needed something other hardware makers couldn't clone. Microsoft played along until it became clear that the companies were at cross-purposes: Microsoft was trying to exploit IBM's market position and IBM was trying to put the DOS-genie back in the bottle. This precipitated a break, and Microsoft was on its own.

If Microsoft could create its own GUI to work on top of DOS, then Bill Gates was killing two birds with one OS. The impact of Windows from a business perspective was as strong as the Mac's impact from a user's perspective. Almost overnight, a boring, obsolete PC could become Mac-like at a tenth of the cost of buying a Mac.

Bill Gates had again adapted to re-define the computer market, and just in time. Just before Windows 95 launched, a company called Netscape went public. Microsoft also had to deal with another oncoming threat: the Internet. How would Microsoft deal with an open global network, seemingly powered by altruistic creators bent on giving their products away?

Easy, Microsoft said -- we'll give our stuff away too. The "browser wars" didn't last long and were particularly one-sided, with Internet Explorer ultimately triumphing over Netscape.

In the next section, we'll look at what gives Microsoft the decisive advantage in nearly every commerce endeavor that it undertakes.