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February 2017
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Strategic Acting

Rather than merely innovating or dreaming, Gates took a disciplined approach toward software as a potential source of business opportunities.

He and his partner Paul Allen wrote the first version of Microsoft BASIC just to get in on the ground floor with a pioneer maker of home-built computer kits. Gates quit Harvard and moved to New Mexico to work with the company, named MITS, hoping to make Microsoft BASIC an industry standard. A few years later, Gates and Allen made similar moves to get close to Digital Research, then the leading maker of the most popular PC operating system. They even marketed a translator that allowed Digital Research software to work on Apple computers, as a strategic move to ride on Digital Research’s coattails.

Microsoft’s ties to Digital Research led directly to its big opportunity, with IBM. When IBM couldn’t get Digital Research to provide an operating system for IBM’s new PC project, Gates was there to volunteer for the job.  It didn’t matter that Microsoft had no expertise in operating systems.

Strategic positioning, as well as a little luck–not some “big idea”–gave Gates the opportunity to make billions with MS-DOS for IBM.

Powerful Partnerships

Gates was never too proud to be the second banana. Like a true entrepreneur, Gates saw the “structural holes” in the personal computing marketplace and moved in to occupy them, always in a subordinate spot to the big players.

First Gates positioned Microsoft as the junior partner to the pioneering MITS, and then served in a similar junior-partner role with industry leader Digital Research. The little-known version of Microsoft’s marriage to IBM is that Gates started out as an ardent matchmaker between Digital Research and IBM. Gates eagerly tried to bring the two giants together, content to be the second-class software in a marriage between big players. But when Digital Research and IBM couldn’t tie the knot, Gates stepped into the void, fearing that IBM might quit the PC project altogether. No matter what, Gates respected IBM’s potential power in the PC market and wanted to be a part of it.

The irony is that by the time Gates had gone on to become the richest man on earth, the first two of his “senior” partners were long gone and forgotten. The third, IBM, stopped making PCs in 2004.

And, by the way, Gates never duped his partner IBM into letting him keep the licensing rights to MS-DOS. IBM’s policy was to not hold the rights for any product developed outside its doors, for fear of legal liability. Gates got the same deal on licensing that IBM would have given to Digital Research or anyone else.

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