The perks of not being the leader: the case of Microsoft Teams and Slack
A technology is labelled disruptive when it ends up replacing the technology that dominated the market prior to it. Considering the case of the messaging platform Slack: with over 12 million users worldwide, Slack has drastically changed the habits of many companies. This business communication platform has wiped out emails for direct messaging, and even Skype for videoconferencing. However, over the past few months, Slack has noticeably lost ground to a similar solution: Microsoft Teams.
A lot less widespread in the first place, Microsoft Teams has succeeded in drawing lessons from the rise of Slack to build its own solution and has now outgrown it in terms of number of users (20 million up to date). How has American giant Microsoft taken advantage of Slack’s success without spending a huge investment? What are the advantages of this strategy, and for what type of company is it most likely to work? What are the lessons that entrepreneurs can learn from this?
Growing tensions between Slack and Microsoft Teams
Navigate on Microsoft teams (Source)
On November 21st, Slack reacted to Teams’s latest ad by tweeting a provocative video, which pointed out that the ad was (almost) the exact replica of a former Slack ad. Slack openly displayed its hostility towards Microsoft, from the video’s caption – “ok boomer” – to its closing – "Choose a better way to work”–.As a matter of fact, beyond the ad, Teams has duplicated many of Slack’s key patterns and assets (direct messaging, channel structure, task management, and videoconferencing…).
Slack Platform (Source)
Despite its first-mover position in terms of collaborative platforms, Slack is now facing a steady decrease of its stock value on the Nasdaq (since last June). Moreover, Microsoft’s recent announcement doesn’t help to solve the problem: Teams’s user-base has now reached the 20 million mark, while Slack’s has about 12 millions.
“Our checks in the field indicate Slack will have significant difficulty further penetrating the enterprise given the significant competitive offering from Microsoft’s [Teams] product that could slow growth going forward quicker than the Street is anticipating”, Wedbush analysts Daniel Ives and Strecker Backe said in a report.
Microsoft: a discrete but effective strategy
In 2016, Microsoft had seriously considered buying Slack, but was discouraged by the lofty 8 billion dollars that Slack was asking for. Hence, Microsoft chose a different approach to get its hand on this compelling product. As collaborative messaging solutions have been gaining popularity since 2013 thanks to Slack, Microsoft kept a close eye on the technology’s evolutions. Through their watch, Microsoft managed to keep up with updates, with little effort and investment. It is only after Slack was quoted on the market – which confirmed the technology’s potential – that Microsoft started investing massively. This led them to develop their own platform: Teams. Thanks to its enormous resources, Microsoft managed to catch up on Slack, and, eventually outnumber its user base. All in all, Microsoft successfully took the lead on radical innovation, without even being first on the subject, or taking risks. Their example shows that companies do not always need to be the first to invent a product, which often comes with risky investments.
Could this strategy work for your company?
Far from being an isolated case, Microsoft’s example is the latest illustration of an already well-defined innovation strategy. At Stim, we have developed a specific tool to describe such innovation strategies. In our terms, regarding Teams, Microsoft would be a “Derisker”; in other words, a company which focuses its effort on inevitable innovations while closely monitoring any technology that could threaten its business. A company’s innovation ambition profile can be defined as its “raison d’être” in terms of innovation, the purpose behind its willingness to innovate. This ambition is often strongly driven by the company’s strategic issues and by its leader’s will. Having a clear innovation strategy prevents scattering the company’s resources and helps to stay ahead of the market. Therefore, for each company, it is crucial to define a clear innovation strategy, in accordance with its ambition profile.
Each profile comes with its own type of innovation activities, level of effort and investment. Through these lenses, Slack could be described as a “Game-Changer”. Game-changers are characterized by their bolder approach: they bring up radically new concepts that deeply transform their industry’s landscape. To stay ahead of changes in technology, market-place and use, they put most of their effort into the early phases of the innovation process: creating new concepts, testing their potential (technical feasibility, cost, viability, scalability,...). These testing phases are often high in costs.
On the other hand, as mentioned earlier, in the case of Teams, Microsoft has behaved as a “Derisker”. Companies that fall in this category solely focus their innovation efforts on idea generation and technological watch, and only take action when they have identified a high-potential opportunity or a serious threat, thussaving their resources.
In practice, a Derisker focuses on their technological watch activities and analyses the success of their opponents’ early tests. Only if a clear market opportunity is identified do they leverage serious investment while mobilizing internal resources en masse. Microsoft has successfully played this gamble: with minimal investment, they caught up on their opponent within only two years. However, this would have been much harder without the help of Microsoft’s solid acquisition channels. With every Office 365 Business download, Teams is included as a default component. In other words, Microsoft has built on one of its undeniable, previous successes in order to quietly promote a more recent innovation. As a consequence, in spite of its lack of novelty compared to Slack, Teams was eventually adopted by more users. Indeed, Microsoft’s success is arguable, as many users have downloaded Teams without even knowing and do not count as active users. Last October, when being interviewed in Les Echos, Slack founder Stewart Butterfield asserted that he was not concerned about Teams, as most people who googled it were actually looking for a way to uninstall it. Beyond this debate, two key elements remain important to have in mind :
With the appropriate innovation ambition profile, it is possible to conquer a market without being first to innovate – with less risk-taking and effort
Making the most of one’s acquisition channels can be an effective lever to catch up on the competition
How can you learn from Microsoft’s example to maximise your own chances of converting innovation into a success? How could you do so with as little risk-taking and effort as possible?