What Microsoft Really Needs to Learn From Kinect

Microsoft's (MSFT) Kinect game controller for the Xbox 360 just dethroned the iPhone and iPad by becoming the fastest selling consumer electronics device, with 10 million units from early November to January 3. That's roughly double the sales the company had expected.

The amount actually looks as though it will make an official record, according to Guinness World Records. However, on its own, that is meaningless. Even if Microsoft actually made the $1.5 billion realized at retail, and it will get considerably less than that after discounts to sellers, that would be a small portion of its overall revenue. What could make a difference is if Microsoft actually paid attention to what it had accomplished and more widely apply it to do better in selling to consumers.

Having a hit is always good in business. But you can no more depend on the luck of having the right product in the right place at the right time than you can on finding twenty dollar bills on the sidewalk. Apple (AAPL) has shown that in spades, with one year of product hits after another. There are 5 reasons:

• Apple tries to understand the psychology of consumers and what motivates them.
• The company has a design ethos that fits in well with consumer desires.
• Apple looks to deliver what consumers really want, not what they may say they want and not what industry "experts" assume is the next big thing.
• Creativity rules at Apple.
• The company is willing to kill its darlings and turn into a new business when that becomes necessary.

Microsoft needs to make better use of this approach in all of its consumer product lines to surprise people with a delightful experience. However, the company must still come to grips with the last two points. Too often entrenched interests in Microsoft have killed innovation. Until executives learn that its future is with innovation, not what has sustained the bottom line in the past, Kinect will just be another flash in the pan for Microsoft.

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