Microsoft pioneers promising technologies but fails to sustain momentum
Microsoft knows how to spot a shift before it happens. Whether it’s mobile computing, mixed reality, or the rise of AI, they’ve often been first to show the world what’s coming. But being first isn’t enough. What we see again and again is a pattern: early momentum, flashy prototype, media splash, and then a gradual fade. The technology doesn’t disappear, but Microsoft’s enthusiasm seems to. They slow down. Competitors step in and take the lead with more polished, useful tools.
They nailed this pattern with HoloLens. It came before Apple Vision Pro and Meta’s VR push. Microsoft even embedded mixed reality in Windows 10. It had everything, great demos, great hardware, deep platform integration. But when it came time to push into every consumer’s hands, they stepped back. Pivoted to defense, lost billions, and exited quietly. Same story with the web. They integrated Internet Explorer and HTML content deep into Windows in the ’90s and could’ve led the web era. But IE6 stagnated. Meanwhile, Mozilla and Google built faster, safer, cross-platform browsers and claimed the future.
In smartphones, they were early. Pocket PCs were basically early smartphones. But they misjudged what people valued, simplicity, speed, great user experience. And they laughed when Apple removed the keyboard. Didn’t end well.
C-suite leaders need to understand what this pattern means strategically. It’s not just about innovation. Every company has smart people. It’s about pushing past the demo and scaling to mass adoption. Prototypes impress engineers. Final products win markets. From a business perspective, Microsoft teaches a lesson we’ve seen too often: capturing early attention is easy. Maintaining product velocity is the hard part, and that’s where they repeatedly struggle.
Microsoft fumbled its early lead in generative AI through Bing chat
Microsoft moved fast. They put money into OpenAI early and, to their credit, got something tangible out of it, Bing Chat. It was the first major AI search engine. Early users were impressed. It wasn’t just functional; it went viral. People loved chatting with it. It was fun, strange, even emotional. But Microsoft didn’t expect that. They didn’t predict people would spend hours talking to their bot. When it started generating off-road responses, they got nervous, so they shut down deeper interactions and made the model boring.
Game over.
Bing Chat had a window. For a few weeks, it had everyone’s attention. Then it was pulled back just when it needed to get more useful, faster, and more integrated. So ChatGPT and others kept iterating, while Microsoft throttled their most promising product in years.
According to Yusuf Mehdi, Corporate VP at Microsoft, their mistake was not anticipating the depth of interaction users would have. They thought people would tap a few questions and close the tab. That misread cost them momentum. And momentum is everything in this space.
For leaders building AI tools, the lesson is straightforward: don’t launch if you’re not ready to scale. You can’t inspire users and then walk it back. Once that window closes, your opportunity to lead evaporates. Microsoft had the lead and lost it within weeks by underestimating behavior, and then over-correcting. This is about readiness to commit to the path that AI adoption demands, fast iteration, rapid learning, and user responsiveness.
If Copilot is going to succeed, it can’t follow that same path. No more prototypes. Get the product right, give people what they want before someone else does.
Microsoft’s early AR/MR investment with HoloLens faded despite initial promise
HoloLens could have been groundbreaking for consumer tech. Microsoft had the hardware, the demos, the platform, and they got there years ahead of others. Unveiled in 2015, it showed mixed reality done well. The Minecraft demonstration was simple but powerful. Windows Mixed Reality was already integrated into Windows 10, giving partners like Samsung a solid foundation to build headsets. Microsoft wasn’t just in the game, they were ahead.
But then something shifted. Rather than developing HoloLens into a scalable consumer platform, they pushed everything toward the enterprise, training, design, and eventually military applications. The biggest shift came with a multi-billion-dollar contract to supply the U.S. Army with HoloLens headsets. That agreement turned into a problem. Microsoft reportedly lost billions on the project, and in 2023 they handed the entire program over to defense tech company Anduril.
Meanwhile, companies like Apple, Meta, Valve, and Google have pushed ahead on the consumer side. Microsoft had taken an early lead and then voluntarily ceded that ground. The consumer market for extended reality is still in its early stages, which makes the decision to pull back even more critical. The early momentum was lost not because of technological limits but because of shifting focus.
For enterprise leaders looking at AR/MR, this underlines a necessary point: innovation is not just about having the technology, it’s also about how long you’re willing to stay in the market and push it forward. Strategic patience matters. If you exit too quickly, especially in new markets, others will take your place. HoloLens is now mostly remembered as a missed opportunity, with huge cost and little consumer impact.
Microsoft misread the smartphone market and lost ground despite early involvement
Microsoft was ahead of the curve in mobile computing. Well before the iPhone, they had Pocket PCs, small devices running Windows CE with apps and web access. The technology existed. The vision was sound. They understood people would want a palm-sized computer. But the execution wasn’t there. The interface was designed like a desktop system crammed onto a tiny screen. It worked, technically. But it didn’t feel right.
Then came the iPhone in 2007. Steve Ballmer, Microsoft’s CEO at the time, publicly laughed at it. He criticized the missing keyboard and said it would never appeal to business users. While Ballmer dismissed it, Apple pushed forward with a device that redefined mobile interaction. Microsoft scrambled to react. They released Windows Phone with an improved interface, years too late. By that time, iOS and Android had taken full control of the smartphone market.
The takeaway for executives is about leadership vision and timing. You can’t ignore changing user behavior. Dismissing a new idea because it doesn’t fit current business logic is a risk. Smartphones didn’t win because they had better specs. They won because they gave users something simpler, faster, and more intuitive. Microsoft misread what people valued and moved too slowly to adjust.
This isn’t ancient history, it still influences how Microsoft approaches new platforms. C-suite leaders should remember that early presence in a market means nothing without real adaptability. The mobile market evolved faster than Microsoft did. And that cost them more than just phones, it cost them an entire generation of platform relevance.
Microsoft envisioned a powerful web early but fell behind due to poor execution and stagnation
In the late 1990s, Microsoft had a strong read on where the web was going. With Internet Explorer 4, they didn’t just release a browser, they built the web directly into the desktop. Technologies like Active Desktop and ActiveX showed they saw potential in making web applications part of everyday computing. At the time, they were ahead of the competition. No one else had that level of integration between browser and operating system.
But they made critical decisions that closed them off from the wider web community. ActiveX only worked on Windows. IE was tightly tied to the Windows ecosystem. Instead of betting on open standards, they pushed their proprietary implementations. That gave them more control in the short term, but deteriorated trust and security over time.
Then they stopped moving. IE6 was released in 2001 and didn’t get a new version until 2006, five years later. That delay gave Mozilla Firefox and, not long after, Google Chrome the space to completely reshape web browsing. Microsoft assumed their position was secure. It wasn’t. Their browser became outdated quickly. Developers moved away. Users followed.
For business leaders, the point here is about pace and commitment. Innovation has to be maintained. Microsoft rightly predicted the web’s role but failed to invest in its evolution when it mattered. Initial vision is not enough. Once the market moves, companies need to stay aligned with new expectations and standards, or they lose control of the ecosystem they helped define.
This misstep didn’t just cost them users. It weakened Windows as a center of digital experiences at a key moment when the web began taking over. The eventual decision to rebuild Microsoft Edge on Chromium, the same engine used by Google Chrome, was a necessary move, but it also confirmed they had lost the browser wars.
Copilot’s future success hinges on Microsoft overcoming its prototype-first, retreat-later legacy
Microsoft is pushing Copilot as more than a feature, it’s being introduced as a consistent digital assistant, integrated across Microsoft services. If done right, it could become central to how people interact with systems like Windows, Office, and even GitHub. There’s a clear ambition to make it indispensable within the Microsoft ecosystem. But the challenge is deeper than engineering. The company has to demonstrate that it’s ready to follow through this time.
Historically, Microsoft launches early, catches attention, then relinquishes the lead. The pattern is visible across multiple product categories: mobile, browsers, mixed reality, consumer search. And each time, the same issue emerges, strong early execution followed by fragmentation, reduced investment, or slow iteration. Copilot cannot afford similar treatment if Microsoft wants users to treat it as indispensable.
AI adoption today is a fast-moving space. Users will compare every interaction with Copilot to whatever product emerges next from OpenAI, Google, or another well-funded startup. If Microsoft repeats the Bing Chat pattern, early lead followed by hesitation, it won’t matter how powerful Copilot is at launch. What matters is how much better it gets within weeks and months.
Leadership here means long-term commitment. It means listening to how people actually use the product, not just what Microsoft expected when it designed it. No more pulling back when user behavior surprises you. The company can’t scale Copilot while keeping it in safe-mode.
That’s the opportunity. Microsoft has the infrastructure, ecosystem, and capital. What’s often missing is that sustained, focused push beyond version 1. If they get that right this time, Copilot has a real chance to redefine human-computer interaction. If not, it becomes another blueprint for competitors to execute better.
Key executive takeaways
- Microsoft’s follow-through gap: Microsoft consistently leads with early tech prototypes but fails to sustain momentum. Leaders should prioritize long-term product execution over early innovation to avoid losing ground to faster-moving competitors.
- Bing chat’s missed moment: Despite launching the first AI-integrated search engine, Microsoft’s overreaction to user behavior stunted Bing Chat’s growth. Executives should ensure AI products are flexible and scalable to sustain user engagement post-launch.
- HoloLens as a cautionary example: Microsoft’s pivot from consumer AR to military contracts led to significant financial losses and missed market leadership. Decision-makers should avoid abandoning emerging consumer markets too early, especially when holding a technology advantage.
- Smartphones and strategic rigidity: Microsoft recognized mobile computing early but dismissed pivotal shifts like touchscreen UI, allowing Apple and Google to dominate. Leaders must remain open to market shifts even when they challenge existing assumptions or legacy structures.
- Web stagnation and ecosystem loss: Microsoft’s decision to lock web technologies to Windows and delay browser development allowed open, faster platforms to take over. Enterprises should support open standards and maintain iteration speed to stay relevant in platform-centric markets.
- Copilot’s critical inflection point: Microsoft’s Copilot effort must avoid past missteps by committing to continuous improvement post-prototype. Leaders should prepare for quick iteration cycles, user-driven updates, and consistent investment to keep AI experiences competitive.
