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Microsoft and the art of distributing something new.
Full-time employment is leveraging your employer's distribution. So is writing for a publication, recording under a label, releasing software in a bundle, or making the first app for a brand-new platform.

by Matthew Guay · August 29, 2022 · #startups

The first time Microsoft sold a spreadsheet, it didn’t even sell it itself.

The spreadsheet standard had been set by VisiCalc, that first killer app for PCs. Microsoft had to follow, fast.

Which is what it did best. If VisiCalc and Lotus 1-2-3 had conquered the DOS-powered Apple II and IBM PC market, Microsoft would focus on everything else, shipping over 100 versions of Multiplan, its first spreadsheet, on every ’80’s computer imaginable. Want a spreadsheet on your company’s AT&T Unix computer or your Commodore 64 back home? There was a Multiplan for whatever computer you wanted. Embrace all the platforms; surely one would win.

But how do you sell 100 different versions of the same thing, in the pre-internet days when literal shelf space was at a premium? Distributors. In the earliest predecessors of today’s App Stores, the early personal computer days were dominated by software distributors. Much like book publishers, they’d pay an advance for software, then burn it to disk and package it in boxes and place it on store shelves and magazines. The publisher had the relationships, you had the software; it made sense to join hands.

So Microsoft, then the upstart trying to get its spreadsheet running everywhere, turned to Human Engineered Software who, for a brief window in the ’80’s, was tied with Brøderbund (today part of Ubisoft after a chain of acquisitions) in software sales. Microsoft built the software, and leaned on Human Engineered Software to sell it. Better distribution, perhaps, could give them a leg-up on VisiCalc.

In the end, even that wasn’t enough, when the competition was popular enough to sell computers on its own. Microsoft’s Multiplan was just another spreadsheet in a sea of copycats. The next time around, with a new spreadsheet christened Excel, the nascent software giant built the then-standard spreadsheet features into one of the first graphical interfaces on the then-new Macintosh and its own new Windows, and the rest is history.

It’s who you know

Excel’s merits and the first-mover advantage of launching on the most popular new computer of its time may have won the day on their own. But Excel also had a powerful cheerleader: Steve Jobs.

The Macintosh needed killer apps of its own when it launched, and Microsoft was ready to build them. “Jobs became so enamored of Excel,” wrote Walter Isaacson in his Steve Jobs biography, “that he would make a secret bargain with Gates: If Microsoft would make Excel exclusively for the Macintosh for two years, and not make a version for IBM PCs, then Jobs would shut down his team working on a version of BASIC for the Macintosh and instead indefinitely license Microsoft's BASIC.”

And the original deal was that Apple would distribute Excel and other Microsoft software, licensing a copy for each Macintosh sold. Microsoft would leverage Apple’s popularity and Steve Jobs’ enthusiasm to make Excel the new spreadsheet standard.

In the end, the tables turned. Jobs backed out on distribution, Gates decided Microsoft could make more money selling the software directly, and the rest is history. A decade and a half later, it was Microsoft with the distribution of a world of offices running on Office, and Apple that would want to leverage that to help sell their new iMacs.

The Microsoft distribution moat is still massive today, evidenced by Microsoft Teams’ quick uptake. Slack and Discord each have their advantages, but it’s tough to compete when Microsoft can push Teams for free to its 180 million active Office 365 users.

Distribution is king

Startups live or die on coverage because they have little else to leverage. No audience. No moat. When you’re fighting everyone else’s momentum, you have to be unique.

That’s why startups broadly have to be “game-changing,” dramatic, and promise the sky. You could ship a good enough chat app when you’re leveraging Microsoft’s distribution; you’d better ship the best chat app of all time if you’re having to shout from the rooftops to get people to try yours.

So you partner and use your investors’ and integrations’ networks to broaden your distribution. You’ll do anything, build for any new platform to get a bit of attention. If you’re Microsoft you could ignore the iPhone, at least at first. If you’re a startup, something new like the iPhone could be your very first break, your chance to be first.

And if you’re lucky, one day you’ll start seeing other startups using their integrations with your product as a distribution hack. That’s when you’ll know you’ve won at some level, along the lines of the Bill Gates line where “A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it.”

And it’s not just startups that face this issue. Every independent contractor and freelancer, every aspiring author and musician, and everyone with a new YouTube channel and blog faces the same challenge. It’s distribution, all the way down. The people with a million followers can publish anything and it gets noticed. Those just starting out could have the best ideas, but they need someone with distribution to notice to get their five minutes of fame.

That’s why it’s easier to make something approximating your value at a day-job, at least at first. Your employer has distribution, a way to sell your skills in a product, and that’s worth the tradeoff of less freedom over your working hours and less leverage over your income. Same goes for publishers and labels. “Publishers are like venture capitalists for writers,” wrote Nathan Baschez in a recent article about blogging platform Medium. “They make early bets and give people a chance.” Same goes for eCommerce; Etsy's and Amazon's fees might make a Shopify store look tempting, but it's far easier to sell your real-world goods on a platform where people are already searching for products like yours. Real-world retail is the same—it can be worth giving up 50% of your margin to get your product in a store.

If you make it independent, if you turn your startup into a success or build enough following to follow your creative dreams, you’ll have to solve distribution and build an audience large enough to support you along the way. And if you really win, you’ll build enough distribution to spare, enough to lift up an ecosystem along with you.

Building distribution

So how do you get there? It's partly what Microsoft did in its earliest days, building for every platform and using others' distribution while they were building an audience of their own along the way:

Use someone else’s distribution. You might make more money eventually on your own blog or by publishing on your own, but the distribution of Substack or Medium or YouTube or the Kindle Store or the App Store might make giving up 30% or more of your revenue worthwhile, at first. Build on a platform first, for distribution. You can always move later.

Build an audience. Start with the platform audience, but find a way to keep it. That’s why email lists are so popular; they’re a portable way to stay in touch.

Make friends. Quote other people’s writing. Invite others on your podcast. Integrate your app with someone a bit bigger. That’s when friends of friends start noticing, and you can grow together.

Build new stuff. You won’t have time to try every new platform when your product’s grown. But for now, make wise bets. If there’s something big and new, go try it. If they get big, you might get big together. If not, you might win a few new friends along the way, and move with them to the next big thing.

Stand for something. Do something unique. “If you stand for nothing, Burr, what’ll you fall for?” as Hamilton asked. It’s trite to be the “Uber of X” but it’s better than nothing. At least people will remember you. You can morph it along the way, until people say they’re the you of X, and then you’ve won.

Give others a leg up. Promote others. Tell your customers’ story, and praise your suppliers, and build ways for others to build on your platform. Become an ecosystem, somewhere others come to get their own bit of distribution.

And that’s where it all starts over, as the next big thing kicks off on your platform.

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