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From Xbox to Zune

We began this introduction with an example of how empathy can help individuals to see the world in a completely different way. We end with an example from one of the largest companies on the planet, and how empathy helped it succeed in a radically new venture.

By the spring of 1999, the game console business had become far too big for Microsoft to ignore. Company executives had watched as pioneers like Atari, and then Nintendo, developed the fledgling industry, built a fan base, and made it financially viable for both console manufacturers and game developers alike. But then, in the mid-1990s, Sony took the business to a whole new level. Sony had leveraged its vast technical capabilities to make PlayStation a worldwide success. Now, Sony was readying the launch of PlayStation 2. The PS2 was much more than the toys that had come before it. The console was a high-powered entertainment engine capable of playing DVD movies, importing digital video, and connecting to the Internet. And it did it all without using a single line of Microsoft programming code. Having successfully fought off rivals like IBM, Apple, and Netscape, Microsoft now faced the prospect of irrelevance as younger people came to spend more time on their video game consoles and less time on their PCs. Microsoft had little choice but to act.

The company was starting at a distinct disadvantage. Sony was the most powerful consumer electronics maker on the planet. It had years of experience to build on and a vast library of games that were hugely popular. Microsoft, by comparison, had relatively little experience in designing and selling hardware. The company wouldn’t be able to put out its console until late 2001, by which time PS2 would likely be in 10 million households. More troublingly, Microsoft’s experience in operating systems and office applications left it with very little feel for the new business.

To win, Microsoft was prepared to spend billions of dollars from its vast cash reserves without the promise of seeing a profit for many years to come. Recognizing that it was entering unfamiliar territory, the company set about assembling a team of engineers, designers, and marketers and charged them with creating the ultimate game console.

The developers decided that they shouldn’t try to be everything to everyone. And they weren’t going to focus on kids. Unlike Nintendo and Sony, Microsoft wouldn’t build a console that would let prepubescent moppets play with magic mushrooms and fairy princesses who needed to be rescued. The team envisioned a game system that would serve up playable versions of action movies, with testosterone-fueled experiences that were even more immersive than any summer blockbuster. The new machine would be for hardcore gamers—the kind of guys who loved to kick some ass. Guys who spent hours playing intense, complicated, and sometimes violent computer games that got their blood rushing. Guys like...themselves.

Two years later, Microsoft launched the Xbox, which used the same electronics as a high-end PC, including a built-in hard drive. Its case was huge, knobby, and eye-scorchingly green and black. Xbox’s signature game was Halo, an intense first-person shooter game that starred a masked hero known as the Master Chief who traveled across galaxies to repel hostile aliens.

Xbox was an overnight sensation in the United States. More than 5 million copies of Halo were sold, making it the top-selling title of its generation. More important, Halo helped define the Xbox as the must-have console for hardcore gamers. Although Sony was still able to outpace Microsoft on the strength of PS2, Microsoft used Xbox to shift the momentum. Xbox’s next version, the Xbox 360, outpaced Sony’s new PlayStation 3 in the United States by a margin of two to one. Microsoft had successfully found a way to compete with Sony. Less than a decade after entering the market, Xbox accounted for ten percent of Microsoft’s total revenue and an even greater percentage of its top-line growth.

Xbox was so successful that Microsoft turned to the same scrappy team of developers when Apple’s iPod became the best-selling portable music player since the Sony Walkman. If the Xbox guys had done so well against Sony, surely they could do the same thing to Apple. On an incredibly tight deadline, the team that worked magic on Xbox threw its collective might behind an iPod-killer. What emerged in Fall 2006, however, barely dented Apple’s armor. The Zune was a boxy gadget that looked like a thicker iPod, albeit in a not-so-stylish brown case. The interface was cumbersome and seemed designed for no one in particular. As one acid-tongued reviewer described it, the overall experience of using a Zune was about as pleasant as having an airbag deploy in your face. Not surprisingly, the Zune managed to sell about 2 million units in its first 18 months on the market. Apple sold more than 84 million iPods during that same period. Apple’s dominance in the music player market remained untouched.

Why was the Microsoft team able to create such a compelling video game system only to churn out a mediocre portable music player? What makes a team deliver bravura performances one day and a fiasco the next? Here again, empathy played a huge part. As one member of the team confided, “The biggest challenge with Zune was trying to figure out who we were building it for. With Xbox, we knew those guys. Hell, we were those guys.”

Microsoft succeeded with Xbox because it was able to leverage the empathy of its development team. Unfortunately, that empathy wasn’t transferable. A brilliant connection with hardcore gamers didn’t prepare Microsoft for the challenges of understanding Zune’s market space. Being a reflection of one type of customer is certainly a quick and easy way to connect with a particular group of people. But to thrive over the long term, organizations need to move beyond their own views and discover what’s happening in the rest of the world. They need to step outside themselves to see the world through other people’s eyes. People are wired to care. Organizations need to be wired to care, as well. When that happens, the effects of empathy can be profound. Companies prosper. Communities thrive. And we all have a better day at work.

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