Photographer: Elaine Thompson/AP Photo

Kinect’s Rapid Decline Shows Microsoft How Not to Pitch HoloLens

With the upcoming headset, the company hopes to avoid the small thinking and corporate infighting that ultimately doomed its predecessor.

Microsoft has a shiny new piece of hardware it promises will revolutionize the way people interact with technology. It's called HoloLens, and it aims to break down the barriers between user and computer through motion and voice control. Microsoft's pitch for this new headset in development sounds a lot like the one it used for the Xbox Kinect camera, but the company's strategy differs in big ways. The goal is to give the new product the staying power its predecessor didn't have.

After the Kinect hit stores in November 2010, the motion-sensor game accessory was, by some measures, the fastest-selling consumer electronics product in history, with more than 10 million units. Despite making the Kinect a centerpiece of Microsoft's Xbox One console, gamers and software developers quickly lost interest.

While the technology captured people's imaginations and provided some entertaining gimmicks, the Kinect failed to become the all-purpose computing device many inside and outside Microsoft envisioned. The company's ambitions for the product started out too small, and by the time it was ready to go further, the different parts of Microsoft were unable to come together and create something with lasting appeal.

The result: This holiday season will be without a major new game designed for Kinect, and on Thursday, Microsoft killed off a key feature of the device. As the company shifts focus to the HoloLens, an augmented reality headset, Microsoft will need to apply lessons from the rapid rise and fall of the Kinect. For one, Microsoft Chief Executive Officer Satya Nadella is getting groups from across the company to collaborate on HoloLens projects rather than working in fiefdoms. He's also introducing the computing platform early to companies from a variety of industries to develop specialized applications that could be ready at the outset.

One of the biggest reasons for the Kinect's fast decline was Microsoft itself. Under Steve Ballmer, Microsoft's various product groups mostly worked independently of one another. The Kinect was designated as a gaming product to start. A version compatible with Windows didn't arrive until more than a year later and required separate hardware. "Ultimately, Microsoft couldn't connect the dots," said Brian Blau, an analyst at research firm Gartner.

Steve Ballmer, the former chief executive officer of Microsoft, delivers a speech during the 2011 CES.
Steve Ballmer, the former chief executive officer of Microsoft, delivers a speech during the 2011 CES.
Photographer: Andrew Harrer/Bloomberg

Nadella, who replaced Ballmer as CEO last year, instituted a reorganization in July designed, in part, to bring previously unrelated teams together. Terry Myerson, an 18-year Microsoft veteran who was put in charge of the combined Windows and devices division, said the structure should benefit the HoloLens, particularly as it pertains to making an impact beyond games. "Steve ran the company a certain way, which achieved incredible results," Myerson said. "One thing it didn't achieve was sharing across divisions. Xbox had this amazing asset in Kinect, and it never really was embraced by the Windows division."

There's no guarantee Nadella's plan will succeed. While HoloLens benefits from tech built for the Kinect, he wouldn't be the first Microsoft chief who failed to capitalize on a promising project incubated within the company. The HoloLens hype cycle has begun early, even though the $3,000 development kits won't ship until early next year.

Microsoft has once again managed to drum up excitement for a new kind of technology. This one centers around augmented reality, which overlays graphics and animations on the wearer's real-world view of the room he or she is in. A well-funded, Google-backed upstart called Magic Leap is working on a similar product. Meanwhile, Facebook and Sony are getting closer to releasing virtual reality headsets, based on a slightly different technology that creates realistic, immersive environments the wearer can explore. Even if Microsoft's take on augmented reality produces a superior product, coming too late to the race could make it difficult to catch up.

No matter what the result for HoloLens, Blau said Microsoft's investment is worthwhile. "These are technologies that are not going to go away, even if the current form isn't the one that takes off," he said. In particular, hand gestures feel like a natural way to interact with computers, Blau said. He'll have to wait for the HoloLens. Microsoft released an update for the Xbox One on Thursday that removed the ability to navigate menus using body movements, which was a longtime selling point of the Kinect. Microsoft said the decision was made "to focus on fan-requested features."

Despite focusing almost solely on entertainment at the beginning, the Kinect eventually lost favor even with gamers. Many people shunned the Xbox One initially for its high price, resulting from Microsoft's insistence that the Kinect be bundled with every console. The company reversed course, and console sales rebounded. Kinect sales didn't. For the holidays, Microsoft is selling a console bundled with Kinect and a few older motion-controlled games, but the package isn't expected to move the needle.

Gaming aside, the Kinect couldn't make the transition to other industries. Attempts to break into retail, as a product scanner or virtual fitting room, and auto dealerships, to introduce shoppers to upcoming models, were short-lived.

Contrast that with the significant focus Microsoft is placing on corporate users with the HoloLens, said Blau. Many of the key people working on the project came from the Kinect team, but their approach this time is different. Sure, it'll play games—the Minecraft demo is especially compelling—but the device will also support immersive video conferences through Skype and software tailored to specific fields, such as architecture and medicine. NASA is working on an app to explore the surface of Mars and planned to send HoloLens prototypes for astronauts to test in space. (The first pair was on board the SpaceX rocket that exploded.)

Myerson, who oversees the HoloLens team at Microsoft, expressed just as much excitement for the nerdier, niche HoloLens apps as the more broadly appealing aspects of the technology: "There's just fantastic, smaller-scale enterprise interest."

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