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File this under “Can’t Win For Losing.”

xboxMicrosoft says it was listening to its customers yesterday afternoon when it reversed some of its most controversial Xbox One policies, including the requirement for a daily Internet check-in and restrictions on game trading. And those customers were speaking very loudly.

Listening to customers is inherently good, right? So any criticism of Microsoft now is not entirely fair. I hereby acknowledge this reality to everyone about to take me to task for what I’m about to say.

But come on, people. This is not how great products are made. And this will make it tougher for Microsoft overall to do anything bold, controversial and game-changing in the future.

Microsoft’s biggest challenge coming out of the E3 video game convention — apart from Sony’s jabs — is that it wasn’t able to truly demonstrate the upside of the policies that it was implementing. The company did talk a lot about the benefits of cloud integration — including the ability to access games from any Xbox One when logged in, the lack of waiting for updates, and the ability for developers to create immersive, persistent worlds using Microsoft’s cloud system.

“There are times when what is really needed is incremental improvement of a product,” wrote Microsoft’s Frank Shaw last week. “There are companies who play that role in gaming right now. And there are times when a vision for the future demands a leap. That’s what we’re doing with Xbox One.”

The problem is that the console is months away from release. Microsoft wasn’t able to let people take that leap and see the things they’d be getting in return for some of the restrictions.

Xbox-One-Don-MattrickI’m not saying that the policies would have been worth it. I simply don’t know. That’s the type of assessment that comes after using a product for days, weeks or more. This is not the Apple Maps fiasco, where the backlash was based on real-world customer pain. It’s also not exactly Windows 8.1, where Microsoft is making changes after seeing how people use the product in their daily lives.

What’s clear is that, up until yesterday afternoon, Microsoft was saying that the tradeoffs were going to be worth it.

Now we get Xbox chief Don Mattrick telling us, “These changes will impact some of the scenarios we previously announced for Xbox One.”

Microsoft had to know these changes would be controversial, and that there would be a backlash. Did this new vision for cloud gaming come from a place of genuine conviction inside the company? If not, then why did the company do this in the first place?

And if so, why wasn’t the company able to stick to its guns, suffer through the short-term challenge, get the product out in the market and make the long-term bet for the good of gamers and its own business?

The answer is that it couldn’t afford to. Look at the rest of Microsoft’s consumer business. Windows 8, Windows Phone and Surface are not exactly setting the world on fire. Microsoft needs Xbox One to be a hit. Microsoft CEO Steve Ballmer and the rest of the company’s leadership — in the midst of a national surveillance controversy and their own internal restructuring drama — seem to have decided that the short-term backlash wasn’t worth it.

As Jeff Bezos at Amazon likes to say, sometimes success means you have to be “willing to be misunderstood for long periods of time.”

Flexibility is nice. But so is tenacity — if you truly believe in what you’re doing. And if you’re putting things like this out there without truly believing in them, then you’ve got a bigger problem as a company.

Poll: Now will you buy an Xbox One?

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