Peggy Johnson left Microsoft to become CEO of Magic Leap in August of 2020. It might seem like an unconventional job swap. Microsoft had one of its best years ever due to the flood of businesses and individuals looking to its tools to help them stay connected and productive during the pandemic. And last week it dethroned Apple as the most valuable company on earth. 

Magic Leap, at the time, was mostly known as the company that raised a ton of money (reportedly more than $2 billion) before finally releasing a pair of augmented reality (AR) glasses in 2018 that almost no one bought. 

It wasn't that the hardware was bad, but the experience wasn't great. There weren't a lot of practical applications for AR. It's hard to convince people to wear a bulky headset just so they could see digital characters dancing around their living room

That's not to say the company didn't seemingly have a lot going for it. Besides raising all that money, it had brought on Neal Stephenson -- the author of Snow Crash who coined the term "metaverse" long before Mark Zuckerberg ever thought about renaming Facebook to co-opt it -- as its chief futurist. 

The problem was, no one really understood who the product was for, or why they would put on glasses that made them look like a character in a Mad Max movie.

Still, Johnson saw something that made her take on the challenge. I spoke with her Tuesday at WebSummit, and she told me she was impressed with the technology. It just needed focus.

"The first thing I realized is technology is very good," Johnson says. "There was nothing broken. It was a matter of focusing the company, and focusing them even more than just to all of enterprise, but to a handful of verticals."

Where the original Magic Leap headset was sold as a consumer product, the company recognized that wasn't a market that was ready to spend money on a device it didn't understand, especially when it didn't do much more than what seemed to be a gimmick. The company defended its technology but also realized that the most logical application was in enterprise.

Johnson narrowed that focus even more, to applications where AR makes the most sense, like health care, manufacturing, and defense. It's a lot easier to convince a doctor training for a complex surgery to wear a headset in the operating room than to get people to put them on when they go out with friends. 

Along with a new focus, the company has also refined its hardware, announcing that Magic Leap 2 will be coming next year. 

"We've got a whole focus on smaller, lighter, faster," Johnson says. "It'll be kind of all-day-everyday wearable. You can put it on, it won't heat up your head or be too heavy. We took all that feedback and made the product something that you could wear as a front-line worker or for the entire day. You'll still see your physical world, but we're placing useful digital content into your physical world."

Of course, a bigger challenge for the company is that it's sort of stuck between two giants in the space -- Meta (the company formerly known as Facebook) and Microsoft, which makes its own AR glasses, the HoloLens. Facebook's VR is still mostly targeted towards gaming, despite its recent push to get people to wear its devices to attend virtual meetings.

As for Microsoft, which has a massive enterprise sales force that can sell headsets to companies that already use a half-dozen of its products, Johnson has a plan for that as well: leveraging relationships with pretty much everyone else.

 "We're clearly a smaller company than Microsoft, which is really the only other device in our category -- that highly immersive AR -- so we needed partners," she says. Magic Leap is partnering with Google, Cisco, VMWare, and others, leveraging their sales teams to bring the product to existing enterprise customers who would benefit.

That's a smart strategy when you're up against the largest company in the world by market cap, and one that already has a foot in the door with millions of businesses. In fact, it's a great lesson for any business: Make the best product you can, hone in your focus on the customers for whom it makes the most sense, and then find and partner with other companies that have the same customers you want to reach. 

"Those are the type of companies that we're bringing on to our ecosystem that I can leverage from their own brand and their go-to-market," Johnson says. "I don't have to have a field sales force. That's how I want to compete with Microsoft." If you had heard the determination with which she told me that, you'd believe her too.