After an anticlimactic seven month CEO search, Microsoft has not just elevated well-liked insider Satya Nadella to the post, but shuffled all the major players in its executive leadership. Founder and former CEO Bill Gates has returned to a day-to-day role as a technical advisor to Nadella, with Gates’ role as Chairman being assumed by outside Director John Thompson. Now that the news is out and the dust is starting to settle, it’s time to take an in-depth look at what the changes mean for the future of Microsoft.
Satya Nadella: A safe choice
As you might expect after a long and fruitless search for a transformative leader from the outside, Microsoft has gone with a well-liked, extremely competent, technically skilled internal candidate. Everyone agrees that Satya Nadella is the sort of person people like to work for, work with, and that he knows how to build products and businesses. He is also refreshingly non-political for a Microsoft executive. Of course, there are reasons the company didn’t look to him right away. He is not known as a technical visionary or major risk taker, and has a relatively narrow range of experience compared to the breadth of Microsoft’s businesses. He has also never run a field organisation, let alone an entire corporation.
Nadella is as understated as Ballmer is melodramatic, which will be an asset in rebuilding morale among Microsoft’s management team. He is in many ways the polar opposite of Steven Sinofsky, the Windows head that Microsoft fired last year. Microsoft’s recent ditching of stack ranking will help Nadella rebuild Microsoft’s once vaunted, but more recently frayed, technical culture.
Nadella also shares a trait that Gates used to help Microsoft grow and change when he was CEO – he actively meets with, listens to, and learns from what other companies are doing in the industry.
Perhaps hoping to compensate for Nadella’s narrow range of business experience, he isn’t going to be alone at the top – Gates and Thompson have signed on to help.
Are three heads better than one?
Microsoft is going the route of having Nadella, Gates, and Thompson each take a role in driving the company with the hope of benefiting from their distinct skill sets in product management, technical vision, and business strategy. While that sounds good on paper, joint leadership approaches are often fraught with peril. This won’t be the first time a triumvirate has been used in a modern tech company. Google successfully used shared decision making between CEO Eric Schmidt and co-founders Larry Page and Sergey Brin for many years – with Eric Schmidt providing “adult supervision” while sharing the business leadership role with Larry Page, and Sergey Brin driving the technical direction. However, Google outgrew that leadership structure when it was much smaller than Microsoft is now – finding the consensus management style slowed it down – so Microsoft will be breaking some new ground.
Microsoft has its very own cautionary tale on this topic. When Ballmer was CEO and Gates was still involved full-time as technical architect, it was common for senior engineers to appeal business line decisions directly to Gates on technical grounds. Decisions often became whipsawed between conflicting chains of command, slowing and confusing Microsoft’s product process and focus. Many insiders blame interference by Gates – often driving his own technical agenda – for the problems with Windows Vista, for example.
Field of Dreams: But no Jobs or Musk
None of Microsoft’s three leaders have the laser-like focus on creating industry-changing products that Steve Jobs had or Elon Musk has. In fact, they have all been part of the current Microsoft team and strategy for an extended period of time. That makes it likely that Microsoft will continue to try to be a fast follower, relying on its shear breadth – cited by Nadella in his very first email to employees – as the deciding factor in why it believes its ecosystem and products will dominate.
Unfortunately, while that strategy worked on the desktop using the leverage provided by Windows and Office, it hasn’t proven successful in the broader environments of mobile and the cloud. Microsoft sacrificed its early innovation and leadership in mobile to Apple, then has had to try to play catch-up ever since. Nadella’s own cloud unit, while economically successful and popular with many existing Microsoft customers, took a very conservative approach modelled itself after Amazon’s AWS offering. By not innovating further, it not only didn’t expand Microsoft’s customer base, but allowed plenty of room for fast-moving vendors like Salesforce.com to innovate well beyond Microsoft’s model.
A lack of category-defining or leadership products leaves Microsoft with something of a “Field of Dreams” strategy. It is working desperately hard to create an end-to-end set of software, services, and devices that deliver on Windows everywhere – but is in danger of not having the single best offering anywhere. This is definitely not the “Embrace the Customer” strategy we were hoping for when Ballmer stepped down. We’ve already seen evidence of this in Windows 8, which has alienated large swathes of its existing desktop users for the sake of providing a unified interface with thus far largely-non-existent Windows tablet users.
For Microsoft’s broader-is-better strategy to be successful, Microsoft needs to clearly identify specific target audiences and deliver unique value for them. Unfortunately for Microsoft, its own breadth – and its new functional organisation structure – work against it here. By trying to serve gamers, mobile users, consumers, office workers, the enterprise, and cloud vendors from one management team all at the same time, Microsoft is fighting a war on essentially every front of the computing landscape.
Microsoft’s introduction of Surface and acquisition of Nokia have extended its battleground to hardware as well as software. While Apple, Google and Amazon have each developed product portfolios in multiple markets, they have been able to innovate in those product lines largely one at a time – Apple created the Mac, the iMac, iPod, the iPhone, and the iPad sequentially; it didn’t have to come up with them all at once. The last company to assume it could dominate the computing industry based on scale alone was IBM – remember when IBM was “the safe choice?” IBM had to abandon that strategy after it had been picked apart by best-of-breed offerings from other vendors in many of its markets. Unfortunately, with this latest set of safe choices in leadership, it seems like Microsoft is not prepared to make any serious changes in the strategy that has gotten it into trouble.
The bottom line
Gates’ time away from Microsoft has certainly given him a uniquely broad perspective about the world and the problems that can be solved by technology. If he can use that perspective, along with his unique ability to guide Microsoft’s direction, to empower Nadella and his team, Microsoft will have a chance to regain its positive momentum. That’s the most optimistic scenario, which still leaves Redmond with the challenge of designing and marketing truly great products.
A more likely scenario is that we’ll see more of the same from Microsoft – an attempt to serve too many markets with too little focus on any of them. That scenario won’t make either investors or customers very happy and will likely rekindle discussions of whether the company should be broken up, or whether the leadership should be changed yet again.
For more on Nadella, check out 5 things you should know about Satya Nadella.