Satya Nadella's Big Bid to Reshape Microsoft

Five months into his new role as CEO of Microsoft, Satya Nadella is ready to shake things up.

In a 3,300 word memo sent to employees and the press Thursday, Nadella laid out the most clear vision yet for how he sees the future of Microsoft. There's a lot to unpack in the memo, but dissecting it and reading through the lines, a few central themes come into shape.

First, Nadella is very clearly differentiating his vision for Microsoft from the vision put forth by former CEO Steve Ballmer. That starts with a new mission statement.
A new mission: productivity

Nadella writes that it is no longer appropriate to call Microsoft a devices and services company, instead laying out a new mission statement for the company:

Nadella has used the phrase "mobile-first and cloud-first" in the past to describe Microsoft, but in his latest memo, he adds an new word to his oeuvre, "productivity." In fact, "productivity" is used 20 times in the memo. Mashable Tech Editor Pete Pachal summed it up best, remarking that

Nadella's Microsoft is "unapologetically productive."

Using a word like "productivity" intimates that Microsoft sees its strengths as resonating more with the enterprise or the business customer rather than the pure consumer. In an interview with The Verge, after the release of the memo, Nadella clarifies his approach a bit. He said:

You're defining the market as 'It's already done, Apple and Google have won, because they won the consumer side.' And I'm going to question that. I'm going to say 'No, any thinking consumer should consider Microsoft because guess what, you're not just a consumer. You're also going to go to work, you're also going to be productive and we can do a better job for you in there.' And that's what I want to appeal to.

In other words, Microsoft knows it can't win if it tries to compete against Apple or Google as a purely consumer-focused company. Where its real strengths are is as a company that can support both the consumer world and the business world.

The best example of that strategy is actually the Surface Pro 3. The Surface Pro 3 represented a fundamental shift in strategy for Microsoft. By deciding to compete with the MacBook Air — rather than the iPad Air — Microsoft was able to release a truly great device that is differentiated in the market.

The same is true for the platform and traditional services side of Microsoft's business. Bringing Office to the iPad — and to Android — increases the value of Office 365. Historically, Microsoft excelled as a company because its products were ubiquitous and available on multiple platforms. It wasn't until Microsoft started losing ground on mobile — and desktop sales started to sag — that the company became more territorial about where its services could be accessed.

Returning to a more device-agnostic approach — that is, truly hyping the underlying platform rather than the specific operating system or device type — is a smart move. At Build, Microsoft's developer conference, the company even highlighted Vesper, an iPhone app from John Gruber, Dave Wiskus and Brent Simmons. Vesper is an app that will probably never come to Windows or Windows Phone, but its new sync structure was built on Azure, Microsoft's cloud platform.

The old Microsoft would have tried to convince the Vesper developers to build an app for Windows Phone. The new Microsoft, under Nadella, wants to highlight that everyone can use their platforms to build apps — whether they run on Windows or not.
Reaffirming a commitment to Xbox

Nadella also makes a point to call out the Xbox and reaffirm Microsoft's commitment, going forward, to its gaming console.

He writes:

Xbox is one of the most-revered consumer brands, with a growing online community and service, and a raving fan base. We also benefit from many technologies flowing from our gaming efforts into our productivity efforts – core graphics and NUI in Windows, speech recognition in Skype, camera technology in Kinect for Windows, Azure cloud enhancements for GPU simulation and many more. Bottom line, we will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft.

It's a curious message inside a memo that seems to be focused on productivity, but it also makes sense.

Microsoft botched the launch of the Xbox One. The Xbox 360 was a phenomenally successful console and won the hearts of gamers and non-gamers alike. And then Microsoft managed to make every flub known to man when introducing its successor.

In a few years, we might look back at the future living room Microsoft was trying to create with Xbox One and feel sad about what could have been — everything from cloud-based game libraries to deep-personalization with Xbox Kinect. But the vocal reaction from the early adopters spoke and Microsoft has slowly but surely backtracked on almost all of its most innovative ideas surrounding the Xbox One.

I saw Microsoft's E3 2014 presentation as the company's attempt at a "do-over." In contrast to last year, where the focus was on cool (but also creepy) features and home entertainment, this year was all about games and franchises that gamers already know and love. Plus, the company dropped the console's price by $100 and got rid of the Kinect requirement.

The additional statement from Nadella, affirming his support for Xbox, shows me that at the very top, they recognize just how vital Xbox is to the future of the company. Xbox might not be one of the core pillars — like cloud, Office and Windows — but make no mistake, it's one of Microsoft's best assets.

Even after a problematic launch, Xbox is still one of the best-known brands in the living room. It is arguably the company's only successful consumer brand. If the company were to play its cards correctly, Xbox could be the halo product that allows Microsoft to capture the next generation of users. Much as Apple was able to attract non-Apple customers by way of the iPod, Microsoft could do something similar with the Xbox.

The key to actually making that transition, however, comes down to culture.
Changing the culture

To that end, Nadella is quite explicit that the culture within Microsoft has to change. He writes:

Nothing is off the table in how we think about shifting our culture to deliver on this core strategy. Organizations will change. Mergers and acquisitions will occur. Job responsibilities will evolve. New partnerships will be formed. Tired traditions will be questioned. Our priorities will be adjusted. New skills will be built. New ideas will be heard. New hires will be made. Processes will be simplified. And if you want to thrive at Microsoft and make a world impact, you and your team must add numerous more changes to this list that you will be enthusiastic about driving.

I am committed to making Microsoft the best place for smart, curious, ambitious people to do their best work.

Culture is an interesting and difficult challenge for a company such as Microsoft. The company has over 100,000 employees and countless divisions. Managing the culture across that many people can be a challenge for any company, but it gets even more challenging when you look at the changes Microsoft as a company has made over the last two years.

The leadership regime has totally changed — from the top down. Beyond that, the hierarchy and corporate structure has gone through multiple changes, too.

As an example, think about the Xbox division. That group has always run relatively autonomously within Microsoft. On the one hand, you might argue that this is why Xbox has remained successful — it hasn't had interference from the suits. On the other hand, that separation means that when products do try to integrate across devices or platforms, the results aren't always as good as they should be.

If Microsoft is going to really embrace and recommit itself to Xbox, maybe that means that the company as a whole should take on more elements of the Xbox team's culture — rather than trying to simply tack Xbox-features onto other products.

Culture will likely be Nadella's biggest challenge. It's difficult to reset the bar and make a company that has always operated in multiple divisions and silos into something more organic. Ultimately, however, for Microsoft to truly transform as a company, its culture must transform first.

Nadella says as much himself. He ends his memo, writing:

With the courage to transform individually, we will collectively transform this company and seize the great opportunity ahead.

This memo is likely just the first public-facing step into what will likely be a long process of evolution. Nadella has a clearly formulated vision for where he wants to see Microsoft in the future. Now the question becomes: Does he have to leadership skills to make that transition happen?

Posted by : Gizmeon