Microsoft, Organization, and Process

Scott Francis
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Much has been written about Steve Ballmer’s failure (and success).

There’s an old saying in British politics that all political careers end in failure. That applies, I think, to Steve Ballmer. In some ways he did a superb job in the last 30-odd years. But he leaves with Microsoft irrelevant in the new paradigm of the tech industry, mobile.

And Benedict Evans has even more coverage of Microsoft’s irrelevance in another post – declining share of connected device sales, and anemic growth relative to the sea-shift that happened with the advent of iOS and Android devices.

And how can we not connect the dots between that macro-level outcome – missing a huge technology wave – and the coincidence of two other background aspects of the story:

  • Bill Gates leaving Microsoft
  • A divisional org structure that was ossifying
  • Stack ranking reviews

Ballmer finally came around to the idea of changing the org structure.  It isn’t clear that that was the problem really, but if it was, he was a few years too late for the change.  And others have done a good job explaining why the change might be a bad idea.

Taking a step back – I can see how a divisional organization might have trouble responding adequately to a threat like that posed by iOS and Android.  Of course, one cool thing about divisional structures is that you can quickly form a new division – or revamp an existing one – like Windows Mobile.  But it can be hard to get the resources and people you need from other divisions if those divisions are fighting you for them.

Ben Thompson’s take on the politics:

In my (very-biased) opinion, I believe collaboration is fundamentally broken at Microsoft. It is all about politics, not great outcomes, and that is absolute death in a functional organization, which has nothing but collaboration to hold together cross-functional product teams. At least in a divisional model all of the relevant team members have a common product and a common boss, meaning everyone has no choice but to work together. Unless the employee review and compensation model is significantly changed, this, along with the lack of mission and clear accountability, will grind progress to a halt.

Divisional approaches seem to work well for attacking smaller markets are changing competitive landscape – but not good at addressing the threat of irrelevance.  The threat looks impossibly remote.  The market looks impossibly small.  There seems to be all the time in the world to respond competitively. But the responses are too slow, too late.  Too small.  And the small threat (search, smartphones) becomes large.  And while you’re focused on the last wave that you missed (Search), the new wave sneaks up on you – and you miss that, too.

So with a lack of vision (about markets and products and technology, and an organization that isn’t setup to respond to the threat of irrelevance with the right level of investment and focus, you have a problem.  Add in the lack of collaboration ingrained in the culture by both the divisional and stack-ranking review process… and now you have a real problem.

The new CEO of Microsoft will have a truly awesome opportunity.  But it is also an incredible challenge.  It isn’t clear to me whether the right answer will be a combination of acquisitions and investments, or whether it will all be about leveraging the resources that are already inside Microsoft.  But my first thought is that Microsoft needs a way to increase its focus in the areas in which it wants to compete.

What does that mean?  The strategy tax is too high – right down to the naming conventions of products that have nothing to do with each other.  Windows Phone is nothing like Windows 7… Why do they share the same brand?  Why does management think that’s a good thing?  Even when branding products the corporation is suffocating identity.

But worse, how does management focus on the things that matter?  How do they unleash the full power of each asset in the arsenal, instead of constraining them to attempt to manufacture network affects.  Some of the obvious points:

  • Get Office onto Android and iOS – and make it really great on those platforms.  Please don’t make it look like Windows anything.
  • Drop the Windows naming convention from products that aren’t based on the same code-base.  Your teams come up with better code names than the real marketing names (e.g. Metro).
  • Make each product part of your customers’ ecosystems, not just part of a Microsoft ecosystem. (For example, figure out how to get Xbox working with not just Microsoft mobile devices- but other people’s as well.)
  • Quit subsidizing products that aren’t selling – like Surface, and like Bing – figure out how to sell them at a profit or breakeven or stop doing it.  Money-losers are a distraction and undermine the discipline of running a sound business.  And they’re emblematic of the strategy tax that is being imposed on the rest of the business.  Also, with the sea-change happening, profits could disappear quickly (see Blackberry for reference) and so Microsoft needs to stop assuming they can keep funding these money losers

Time to get out the popcorn, it’ll be interesting.

 

 

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