Thoughts On Microsoft’s Announcement

I have come to the conclusion that the most important element associated with company performance is the managing of resources. It really is entrepreneurial. The entrepreneur, if you remember, is someone who has the ability to see how something is currently operating, identify inefficiencies, and then create a new way of doing what needs to be done. The entrepreneur has the ability to creatively destruct what was occurring and replace it with something new. The entrepreneur will usually accomplish this with the limited resources they have at their disposal.

However, through the life cycle of an organization how resources are managed will evolve, but the need to do this never changes. The importance of resources and capabilities cannot be over emphasized enough to the future business leader. This need is relevant to all levels of management structure.

If we look at the first level of management the importance of managing your day-to-day resources is critical. You start your day walking around your department seeing who has shown up for work and who is missing. If there are gaps affecting the day’s needs then you need to move resources to ensure the work gets done! Are their missing supplies that keep you from completing your daily tasks? Then you need to work to get those supplies on hand to complete the day’s tasks.

Tactically, the midlevel manager needs to ensure the organization has the right resources. This could be employees, managers, whomever, but their job is to ensure that the organization has the right capabilities to respond to the changing environment.

At the senior management level the board needs to ensure that the CEO is the right person to lead and govern the organization to ensure sustainability and longevity. This is what we see Microsoft struggling to accomplish. Several moves were announced yesterday involving governance and strategy. The moves will be analyzed for days, and several years from now they will be judged as effective, or not, by the results produced.

Everyone knew Steve Ballmer was retiring. The question was who would replace him, and would they be effective. Many thought that the purchase of Nokia would bring a particular gentleman into the Microsoft family who could move into the role. However, the Nokia purchase has not been completed, so that did not pan out. Now an insider has been appointed to run the company. Satya Nadella  has been appointed to CEO. He has been with the company for 22 years, recently leading the Cloud Computing part of the Microsoft. What about Bill Gates?

Bill Gates has been replaced by a Mr. Thompson, which seems like an important move. Remember when Phil Knight stepped down from Nike and was replaced by William Perez? Remember how, due to differences between Perez and Knight, Perez stepped down after one year? This is very common when strong leaders give up leadership within the company they founded. Perez could not do what he thought needed to be done because Knight did not agree. Therefore, can Gates step down from the Chairmanship of his company to allow Nadella to do what needs to be done?

I think the placement of Thompson as the Chairman is an attempt to ensure the board is Nadella’s boss and not Ballmer or Gates even though they will be on the board. But Thompson has the ability as chairman to control how the board governs the company. This will be critical for Microsoft because their defensive strategy may not work anymore.

Holman Jenkins discussed the non-revolution that is reflected in the current announcement of Nadella and Thompson. “Staying the same by changing would seem to be the agenda behind the naming this week of a new Microsoft CEO, only the third since the company was founded.” Jenkins does a great job of arguing that Microsoft’s move into the cloud, Bing, and Nokia are all defensive strategic moves to warn Google and Apple to stay away from their core business of supplying PC software and services to Corporate America. “Its long been evident that such zero-sum, Cold-War thinking has been part of Bill Gate’s and Microsoft’s survival kit. Many of Microsoft’s investments are not supposed to make money – they’re supposed to deter attacks on Microsoft’s bread and butter.” This is an interesting argument.

I never use Bing, because I Google it. I will never use a Microsoft phone because I enjoy my IPhone. So why would Microsoft try to do something that is not within their core interests? I think Jenkins has hit the nail on the head. However, Microsoft still needs to pay attention to the theory associated with product lifecycle.

If there is anything I have learned in my forty years plus of being in business is that there is always a new idea. The new idea creatively destroys the previous idea. Thus, a defensive strategy only works so long. Microsoft is antiquated and needs to create need products, not just revise old products. If not someone will come along and meet the needs of an evolving market.

So congrats Mr.’s Nadella and Thompson. But, how you run Microsoft will determine if it stays around. It may be time to rethink the defensive strategy, and look into growth opportunities in new markets, etc. I think your investors and the market will appreciate it.

And that is my thought for the day!

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