Microsoft’s Crucible Moment

by Steven Snyder on February 11, 2014

Satya Nadella, MicrosoftIn the 1980’s, when I worked for Microsoft, you could feel the buzz. We were only 250 employees back then, but each one brought enormous drive and energy. The company worked together as one—the whole greater than the sum of the parts.

Microsoft still has some of the most talented employees in the world, now numbering over 100,000. They’ve fallen behind because they’ve not been able to fully channel those capabilities to meet changing market needs.

The appointment of Satya Nadella, a Microsoft veteran of 22 years, has drawn much criticism.

Many argue that Microsoft should have recruited from the outside. But these critical voices do not fully understand the complexity and risks of bringing in outside leadership.

It is easy to point to the spectacular turnaround of IBM by outsider Lou Gerstner in the 1990’s. But, there have been some monumental failures as well, when outsiders have acted without fully understanding the facts on the ground. Just look at what Ron Johnson did to JC Penney or what Leo Apotheker did to HP.

Nadella knows Microsoft intimately, and can draw on its many strengths. In addition to a talented work force, they have a hugely profitable business, plenty of cash, and a large customer base.

This is not to minimize Nadella’s challenges. Technology is changing rapidly, and Microsoft has been out of touch in many ways. Product development cycles need to be drastically reduced. And energy draining fiefdoms must be eliminated and a culture revived.

Nearly forty years after its founding, Microsoft is at a crossroads. Will Nadella rise to the occasion?

I am optimistic that he will. Nadella is well respected internally, and many company employees favor a leader who has deep technical expertise. Furthermore, Bill Gates’s return as a technical adviser bodes well. I worked closely with Gates in the 1980’s, and his wise advice and sharp critical thinking skills helped me steer clear of many landmines.

Another reason to be optimistic is that Microsoft’s strategy is fundamentally sound. Moore’s law is driving down the cost of tablets, while increasing their processing power. Soon these tablets will be more powerful than the desktops of just a couple of years ago. Apple and Google’s strategy has been to power these devices with an operating system that has grown up from the smart phone. Over the years they’ve added more and more features, but this paradigm has its limits.

Microsoft’s strategy is to inject these tablets with a full-fledged operating system, capable of handling the most sophisticated applications that will soon be possible on the ever-more-powerful tablet devices. In short, Microsoft is well positioned to take advantage of the inevitable consequence of Moore’s law, just as it did in the 1990’s, when Windows rode the wave of microprocessors capable of powering a graphical user interface.

Microsoft has the right organizational strategy as well. The vision embodied in Steve Ballmer’s July 2013 “One Microsoft” memo was basically sound, even if Ballmer wasn’t the right person to implement it.

Clearly this is a crucible moment for Microsoft. Nadella needs to restore the buzz it had in the 1980’s. If he does that, Microsoft can be a great company again.

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