a record-setting hoard of cash,1 a reportedly strong pipeline, a vibrant developer community, a favorable public image, and largely positive coverage from Wall Street.
The 46-year-old Nadella was not nearly as lucky. He had then and – has now – no small chore ahead of him. Many industry types, critics, ex-Microsoft employees, and activist investors have argued for years that the iconic tech company needs a drastic makeover. Ballmer’s exit was just the first of many notable moves that it would need to make to remain relevant.
Long a tech powerhouse, Microsoft now finds itself at a crossroads, a potential victim of The Innovator’s Dilemma, Clayton Christensen’s classic business text about disruptive innovation. Christensen astutely observed that very successful organizations have historically become complacent. They have tended to ignore the emerging trends and technologies that ultimately annihilated their businesses.
You might be thinking that that could never happen to a company as large, successful, and ubiquitous as Microsoft. It is too big to fail.
Think again.
Polaroid, Kmart, Eastman Kodak, Blockbuster Video, Tower Records, and Research in Motion (recently rebranded as Blackberry) were once economic juggernauts. They are now punch lines to jokes, historical footnotes, and the subjects of MBA case studies of what not to do. Briefly stated, each company failed to react to new consumer tastes, business realities, and technological changes until its song was over.
Now, Microsoft hasn’t fallen as far as those companies did, and maybe it never will. Still, only a wild-eyed optimist can ignore the warning signs. Many of its recent high-profile product launches (e.g., Vista, Zune, Surface, and Soapbox) have performed much worse than anticipated, sometimes to embarrassing degrees.2 Other than Xbox, the company hasn’t had a true hit in a long time. The halcyon days of Windows and Office have long past, although each remains a multibillion-dollar franchise. Many questioned the wisdom of Microsoft’s $7.2 billion Nokia purchase in September 2013. More than ever, there is cause to worry in Redmond, Washington.
A few chilling statistics will illustrate the point. In 2000, more than 90 percent of all devices connected to the Internet via some version of Windows. Thanks to the explosion of mobile devices and Microsoft’s missteps, that number currently hovers around a shocking 20 percent – and continues to fall.3 As of this writing, research firm International Data Corporation (IDC) reports that only 3 percent of mobile phones in the United States run a mobile version of Windows, putting Microsoft only marginally ahead of moribund Blackberry. Android dominates with a market share exceeding 80 percent, followed by iOS with roughly 12 percent.4 It’s not hard to find industry experts who believe that Microsoft has fallen and it won’t be able to get up.
Nadella is quite familiar with Microsoft’s culture and its challenges. He joined the software giant way back in 1992. As the new captain of a massive ship, he knows that steering it in a new direction will be much easier said than done. Forget any perceived or real hard technological challenges for a moment. Standing in Nadella’s way are considerable “squishy” obstacles like Microsoft’s legendary internal politics, bureaucracy, and organizational silos. Effecting his vision will require infusing a new way of thinking and working into Microsoft. Nadella will have to eliminate significant cultural and institutional impediments and, not surprisingly, make major personnel changes. To this end, the company will be parting ways with more than 18,000 employees. The reported 14 percent workforce reduction will represent Microsoft’s biggest layoff to date.
On July 17, 2014, Nadella articulated his long-term vision for the company and broad steps on how to achieve it in the way that most CEOs do today: via a corporate memorandum. In a memo titled “Starting to Evolve Our Organization and Culture,” Nadell begins inauspiciously:
Last week in my e-mail to you I synthesized our strategic direction as a productivity and platform company.5
It only goes downhill from there. He continues:
Microsoft has a unique ability to harmonize the world’s devices, apps, docs, data and social networks in digital work and life experiences so that people are at the center and are empowered to do more and achieve more with what is becoming an increasingly scarce commodity – time!”6
Keep reading Nadella’s memo and you’ll find plenty of gems straight out of Dilbert and Office Space: regular synergies, integration synergies (evidently there’s a difference between the two), strategic alignment, and others.
A few disclaimers are in order here. In my fourth book, The Age of the Platform, I was critical of Microsoft’s tactics and decisions over the past decade. Truth be told, though, I am certainly not anti-Microsoft.7 In fact, I concur with much of Nadella’s overall vision for the company – at least from the interviews he’s given and the articles I’ve read. I also can’t think of a painless way to announce that 18,000 people will soon be looking for work through no fault of their own. And, to be fair, Microsoft claims that it will grant generous severance packages.
I certainly don’t know how Microsoft employees felt about their new CEO’s memo. For all I know, the majority of “Softies” honestly found it to be positive, bold, clear, effective, and even necessary given the current state of the company. I strongly suspect, however, that that was the minority view. I’d also bet that many employees felt a sense of déjà vu (i.e., that they had seen this movie before). Nadella’s vision hit employee screens nearly one year to the day that his predecessor sent his own terribly worded memo. In “One Microsoft” (sent on July 11, 2013), Steve Ballmer announced a major reorganization that included this 42-word dizzying sentence:
Today’s announcement will enable us to execute even better on our strategy to deliver a family of devices and services that best empower people for the activities they value most and the enterprise extensions and services that are most valuable to business.8
Just as Ballmer’s message failed as an effective internal communications vehicle, so did Nadella’s – a view shared by many. The media widely lampooned it as yet another example of the same old corporate blathering we’ve seen for decades. Shaun Nichols of The Register called it “coma-inducing.” One could make the case that, because of the timing, Nadella’s memo did more damage than his predecessor’s did a year earlier. Sure, at that point, Ballmer was the face of Microsoft, serving as its CEO from January 2000 to February 2014. Still, most people knew that Ballmer would be departing soon; the only question during the last few years of his tenure surrounded his eventual replacement. In theory, Nadella may have had a clean(er) slate with many Microsoft employees – or at least he did until he sent that eerily redolent and vacuous message.
That’s enough skewering of Microsoft’s executive leadership. Let’s move to another recent instance of truly awful corporate communications. The target this time: Computer Sciences Corporation (CSC). The company describes itself on its website as:
a global leader of next-generation information technology (IT) services and solutions. The company’s mission is to enable superior returns on clients’ technology investments through best-in-class industry solutions, domain expertise, and global scale. CSC has approximately 79,000 employees and reported revenue of $13 billion for the 12 months ended March 28, 2014.9
A few days before I signed the contract to write the book you are now reading, the following press release came across the wire:
For Immediate Release: CSC Launches Next-Generation Big Data Platform as a Service
FALLS CHURCH, Va., June 26, 2014 – CSC (NYSE: CSC), a global leader in next-generation IT services and solutions, has added new security, compliance, data infrastructure technologies, and cloud deployment