There has been a lot said and written already about new Microsoft CEO Satya Nadella and what needs to be done at Microsoft. He has only been on the job for a few weeks and there may be questions of me and what do I think of this hiring. I am going to avoid that subject as I don’t see the value and I think it is better to think about the future at Microsoft and what Satya will need to accomplish in his first year. There are a number of areas where Microsoft is focused moving forward, which were outlined recently at the financial analysts’ meeting. The four pillars that have been defined as the future strategy for Microsoft are Mobility, Cloud, Social Media and Big Data. In order to succeed in these areas it is my view that each area will need different thinking and expanded thinking. In a perfect world Satya will read this and come seek my advice, but I am afraid that world does not exist, so to my loyal readers of five here are my thoughts and I welcome your feedback.
Mobility is that area that has come up first time and time again. I think it is also the first area Microsoft go to when addressing their shortcomings in recent years. In Kevin Turners Financial Analysts meeting presentation it was apparent that any type of good news around Windows Phone and Surface would be shared. Bottom line though as we all know Microsoft missed the industry boat and I have written numerous blogs about how Microsoft lost mobile and the developers. My horror upon hearing Steve Ballmer saying “the industry needs a third ecosystem”. In looking at KT’s presentation one thing sticks out, which is the industry for mobile devices will continue to grow through 2017. My suggestion to Satya is do not look too directly at the numbers and what the opportunity is but what it could be. If we have learned anything over the past ten years in the industry is moving incredibly fast and the velocity at which it is moving will only increase. To say, “we want to capture x % market share by 2017”, may put a number to a goal but in the end I believe will lead you to defeat. I defer to Sun Tzu and “The Art of War” – “When confronted by superior numbers you need to change the battlefield”. Thus it is with mobility and as we look forward where we are in three to five years may be a much different landscape than we have today. It very well may not be smartphones and tablets. The challenge for Satya Nadella will be finding the next “big thing” and getting in front of it. My belief is the problem with today’s handheld devices is just that, they are handheld. Mobility will stretch beyond the handheld to wearable and embedded.
The Cloud is everywhere and it is growing. I think in some ways the term “Cloud” is a bit mislabeled. We think of it as something new as if it had to be built from scratch. But when I look around the other initiatives at Microsoft they all connect back into the cloud. Beyond the services companies wish to deliver via the Cloud, it is the information collected and stored in the cloud that make cloud based services interesting. Today the largest examples of Big Data reside at Yahoo and Google, not surprisingly. It is east to think of Big Data as pulling data from the cloud, but I also think of it as feeding the cloud. When I look at Google’s acquisition of Nest all that data our thermostat provides will be fed into the cloud. Then I have to ask, “how many other devices could feed the cloud? My lawnmower? Television? Washer and Dryer? How many devices are not connected today? The amount of application services that can be delivered as a cloud app starts to increase as the amount if data being fed to the cloud increases. My message to Satya would be stop worrying about Amazon and Google, worry about what is next. Define what is next. Microsoft could then be the cloud leader. Then Google and Amazon can worry about Microsoft.
Social was an initiative that initially confused me, My first thought was Microsoft going to create the next Twitter? But in looking at what was initially proposed it makes sense to me, Microsoft is viewing Social media from the perspective of the enterprise. In this arena Microsoft has a lot of assets. They have SharePoint Services, Yammer, Exchange, Lynch and most importantly they have the default directory service for nearly all Fortune 1000 companies, Active Directory. All Microsoft would need to make sure of is to provide extensions to these assets to connect outside the corporate firewall to consumer based social media services such as Facebook, Twitter etc and it could own the footprint of social media in the enterprise. It would then be interesting to extend social media from the enterprise to the consumer, versus the other way around which Microsoft is not well positioned to lead. Remember Widows stated as a business device that founds its way back to our homes.
Big Data is probably the most recent industry “buzz” and in many ways the hardest to decipher and crack. For many Big Data is Hadoop. Yes we can collect large amounts of unstructured data today. However our ability to make use of that data is still rather difficult. As noted earlier I view Big Data and Cloud as going hand in hand. The cloud will be fed increasing amounts of data that companies will try to decipher and put into actionable services. If I had a concern based on what I have read so far from Microsoft is there seems to be an attempt to put Big Data into products, such as SQL Server and Excel. I would warn Satya against looking at this through the prism of what exists today and look beyond to what services can be delivered tomorrow. Data is growing on the web and growing fast. Every day we create 2.5 Quintilian bytes of data. the web houses a yottabyte. A company’s ability to harness and make accessible that data can be the determining factor between great success and failure.
One challenge Satya will have is the Microsoft Board of Directors. It will be an interesting mix and if there is one concern is that it may be too involved. You will have Bill Gates and Steve Ballmer, who frankly wear Microsoft on their sleeve. They will need to lie low and let Satya put his imprint on the company, they will need to let him make mistakes and not scrutinize him too much should he want to veer Microsoft in a different direction, which I know many outside onlookers hope he does do. You have ValueAct, a large activist investment firm, getting a seat on the board and by early indicators favor an enterprise focus for Microsoft. Will Satya appeal to this view or does he have a fundamentally different one? Finally you have John Thompson who is the new Chairman of the Board. With Steve and Bill on the board is he just an emperor with no clothes? In the meantime it is important for Satya to not let these board dynamics distract him. Boards are always distracting, but in Satya’s case it seems they are unique and unfortunate. In the end however Satya just needs to be Satya and the board needs to trust in their decision to appoint him CEO. In the end Satay needs to let his own instincts guide him.
Company Size and agility will be a focus and one that is much discussed. Microsoft is huge and it feels bloated. Maybe ValueAct will get its was and split the company into consumer and enterprise (if indeed that is what ValeuAct desires). Like any large company Microsoft has had to develop processes to oversee the business as it grew. The Jack Welch philosophy of “kill your brother” was tried and failed. I do not believe as much out of Jack Welch, but trying to implement something that worked at GE but was not designed for Microsoft. Satya has already said he wants to tear down barriers to doing business at Microsoft. The challenge will be sifting through thousands of suggestion as to how best to do that. Building a big company is easy when compared to how to make it agile and nimble.
Despite all these challenges and opportunities, Satya Nadella is inheriting a great company. On the outside Steve Ballmer has been routinely criticized for his mistakes and missteps, but numbers do not lie and Microsoft grew into a company that earned over $77 billion as of June 30th, 2013. Microsoft has available in cash nearly $77 billion . All under Steve’s watch and that cannot be taken away from him. Microsoft has some great assets in Windows, Office, Enterprise business, and the Xbox. Probably only Tim Cook as Apple has had this type of luxury in taking on a CEO role. One advantage Satya has visa vi Tim Cook is he is a decade removed from a legend, Bill Gates. It is like the old saying in sports, “you don’t want to be the guy who replaces the legendary coach, but the guy who replaces the guy who replaced the legendary coach”. The one thing that needs to happen is time. Satya needs time to make his imprint on the culture of Microsoft and the landscape of technology. The former will take time and the latter will require Satya to make some big bets. The tools are there to make great change, as big as a struggle as it seemed to be to hire a new CEO, its hard to believe so few really wanted the job. Here is to Satya on what will be his greatest life’s adventure.
Good Night and Good Luck
Hans Henrik Hoffmann March 10, 2014