The main lesson [new tech firms] will draw is that it was too protective, for too long, of its main franchise, which led it to ignore threats that eventually became unignorable.
So The Economist wrote in its April 4 piece, “Microsoft at middle age — opening windows” (pp. 59-60).
It’s a common analysis, but is it fair?
The Economist summarizes its case: From the mid-1990s until Steve Ballmer retired last year, “Everything Microsoft did had to strengthen Windows, to make it ever more crushingly dominant.” Readers familiar with Boyd’s organizational climate will recognize a Schwerpunkt.
The Economist claims that “many of the company’s best innovations were killed because of this ‘strategy tax.'”
On the other hand, because they were killed, it’s impossible to know whether they would have been “best.” Rather than engage in alternative histories, let’s look to the future. Has this strategy locked Microsoft into a fading platform, dooming it to share the fates of other once-towering technological giants like Kodak, Xerox, and Polaroid? I don’t think so.
Using data in that same article, one could argue that Microsoft has cleverly played a winning hand. Beginning with Bill Gates’s famous 1995 Internet memo, Microsoft has been aware of both the dangers and the opportunities outside the (PC) box. As The Economist notes, “Ironically, Microsoft was among the first software firms to recognise the potential of cloud computing … Likewise Microsoft was among the first to see the promise of handheld computers, as smartphones where once called.”
As for Windows and Office, The Economist reports that those two products still generate 44% of Microsoft’s revenues and 58% of its profit. And although Apple’s net profit passed Microsoft’s in 2010, the Redmond company still racks up around $20 billion in net profit per year.
It is difficult to fault Microsoft for fishing while the fish are biting, as the old marketing saying goes. Looking ahead, the ascendence of Apple and Google should do wonders for Microsoft’s orientation, and $20 billion buys time and options.
Were Microsoft CEO Satya Nadella ask me, I’d give him the same advice I’d give GE’s Jeffrey Immelt or IBM’s Ginni Rometty: Go back to Chapter I of Sun Tzu, particularly the Five Measurements and the Seven Assessments. By thinking through these elements, you can tell who is going to win. In fact, they provide much more than a template for analysis: The competitor who applies them most analytically, most dispassionately, and most creatively will win.
Unfortunately they predict success in war, not business, so using them involves developing a deep understanding of why these principles lead to victory. Then you can apply that understanding to any sphere of competition. Here’s a hint: Although they predict success in war, there’s not a word about numbers or technology. They’re all about people, culture, and organizational climate, just like Boyd’s EBFAS principles, which define an organizational climate for opportunistic, agile organizations in general. I don’t know enough about IBM’s corporate culture to comment, but GE and Microsoft should be able to exploit a people-centric strategy to great advantage. GE has been thinking hard about its culture since Jack Welch began his tenure in 1981, and Microsoft under Nadella has been so bold as to abolish employee ratings because they recognized that they “discouraged risk taking and collaboration.” (WSJ, “The trouble with grading employees,” April 22, 2015, p. 1).*
In an era when Windows seems to be winding down — in the 4th quarter last year, revenues from Windows were down 13% from the previous year — “agile” and “opportunistic” are two qualities that might prove useful.
*This was a step urged by Deming a generation ago, but few established companies have followed his suggestion. According to the Journal, another fading giant, Intel, just can’t bring itself to take the step, fretting over “unintended consequences.” Orientation can lock in many ways but ultimately with the same result.
“On the other hand, because they were killed, it’s impossible to know whether they would have been “best.” ” And considering what Google considered best, and what later was killed, it is hard for most tech firms to give an honest peer review.
In boxing, peers barely understand how it is possible that one boxer is able to hit harder than another, so what “works” in the real world is very subjective, and often comes down to the question of position. How is it possible that a person in one position has an advantage over all others, while another person (or now corporation) in a similar position doesn’t? And I think the answer comes down to the question, “what are you trying to accomplish”? Are you trying to win, or are you trying to do what is right?
“… Microsoft under Nadella has been so bold as to abolish employee ratings because they recognized that they “discouraged risk taking and collaboration.”
And now that the decision has been made to abolish employee’s ratings, it might now be a good time to think about it.
In the 2015 environment, all today’s games and social media is about ratings, so why not let Microsoft’s employees get in on the ratings game?
Some may wish to opt-out, but with the vast majority of Microsoft’s employees being foreign, (I mean isn’t their software written by those in India?) perhaps they might want to opt-in.
In that case, I would say why not let them go for it?
Then it comes down to resources. With the vast amount of resources lock in the basement in Redmond, Washington, what will the relationship be between ratings and resources?