Microsoft Is Looking More Like the House Nadella Built

Some aspects of CEO Satya Nadella’s vision for Microsoft are becoming more clear. For one thing, the company’s interest in advertising is seriously on the wane.

Microsoft reportedly has handed off most of its digital advertising sales business to AOL, along with a possible 1,200 employees who will be given the opportunity to go where their jobs are headed.

Microsoft will retain control of its search advertising sales, however, and Bing will replace Google as the engine powering AOL’s consumer searches.

Microsoft’s housecleaning didn’t end with ad sales, though. Uber reportedly has inked a deal to take over some of Bing’s mapping activities — in particular, its image collection — along with about 100 employees.

New Vision, Same Strategy?

These moves are consistent with the restructuring Nadella began last year, with the lofty mission statement of empowering every person and every organization on the planet to achieve more.

Nadella reiterated his intentions in an email sent to employees last week.

Microsoft must innovate in new areas, execute against its plans, make some tough choices in areas where things are not working, and solve hard problems in ways that customers value.

Shifting some operations and assets to AOL and Uber no doubt are among those “tough choices” — but the ball may have started rolling with a management reshuffle that took place earlier this month.

Former Nokia chief Stephen Elop, who once was considered a possible successor to Microsoft’s ex-CEO Steve Ballmer, departed the company.

Strategy chief Mark Penn also made his exit, as did several other top execs. Formerly a top adviser to the campaigns of Bill and Hillary Clinton, Penn was noted for his bare-knuckles brawling attitude.

The executives “were clearly redundant after [Nadella] figured out what he wanted to do,” Rob Enderle, principal at the Enderle Group, told the E-Commerce Times. “Part of the problem at Microsoft was too many independent empires that didn’t play well.”

The Refined Nadella Vision

Nadella’s emphasis clearly is on the cloud and mobility.

Microsoft’s strategy is to build best-in-class platforms and productivity services for a mobile-first, cloud-first world, he said.

The company will invest in three interconnected and bold ambitions: reinventing productivity and business processes; building the intelligent cloud platform; and creating more personal computing.

Microsoft will reinvent productivity services for digital work spanning all devices, and it will build more business process experiences into its content authoring, consumption, communication and collaboration tools, Nadella said.

“Satya’s management style appears to be to provide a feedback loop, and keep tuning the organization to ensure that it is running in as agile a manner as possible,” said Wes Miller, a senior analyst at Directions on Microsoft.

Stepping Up to the Plate

Microsoft already has begun helping companies reinvent business practices — one of its three stated objectives, said Jeff Cotrupe, an industry director at Frost & Sullivan.

“More than 42,000 retailers are using Microsoft Retail Solutions today, and the company’s looking to both go wide by expanding its footprint and deep by radically enhancing its capabilities through two partnerships in the space,” he told the E-Commerce Times.

One of those tie-ups is with Sitecore, to integrate its customer experience platform with Microsoft Dynamics’ omnichannel functionality.

The other is with Toshiba Global Commerce Solutions, to integrate its retail point-of-sale systems with Microsoft Dynamics. The joint solution is branded as “TCxGravity powered by Microsoft Dynamics.”

Never Mind the Tech, Go for the Culture

Perhaps the most important driver of success is culture, Nadella told employees. Microsoft needs a culture founded in a growth mindset based on a belief that everyone can grow and develop, that potential is nurtured, and that people can change their minds.

Leadership is about bringing out the best in people, he said.

Those statements are an indictment of Microsoft’s former dog-eat-dog culture.

Turf wars “were a near-terminal disease in that company, and they’re right to focus on wiping that out,” Enderle remarked.

“Microsoft had a better program than the iPod, but it was killed rather than fixed,” he recalled. “Microsoft had the iPhone first as a concept, but it was killed. Microsoft had a better tablet, and it was killed. Microsoft had Adobe Flash first, but it was killed. Microsoft had a better set-top box platform, and it was killed — and we could go on and on.”

However, many of the old practices are “ingrained, and [Microsoft] will have to be very aggressive if they want to eliminate them in timely fashion,” Enderle suggested.

For all of its exhortations, Nadella’s email doesn’t indicate any significant change in direction, noted Citigroup analysts Walter Pritchard and Kenneth Wong, who reiterated their sell rating for Microsoft’s stock.

Microsoft “needs to get consumers excited again, and get developers excited about building for Windows,” Directions on Microsoft’s Miller told the E-Commerce Times.

“Neither of those happened with Windows 8.x or Windows Phone,” Miller pointed out. “Can they do it this time?”