Way back in August last year Microsoft’s CEO Steve Ballmer revealed plans to retire within the next 12 months. A committee – including Microsoft chairman Bill Gates – was set up to search for his successor, looking at both external and internal candidates for the job.
Over a period of months – far, far longer than most industry watchers thought it would take – a list of over 40 executives was gradually whittled down to just a few front runners, some of whom then publicly ruled themselves out. And now finally Microsoft has finally ended the wait by confirming that Satya Nadella is to be its new CEO. Nadella needs to get moving as soon as possible; after months of Microsoft’s staff effectively treading water while waiting for a new chief to be appointed, he’ll have an overflowing inbox and many decisions to make about the future direction of the company and its products.
Here are some of the knotty interrelated issues Microsoft’s new chief executive will have to struggle with sooner rather than later.
1. Finding a way to step out of the shadow of Gates and Ballmer
Microsoft’s new CEO will be only the third CEO Microsoft has ever had. But rather unusually, the other two guys are still hanging around the place.
“I love Microsoft. I love everything about Microsoft. I own a lot of Microsoft stock. I’m going to continue to own a lot of Microsoft stock,” said Ballmer, who will continue to sit on the board after stepping down as CEO. Bill Gates is also going to be spending more time on the company in his new role of technology advisor.
With the outgoing CEO putting such emphasis on the continuation of the ‘devices and services’ strategy it’s going to be enormously difficult for a new CEO to make the company over again in their image. That’s especially the case as Ballmer gave the company a huge shove in one particular strategic direction with the acquisition of Nokia. Finding a way to build on his predecessors work but also set his own direction is Nadella’s absolutely top priority.
2. Redefining Microsoft’s personality
Ballmer has defined Microsoft for too long with that odd combination of puppy dog enthusiasm and hard-nosed business sense. Compare that to rivals like Google, or Apple, or Amazon; they’re all corporate behemoths too, but they’ve managed to tell a different story about their motivations and inspirations.
That matters because the corporate mythology helps attract staff with smart ideas, and customers who want a brand to believe in. Microsoft’s new chief has to tell as different story about the company, one that isn’t defined by Microsoft’s antitrust clashes; something new and fresh. Another job on the to-do list; Nadella needs to figure out transform Microsoft from a many-headed hydra into a manageable supertanker again.
3. Decide the future of Windows
Windows and Office have defined Microsoft for decades but it’s entirely possible that these products won’t define it forever. Microsoft is now much, much bigger than just desktop software and Word; it’s an incredibly diverse software, and now, hardware company.
Windows and Office don’t have the same mesmeric qualities for consumers using tablets and smartphones as they did for workers in the old desktop world. And Windows 8 hasn’t been the huge hit that Microsoft really needed, either. As such, Microsoft needs to rethink the role of Windows (in particular what to do about Windows RT, Windows Phone and Windows 8). The future of Office is another big issue – how long will Microsoft dodge delivery of Office for iPad?
4. Getting the balance right between business and consumer
Microsoft’s engine room is its enterprise business, no doubt about it. The problem for the new CEO is working out whether that’s where the growth is going to be in future.
Shinier, more glamorous rivals like Apple and Google have captured the consumer imagination over the last decade and Microsoft has appeared dowdy by comparison and ceded ground. But with the rise of consumerisation there’s a significant danger that if consumers fall out of love with a technology company, then enterprises will next.
Microsoft needs to make consumers fall in love with it again (which it has failed to do so far with its smartphones and tablets) if only to make sure CIOs still feel comfortable having Microsoft in the datacentre. That probably means fewer products like Surface, which feel as if they were built for business and then dumbed down for consumers. Microsoft needs to feel comfortable about building (mostly phones and tablets) that are unashamedly for consumers, not workers.
5. Figuring out a way back in mobile
Mobile is vital for Microsoft in the same way consumer products are: it’s where the market momentum is. Losing out to Apple and Google on smartphones would be the equivalent of giving up on the desktop of tomorrow and has huge knock-on implications for technologies from Office through to Azure.
Microsoft’s acquisition of Nokia’s devices business gives it a good shot at becoming a strong third place player in the mobile space, but doesn’t fix everything. Nadella will now have to work out how to get more benefit out of Nokia as part of Microsoft, and to figure out how to push more sales of the high-end Windows phone models (much of the growth so far has been at the lower end). Just pandering to the business audience won’t really work.
6. Deciding if Microsoft can really fight Apple and Google (and Amazon) all at the same time
Right now the strategy seems to be that Microsoft is an enterprise company, but that it can’t be an enterprise company without at least paying lip service to the consumer market. It’s one of four companies including Apple, Amazon and Google that are trying to create a total software and hardware ecosystem, which means fighting on a number of fronts – smartphones, tablets, cloud and more.
Can Microsoft really compete with all these rivals at once? Can it really fight every battle, from consumer devices right through to search and cloud infrastructure, or are there some areas where it should concede defeat?
7. Decide what goes, and what stays
There have already been suggestions that Microsoft should sell off the Xbox and Bing units from those worried by the expense and uncertain about how these businesses fit with the broader strategy, and Microsoft certainly does have a lot of businesses that don’t always work well together. So while an excellent case can be made for keeping both Xbox and Bing, in that they epitomise the developing devices and services strategy, it’s entirely possible that some other elements of the portfolio need to be trimmed.
8. Build a reputation for making bold bets – and having fun
What Google has done so effectively is take a small piece of its enormous profit and use that to make some stupidly huge bets (Glass, self-driving cars, Chromebooks) that might just come off. These are also very public bets, which also helps to cement the perception of Google as a hotbed of innovation, rather than, say, just a very big ad company.
Microsoft needs to start making some big, fun, bets like this to shake off its reputation as a lumbering, bureaucratic ministry of tech. For example, Microsoft has a sizeable array of R&D labs around the world working on some impressive technologies – one challenge for Nadella as CEO is to develop research projects into products faster.
User interface is one area where Microsoft is behind but could shine – for example it’s done some interesting work on gesture control and its Kinect technology could have plenty of uses beyond gaming. The Cortana digital assistant is another area of development that should be brought to market sooner rather than later; Apple’s Siri and Google Now are developing a following and it’s time for Microsoft to play here too.
9. Getting it right with that first, defining acquisition
New CEOs are often defined by a bold strategic acquisition, for better or worse; Marissa Meyer swooped on Tumblr while Leo Apotheker bought Autonomy. While Microsoft is (probably) not about to snap up Snapchat, Nadella should be aware of the importance of that first, symbolic acquisition – something bold and beautiful that redefines the company in one act, like buying Oculus Rift or Xiaomi. We can but dream…
10. How to run fast and tread carefully
While Steve Ballmer may be optimistic to say “Microsoft has all its best days ahead,” the company is doing very well. At worst it’s a solid company that makes a lot of money and at best it’s one embarking on a shift from one wildly successful business model to another that might be even more lucrative. Microsoft needs focusing and reinvigorating, but it doesn’t need major surgery; in fact, Microsoft is in pretty good shape, containing 16 different billion dollar-plus businesses.
This is not a turnaround situation, although an over-ambitious CEO who moves too fast and breaks too many things might just turn it into one.