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MICROSOFT
40 years in tech biz.20 years of tech feats.20 years of tech repeats.
reboots
windows 10
open innovation?is future hololens?
365Office
what can new ceo satya nadella do to mobilize microsoft?
presented by victoria gladstone5.11.15
MICROSOFT REBOOTS
Assignment 3 FINAL Design innovation and leadership parsons the new school for design
strategic design + management ms program Instructor: Dr. Suzanna Schmeelk
Student: Victoria Gladstone May 13, 2015
boot - a verb, derived from bootstrap, as in “pull yourself up by the
bootstraps.” A computer boots up or loads its system software when it is
turned on.
REBOOT refers to restarting a computer and has yielded the Unix-world
maxim: “When in doubt, reboot.” 1
1 Hale, Constance. (Editor). Wired Style: Principles of English Usage in the Digital Age. 1996. HardWired. Publishers Group West. San Francisco. pg.
1
INTRODUCTION
In 1975 when Bill Gates and Paul Allen founded Microsoft Corporation
(Microsoft) their mission, far-fetched as it sounded at the time, was to power
a personal computer (PC) on every desk and in every home. Microsoft, with
its Windows and Office software products, dominated the interactions most
people had with their computers for almost twenty years they were at the
forefront of the digital revolution.
Fast forward to 2015, and although still extremely successful, the
Microsoft era ended in 2010 when Apple, surpassed Microsoft to become the 2
world’s most valuable technology company. How did this happen? First
Microsoft is an incumbent as described in the Harvard Business Review
article entitled, “Value Innovation: the strategic logic of high growth”. They 3
were constrained by their sunk investments, existing assets and the ongoing
distraction of defending their position by fighting legal battles at home and
abroad. Theirs became a zero-sum strategy, milking the business for all its
worth albeit in the shrinking desktop computer market that they made
possible.
Microsoft focused on building incremental advantages over their
competitors instead of radically innovating. It was predicted by Gordon
Moore in 1965, that steadily improving microchips would exponentially
increase computing power making it drastically faster, cheaper, and smaller
2 Helft, Miguel and Vance, Ashlee. “Apple Passes Microsoft as no. 1 in Tech”, Technology Section. The New York Times. (Online Ed.) {Internet}. 2010, May 26 [cited 2015, May 4]: Available from http://www.nytimes.com/2010/05/27/technology/27apple.html 3 Kim, W. Chan, and Renee Mauborgne. "Value innovation: the strategic logic of high growth." Harvard Business Review 75.1 (1997): 102+. Business Insights: Essentials. Web. 3 May 2015.
2
first every ten years, then upon reflection he revised it to every two years.
This has come to be known as Moore’s Law - taken from an article he wrote 4
for Electronics Magazine entitled “Cramming More Components Onto
Integrated Circuits”. Moore essentially predicted personal computers, 5
cellphones, self-driving cars, the iPad, Big Data and the Apple Watch. Fifty
years later and the prediction remains true and foreshadowed the rise of
mobile computing.
This technology driven disruptive innovation “overturned the
marketplace and the rules by which it was previously run”, precisely as
detailed in the article by Tim Jones, entitled, “Paradigms Lost”. In the 6
twenty first century, desktop computers lost ground to the swipe of a finger
across a smartphone or tablet touchscreen. When bandwidth expanded
making streaming audio and video possible, people wanted technology that
didn’t just sit on a desk - they wanted it to fit in their pocket, or better yet
their hand.
Microsoft was seemingly positioned to take full advantage of this
development but instead found itself in a situation similar to that of Xerox
PARC, where their closed innovation paradigm hobbled their ability to
commercialize some of their innovations, as detailed by Constance E. Helfat
and J. Brian Quinn in their review of the Henry Chesbrough book, “Open
Innovation: The New Imperative for Creating and Profiting from
4 Hale, Constance. (Editor). Wired Style: Principles of English Usage in the Digital Age. 1996. HardWired. Publishers Group West. San Francisco. pg. 4
5 Friedman, Thomas L. “Moore’s Law Turns 50”. The New York Times Online. Opinion Pages. {Internet} 2015, May 13. [cited 2015, May 13] Available from http://www.nytimes.com/2015/05/13/opinion/thomas-friedman-moores-law-turns-50.html?_r=0
6 Jones, Tim. “Paradigms Lost”. RSA Journal, Vol. 153, No. 5525 (October 2006), pp. 28-31. Published by: Royal Society for the Encouragement of Arts, Manufactures and Commerce Stable URL:http://www.jstor.org/stable/41379736 . Accessed: 21/02/2015 13:46
3
Technology”. This made a way for Microsoft’s competitors, like Apple and 7
Google to overtake them.
Under the leadership of their first CEO Bill Gates, and his successor
Steve Ballmer they focused on growing and then protecting their existing
business model and failed to grasp the wholesale opportunities brought
about by portable digital devices. While other tech companies like Apple,
Google, Facebook and Twitter openly innovated, Microsoft innovated in
secret - each business unit within its own soundproof silo, refusing to work
in cross functional teams, or with outside competitors. They introduced a
string of “me too” products like their retail stores which have been
moderately successful. Apple has its “Genius Bar” and Microsoft its “Answers
Desk”. At last count there are 125 locations in the U.S. and Canada. 8
Microsoft succeeded in their first mission, but having reached it, they
failed to articulate and mobilize to achieve a new one. In 2014 Steve Ballmer
stepped down as CEO and Satya Nadella, an insider with more than 20 years
experience in leadership at Microsoft became its third CEO.
With 128,076 employees, 40+ year history, and slowing income 9
growth, Nadella must manage one of the world’s largest businesses, and
innovate for the company’s future success. He is tasked with installing a new
jet engine while the aircraft is in flight. Can Satya Nadella foster a new
collaboration culture, get ahead of the innovation curve, and reboot
Microsoft?
7 Helfat, Constance E. and Quinn, J. Brian. “Open Innovation: The new Imperative for Creating and Profiting from Technology by Henry Chesbrough. Academy of Management Perspectives. Vol. 20, No. 2 (May, 2006), pp. 86-88. Published by Academy of Management. Available at URL:http://www.jstor.org/stable/4166240 8 http://news.microsoft.com/presskits/retailstores/ 9 http://news.microsoft.com/facts-about-microsoft/
4
Microsoft Corporation
Technology company
Microsoft Corporation is an American multinational technology company headquartered in Redmond, Washington, that develops, manufactures, licenses, supports and sells computer software, consumer electronics and personal computers and services.
Stock price: MSFT (NASDAQ) $47.75 +1.05 (+2.25%)* CEO: Satya Nadella Employees: 128,076 Founded: April 4, 1975, Albuquerque, NM Headquarters: One Microsoft Way, Redmond, WA 98052 Website: www.microsoft.com Founders: Bill Gates, Paul Allen Source: Wikipedia *as of May 8, 4:01 PM EDT
Figure 1.
BACKGROUND COMPANY
5
On April 4th, 1975, William Henry Gates and Paul Gardner Allen
started a small company named Microsoft; at the time Gates was 19 years of
age and Allen was 22.
That was the beginning of the personal computer (PC) Revolution. The
two radical innovators created and sold their first product inspired by an
article in Popular Electronics magazine. Allen and Gates developed a BASIC
computer language for the Altair 8800, and by 1978 year-end sales
exceeded $1 million.
Title page from Microsoft’s first product BASIC - Source: Twitter post by Microsoft Cofounder
Paul Allen at 11:00 AM - 4 Apr 2015. Accessed at 11:00 AM - 4 May 2015 10
Figure 2.
In 1983 Microsoft announces the introduction of Windows graphical
user interface. It shipped in 1985. Microsoft launched an IPO (Initial Public
10 Wingfield, Nick. “40 Busy Years Later, Paul Allen, a Microsoft Founder, Considers His Creation”, Bits Section. The New York Times. (Online Ed.) {Internet}. 2015, May. 3 [cited 2015, May 4]: Available from http://bits.blogs.nytimes.com/2015/05/03/40-busy-years-later-a-microsoft-founder-considers-his-creation/?_r=0 Subscription may be required.
6
Offering) in 1986, and the stock was priced at $21.00 a share, and it was
the most successful stock offering in that decade. By December 1, 1999
when Bill Gates stepped down as CEO the stock was at its zenith, $58.38.
Today, May 4, 2015 the stock is priced at $48.24. In 1989 Office for
Macintosh, version 1.0 was launched. The 1990s was really the Windows
Operating System (Windows OS) era and they continued innovating from
Windows 3.0 to Windows NT to Windows 95. The Internet exploded in the 11
late 1990s and Microsoft delivered one of its blockbuster evergreen
products, Microsoft Internet Explorer 4.0. web browser which they packaged
as a default browser with their popular Microsoft Office Suite of Software.
Between 1994 and 1999 internet use rose from 3 million to 200 million
users.
For a time Gates became the wealthiest man in the world. He
continued to work full time at Microsoft until 2008 when he stepped down as
CEO to focus on philanthropic efforts through the Bill & Melinda Gates
Foundation. Cofounder Paul Allen left Microsoft in the early 1980s to seek
treatment for Hodgkin's Lymphoma. Steve Ballmer succeeded Gates and
held the office of CEO from January 2000 to December 2014 when he was
succeeded by Satya Nadella, Microsoft’s third chief executive officer since its
founding.
11 Microsoft.com. “Timeline”. Accessed May 2, 2015. Available from http://www.microsoft.com/about/companyinformation/visitorcenter/timeline.htm
7
Satya Nadella, CEO, Microsoft. Photo credit Microsoft
8
background ceo
On 4 February 2014, it was announced that its Board of Directors
appointed Satya Nadella the new Chief Executive Officer (CEO) of Microsoft.
Nadella had previously held the position of Executive Vice President of
Microsoft’s Cloud and Enterprise Group. Founder Bill Gates telegraphed the
company’s future direction when he stated in the press release that, “Satya
is a proven leader with hard-core engineering skills, business vision and the
ability to bring people together.” 12
Microsoft also announced that Bill Gates would step down as Board
Chairman and assume a new role on the board as Founder and Technology
Advisor “supporting Nadella in shaping technology and product direction.”
Satya Narayana Nadella was born August 19, 1967 in Hyderabad,
India. He traveled to the U.S. to study for an M.S. in Computer Science at
the University of Wisconsin-Milwaukee, receiving his degree in 1990.
Nadella has both technical and business acumen. He has a B.S. in Electrical
Engineering Degree from Manipal Institute of Technology from Mangalore
University, and an MBA from the University of Chicago Booth School of
Business. Prior to joining Microsoft in 1992 he worked at Sun Microsystems
as a member of its technology staff. Nadella said he, “always wanted to build
12 http://news.microsoft.com/2014/02/04/microsoft-board-names-satya-nadella-as-ceo/
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things”, and knew that he wanted to pursue computer science. He loves
cricket and credits it with teaching him about teamwork and leadership.
Innovation + management style
In a little more than one year Nadella has gone a long way in leading a
change of the culture of Microsoft from an insular balkanized behemoth to a
silicon valley startup. According to an article in Wired Magazine, “Microsoft in
the age of Satya Nadella” by Jessi Hempel, “Nadella developed much of his
management approach on the job”. The article goes on to say that he had 13
a life altering personal event that clarified his vision and resulted in his
“emphatic listening style”. His son Zain was born severely developmentally
disabled and this shifted his perspective.
As CEO, Nadella has restructured Microsoft to function more like the
tech companies that have surpassed it. Nadella has unsettled the
organization and has made clear that he understands what is needed to run
the business and what’s needed to foster creative activity. First he knows
that there are organizational roadblocks that have to be addressed, and he
has undertaken the four steps as outlined in the article, “Tough-Minded
Ways to Get Innovative” by Andrall E. Pearson. Nadella is a champion for 14
the HoloLens augmented reality headset project. He has the sponsorship of
13 Hempel, Jessi. “Microsoft in the age of Satya Nadella.” Wired, Issue 23.02, 064-079.
14 Pearson, Andrall E. “Tough-Minded Ways to Get Innovative”. Harvard Business Review. August 2002.
10
Bill Gates and this ensures that he has the resources and authority to make
things happen. With the opening of the innovation Garage to the public and
other initiatives he has created a collaborative environment for the sharing
of ideas, and lastly by flattening the hierarchy of Microsoft he has smoothed
the process for moving ideas through the system quickly. Here is a
snapshot of his first year. In March, 2014 Nadella introduced Office for the
iPad. On April 2, 2014 he made Windows free to manufacturers of devices
smaller than 9 inches. On May 29, 2014 Microsoft partnered with Salesforce
a long time rival. On September 15, 2014 Microsoft purchased Minecraft
maker Mojang for $2.5 billion. On October 9 he apologized for comments
made as a guest speaker at a women’s technology conference where he
discouraged women from asking for raises, imploring them to trust in karma.
On October 22, 2014 Nadella expanded Garage, Microsoft’s in-house idea 15
factory, to let the public chip in. November 12, 2014 Microsoft announced
that .NET software framework would be open source. December 15 Skype
translator in beta is released.
The silos are crumbling and in their place are cross-functional teams
with a mandate to innovate across any platform. Nadella abolished the
product divisions for a flatter more integrated and streamlined approach.
Just imagine the Skype team working with the Azure Cloud team and the
Office team.
15 Jha, Sonora. “How Satya Nadella Sounds a Lot Like My Brother And why that is not a good thing.” Seattle News Weekly. (Online Ed.) {Internet}. 2014, Oct. 14 [cited 2015, May 2]: Available from http://www.seattleweekly.com/home/954979-129/how-satya-nadella-sounds-a-lot
11
Satya Nadella in his first interview as CEO of Microsoft. Interviewed February
2014 by Steve Clayton, GM, Microsoft Storytelling.
https://youtu.be/T8JwNZBJ_wI
12
What makes microsoft successful
First there is the Windows Operating System and then there is
Microsoft’s Office Suite of software. Launched in 1990, Word, Excel,
Powerpoint, and now Access Database, Sharepoint etc., these applications
are in use by millions of businesses, organizations and individuals every day.
Over a billion people now use Office. Microsoft Word and Excel are still the
most widely used software for word processing and spreadsheets. At $140
per license for the least expensive version of Office, it’s no surprise that they
are still raking in the cash. They have a 90% market share according to
investopedia.com. Microsoft’s success is built directly on the Windows 16
platform.
conclusion
All indications are that Satya Nadella is the right person to lead
Microsoft forward. His green light for the Project HoloLens, augmented
reality goggles and Windows 10 which is a platform where developers from
other platforms - iOs, Android, Linux would be welcome portends a bright
future if the culture that was once closed can embrace an open innovation
mindset. The inflows and outflows described by Henry Chesbrough as
necessary to benefit from global collaboration are the opposite of the old
Microsoft culture. At this year’s Microsoft Convergence Experience Expo in
Atlanta, Georgia, Nadella made clear that Microsoft is focused on three
16 Investopedia.com. http://www.investopedia.com/stock-analysis/032014/real-secret-microsofts-success-msft-aapl-goog-ibm.aspx#ixzz3ZEM6gI3w
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things: “empowering people, organizations and industries.” Can they ever 17
claim the top spot for technology innovation again? There is only one
company that has ever done it, Apple, and although that seems an unlikely
event, so did powering a PC on every desk and in every home, but Microsoft
did it, didn’t they?
####
17 http://convergence.evo-td.com/library/KEY150001
14
Bibliography:
1. Helft, Miguel and Vance, Ashlee. “Apple Passes Microsoft as no. 1 in Tech”, Technology Section. The New York Times. (Online Ed.) {Internet}. 2010, May 26 [cited 2015, May 4]: Available from http://www.nytimes.com/2010/05/27/technology/27apple.html 2. Kim, W. Chan, and Renee Mauborgne. "Value innovation: the strategic logic of high growth." Harvard Business Review 75.1 (1997): 102+. Business Insights: Essentials. Web. 3 May 2015.
3. Hale, Constance. (Editor). Wired Style: Principles of English Usage in the Digital Age. 1996. HardWired. Publishers Group West. San Francisco. pg. 4
4. Friedman, Thomas L. “Moore’s Law Turns 50”. The New York Times Online. Opinion Pages. {Internet} 2015, May 13. [cited 2015, May 13] Available from http://www.nytimes.com/2015/05/13/opinion/thomas-friedman-moores-law-turns-50.html?_r=0
5. Jones, Tim. “Paradigms Lost”. RSA Journal, Vol. 153, No. 5525 (October 2006), pp. 28-31. Published by: Royal Society for the Encouragement of Arts, Manufactures and Commerce Stable URL:http://www.jstor.org/stable/41379736 . Accessed: 21/02/2015 13:46 6. Helfat, Constance E. and Quinn, J. Brian. “Open Innovation: The new Imperative for Creating and Profiting from Technology by Henry Chesbrough. Academy of Management Perspectives. Vol. 20, No. 2 (May, 2006), pp. 86-88. Published by Academy of Management. Available at URL:http://www.jstor.org/stable/4166240
7. http://news.microsoft.com/presskits/retailstores/
8. http://news.microsoft.com/facts-about-microsoft/
9. Wingfield, Nick. “40 Busy Years Later, Paul Allen, a Microsoft Founder, Considers His Creation”, Bits Section. The New York Times. (Online Ed.) {Internet}. 2015, May. 3 [cited 2015, May 4]: Available from http://bits.blogs.nytimes.com/2015/05/03/40-busy-years-later-a-microsoft-founder-considers-his-creation/?_r=0 Subscription may be required.
15
10. Microsoft.com. “Timeline”. Accessed May 2, 2015. Available from http://www.microsoft.com/about/companyinformation/visitorcenter/timeline.htm 11. http://news.microsoft.com/2014/02/04/microsoft-board-names-satya-nadella-as-ceo/ 12. Hempel, Jessi. “Microsoft in the age of Satya Nadella.” Wired, Issue 23.02, 064-079. 13. Pearson, Andrall E. “Tough-Minded Ways to Get Innovative”. Harvard Business Review. August 2002. 14. Jha, Sonora. “How Satya Nadella Sounds a Lot Like My Brother And why that is not a good thing.” Seattle News Weekly. (Online Ed.) {Internet}. 2014, Oct. 14 [cited 2015, May 2]: Available from http://www.seattleweekly.com/home/954979-129/how-satya-nadella-sounds-a-lot 15. Investopedia.com. http://www.investopedia.com/stock-analysis/032014/real-secret-microsofts-success-msft-aapl-goog-ibm.aspx#ixzz3ZEM6gI3w 16. http://convergence.evo-td.com/library/KEY150001
17. Wingfield, Nick. “Microsoft (Yes, Microsoft) Has a Far-Out Vision, Technology Section. The New York Times.” (Online Ed.) {Internet}. 2015, Apr. 30 [cited 2015, May 2]: Available from http://www.nytimes.com/2015/05/03/technology/microsoft-yes-microsoft-has-a-far-out-vision.html?ref=technology Subscription may be required.
18. Ulwick, Anthony W. “Turn Customer Input into Innovation”. Harvard Business Review. January 2002.
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