Looking for Strategy as Microsoft Enters FY15

Looking for Strategy as Microsoft Enters FY15

What's the strategy this week?

Next week, Microsoft will hold its annual worldwide partner conference in Washington D.C., an event that always occurs right at the start of the firm's fiscal year. As such, WPC is often a time at which Microsoft floats its view of the future. But this year, Microsoft CEO Satya Nadella has stepped to the podium, at least virtually, a few days early with an open letter to employees (and thus to the world). The question: Is there any substance there?

If you listen to Windows Weekly, you know that Mary Jo Foley and I often—and this week in particular—kvetch about Microsoft's inability to communicate effectively. And while we appreciate that this shortcoming has given us ample material over the years, we've often called on the firm to be clearer and more open about what it's doing.

As if on cue, Microsoft CEO Satya Nadella published his open letter this morning. You can read the whole thing on the Microsoft web site, of course. But what I'd like to do here is parse through it and see whether I can pull out any substantive bits of actual strategy and new information. That is, talk is cheap. What's he really saying?

It's about strategy. Right up front, Mr. Nadella explains very clearly that this letter—and more vaguely that the month of July—is all about "a dialogue about Microsoft's bold ambition and core focus." Quarterly (and annual) earnings are coming soon. Microsoft will focus on its "core" in FY15 (July 2014 – June 2015). And more "engineering and organization changes" are coming. That is a lot of stuff crammed into a single paragraph.

Microsoft's view of the world. As previously stated, we live in a mobile-first and cloud-first world. Though many of the devices and screens that 3+ billion use to access the Internet are not running on Microsoft platforms, Mr. Nadella sees this as "a unique opportunity."

Microsoft's core. While "a PC on every desk and in every home" was a cute vision for the 1980's, today Microsoft sees itself as "the productivity and platform company for the mobile-first and cloud-first world." He says that Microsoft will "reinvent productivity to empower every person and every organization on the planet to do more and achieve more," which matches nicely to my previous commentary stating that Microsoft should focus on what it does best, which is productivity.

It's about productivity first. But what's productivity? "Productivity for us goes well beyond documents, spreadsheets and slides," Nadella explains. "We will reinvent productivity for people who are swimming in a growing sea of devices, apps, data and social networks. We will build the solutions that address the productivity needs of groups and entire organizations as well as individuals by putting them at the center of their computing experiences. We will shift the meaning of productivity beyond solely producing something to include empowering people with new insights. We will build tools to be more predictive, personal and helpful. We will enable organizations to move from automated business processes to intelligent business processes. Every experience Microsoft builds will understand the rich context of an individual at work and in life to help them organize and accomplish things with ease."

It's about reinventing productivity. I like this bit: "Across Microsoft, we will obsess over reinventing productivity and platforms. We will relentlessly focus on and build great digital work and life experiences with specific focus on dual use. Our cloud OS infrastructure, device OS and first-party hardware will all build around this core focus and enable broad ecosystems. Microsoft will light up digital work and life experiences in the most personal, intelligent, open and empowering ways."

Digital work and life experiences. Tied to the dual use bit above, Nadella straddles the work/play line but doesn't offer much in the way of play. "We'll push forward and evolve the world-class productivity, collaboration and business process tools people know and love today, including Skype, OneDrive, OneNote, Outlook, Word, Excel, PowerPoint, Bing and Dynamics."

Cloud OS. No one understands this term because it's not a product, but looking at it now a year later, I'm starting to see the genius of it: By commingling on-premise servers (private cloud) with hybrid and pure cloud (public cloud) services into a nebulous something called Cloud OS, Microsoft has a way to easily describe what used to be the server part of client/server infrastructure. Worried about the details? "The combination of Azure and Windows Server makes us the only company with a public, private and hybrid cloud platform that can power modern business," Nadella notes correctly.

Device OS and hardware. Here's the client side of what used to be the client/server infrastructure. He calls Windows the "Windows device OS" and refers to first party hardware (i.e. Surface/Lumia) as setting the bar ... for productivity experiences. (Again, the focus is on productivity.) "Windows will deliver the most rich and consistent user experience for digital work and life scenarios on screens of all sizes – from phones, tablets and laptops to TVs and giant 82 inch PPI boards," he writes. "Windows is the most secure, manageable and capable OS for the needs of a modern workforce and IT. Windows will ... enable Universal Windows Applications to run across all device targets. Windows will evolve to include new input/output methods like speech, pen and gesture and ultimately power more personal computing experiences." Nothing surprising, but it's a very big tent when you lay it out like that. But this bit I don't quite get: "We will responsibly make the market for Windows Phone, which is our goal with the Nokia devices and services acquisition." Make the market?

Xbox. Given all the productivity focus thus far, Nadella specifically calling out Xbox—rather than say, consumer products and services more vaguely—is interesting. And he implies that Xbox is not "core" to Microsoft but is still important. "Microsoft will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft."

Changes are coming. "Nothing is off the table in how we think about shifting our culture to deliver on this core strategy," Nadella writes. "Organizations will change. Mergers and acquisitions will occur. Job responsibilities will evolve. New partnerships will be formed. Tired traditions will be questioned. Our priorities will be adjusted. New skills will be built. New ideas will be heard. New hires will be made. Processes will be simplified. And if you want to thrive at Microsoft and make a world impact, you and your team must add numerous more changes to this list that you will be enthusiastic about driving." I love that bit about "tired traditions" since this is something I write and speak about all the time: All too often, we continue to do things—manage a music collection, say, or storage in general—in ways that are familiar but also archaic. It's odd to me that something "new" like technology could be so bound up in tradition, but it often is.

Customer-focused. Microsoft will "obsess over its customers," will deliver the experiences those customers need and want in this mobile first, cloud first world, and will be more effective in predicting and understanding what customers need. It's not clear how any of that will happen.

Faster. The rapid release model is now formal policy, apparently. "We will streamline the engineering process and reduce the amount of time and energy it takes to get things done," he said, in a move that can only be described as "anti-Sinofsky." "You can expect to have fewer processes but more focused and measurable outcomes. You will see fewer people get involved in decisions and more emphasis on accountability."


I guess the key take-aways are something like the following. The world is changing and Microsoft is changing to adapt to that, though it will continue to evolve core products like Azure/Server, Windows, Phone and Office as well. As such, Microsoft will focus on productivity first and, aside from Xbox, pretty much just productivity. It will deliver the products that customers want, and do so more quickly.

From a specifics standpoint, there isn't really much there. Mr. Nadella came out emphatically for keeping Xbox and for continuing to invest in Windows Phone and Surface.

Anything else stick out in there for you? Anything new/different that I missed?

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