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by • July 13, 2013 • UncategorizedComments Off133

Does Microsoft have a Good Strategy or Bad Strategy?

(Based on Microsoft’s recent notes on strategy and realignment. Spoiler alert: they’re about to go on a serious startup shopping spree)

Before we begin, here’s their strategy, as stated. What do you think?

“Going forward, our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most.”

I mean, what sort of company would empower the activities people value least? And which global company wouldn’t want to reach customers around the globe? Let’s cut out the fluff & truisms to get to the heart of it:

Create a family of devices and services for individuals and businesses.

There might be a strategy in here! We’ve got 4 real ingredients:

  1. Consistent “family” of experiences across all devices
  2. Both devices and services
  3. Desirable for consumers
  4. Useful & safe for businesses

There are also some cute jabs thrown in against Apple and Google. For example, implying that the competitor’s devices are only good “for light fun, for example play[ing] solitaire.” Microsoft, on the other hand, is going to focus on the “serious” fun of watching sports and playing hardcore games.

Let’s break it down using Rumelt’s framework from Good Strategy/Bad Strategy:

  • Situation – an honest assessment of where we are, what we’re up against, and why we’re in trouble
  • Guiding Policy – at a high level, our general philosophy and approach
  • Actions – specific, doable steps that we can take today, based on the Guiding Policy

Here comes the fun bit!

Situation

The public version is masked in positive spin and skirts the difficulties of the situation, but it’s clear that a series of honest and difficult conversations have happened behind closed doors. Some of the changes in the documents sound a bit like “Let’s try harder,” but they still give us a sense of Microsoft’s view of the problems, dangers, and challenges.

“We will see our product line holistically, not as a set of islands.”

“All parts of the company will share and contribute to the success of core offerings”

“We will pull together disparate engineering efforts today into a coherent set of our high-value activities.”

“To improve engineering pace and quality, we will increase focus on our engineering systems, processes, and tools”

Interestingly, very few of the problems are about the market or competitors. Almost all of the major challenges are internal to Microsoft.

One might summarise the situation as, “We lack a focused strategy and the ability to execute on it.” The first step is acceptance.

Guiding Policy

The four points I listed above are my reading of the Guiding Policy based on the strategy statement. However, you can also see it broken out in Microsoft’s own words:

  1. A business model based on partner and first-party devices with both consumer and enterprise services
  2. Optimization for activities people value most
  3. A family of devices powered by a service-enabled shell
  4. Design for enterprise extensibility and enterprise needs

It’s dangerously close to being everything for everyone (services & devices, businesses & consumers, everything they value, apps!). Still, I generally like it, so long as management can ensure it keeps its edge.

I mentioned earlier that I thought “activities they people value most” is fluff. It could potentially be real, but I don’t think it’s a claim which carries a decision-making edge. If this stance drives Microsoft to reject Angry Birds from their app store, I’ll gladly renege.

Still, Microsoft does go on to list some specific high-value areas to focus on, including “serious fun, meetings, tasks, research, information assurance and IT/Dev workloads.” Will that inform their actions or are is it just a list of sure-would-be-nice-to-win categories?

Actions

The only concrete actions we’re privvy to are about creating better development tools, continuing to merge the various platform operating systems, and re-organising the engineering team. To be fair, that’s pretty good. Without doing the above, they’d be in trouble, and I particularly admire the re-org (more on that later). Still, there’s that pesky little task of beating iOS and Android.

The actions for winning the consumer war seem like a total disaster. In fact, there isn’t any discernible plan at all.

“We will continue to reinvent the core “shell” of our family of devices”
“We will keep evolving our new modern look”
“[Allow] people and their devices to capture, store and organize their “stuff” in new ways”

This all sounds a little muddy. On the bright side (for the startup ecosystem), you’ve got quotes like the following, which express the desirability and imporance of creating apps for:

“…Immersing them in live events and entertainment (including sports, concerts, education and fitness) while allowing interactive participation.”
“We also see opportunity in fitness and health because, for many, this is serious fun”

So Microsoft is going to create a category killer app for every “high-value” vertical? Colour me skeptical. Instead, what’s going to happen is that they’re going to try to build these apps, and then end up acquiring. I think Microsoft is going to go on a shopping spree to put Yahoo’s to shame: modern calendars, live sports viewing, time slot booking, email, presentations, document revisions, etc etc. These are going to be big, strategic acquisitions too, well beyond the startup’s revenues and traction. Every category Microsoft takes seriously here has a potential Instagram within it.

“…Focusing the whole company on a single strategy… This is a big undertaking. It touches nearly every piece of what we do and how we work.”

Focus gives a strategy its strength, but it’s hard because it means cutting everything else. And cuts can be politically, financially, and emotionally difficult. Still, they are going to try. The engineering team is being reorganised into 4 cross-device teams: OS, apps, clouds, and devices. There are some high-profile retirements.

Without the willingness to focus, all the rest of this would have been just arm-waving. But they’re making big moves, at least internally. As far as I understand it, I like the strategy. Despite plenty of optimistic fluff in the presentation, it has teeth and can illuminate a path through tough decisions.

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