Feb 8 2014
This week, Microsoft moved forward with a management team that was both familiar and radically different. Satya Nadella, a 20-year Microsoft veteran took the helm as CEO and at his right hand, Bill Gates returned as Founder and Technology Advisor.
The company is far from a failure, with sales of $83 billion and a market worth of over $300 billion, but the company has been plagued with slow growth, declining market share and troubled product launches. (Raise your hand if you have a Zune..?)
In his letter to employees, Nadella called Microsoft a company that empowers people to “do more.” There’s no doubt this is true, but for Microsoft to regain the power and respect it once possessed, it should start by doing less.
No organization can do everything well, and those that try to be all things to all people generally end up doing nothing well.
Yet Microsoft has endeavored to jump into almost every category of computing. No other company has attempted a broader offering. From video games to search engines to phones to servers and on and on, Microsoft seems to respond to every competitive innovation with “we can do that, too.” But what they should be asking is “can we do it better?”
When we look at what Microsoft does best, the answer is surprisingly clear. Microsoft’s largest segment is its Business Division, which houses the nearly ubiquitous Microsoft Office and other business software. Next in line is the Server Division, which sells hardware and tools businesses use to store and share data. The Windows Division, housing the popular operating system, has fallen to third place in revenue. It remains the operating system of choice for the business world but has lost ground in home and education. These three divisions represented $64 billion of the company’s $78 billion in revenue last year, while entertainment and devices accounted for only $10 billion.
What we can learn from looking at the numbers is that for all the company’s work in games, music devices and other tools for consumers, Microsoft derives most of its revenue, and arguably most of its reputation, from the products and services it offers to businesses. Microsoft may not be the favorite brand of your son with the garage band, but it’s certain to be the choice of your CFO.
Now imagine for a moment that Microsoft threw all of its massive financial strength into becoming the company that helps businesses and organizations “do more.” Imagine it told Apple and Google “you can have the consumer, but your encroachment into business ends today.” What could they do to reinforce their lead?
They might start by buying or partnering with an army of growing technology companies that also serve business. Companies like Intuit, maker of QuickBooks, the accounting software of choice for small business; Salesforce.com, where small businesses go to manage sales efforts; LinkedIn, the social network for business contacts; or even Kickstarter, a funding platform for start-up entrepreneurs. Microsoft has the capacity to acquire any of a vast pool of potential targets from giants like SAP to smaller businesses like Evernote. Imagine what some of these additions could mean to the company’s relevance as a business technology company.
A focus on organizational computing could also differentiate existing products like tablets, phones, the Explorer browser and Bing search engine. What if each was completely customized to be perfect for business use? Features would be optimized for the needs of business users and the IT managers who serve them. Microsoft would no longer have to beat companies like Apple and Google at everything, they could focus on perfecting products for business, safe in the knowledge that their competitors would not likely follow them.
It’s all happened before. IBM, another titan in business technology, strayed into personal computers in 1981 and quickly became a leader, but after lackluster results and a loss of focus, the company sold off its PC business, and instead of shrinking, the company’s revenues and stock price have grown.
Certainly, there’s a good economic case to be made for focusing on businesses and organization, but the real value of such a move can’t be calculated in financial terms alone. Microsoft is a company that aspires to change the world, and a tighter focus on the needs of organizations may be the best avenue for accomplishing this.
Globally, innovative businesses are starting up at record rates. They have the capacity to reshape our economies and lives in ways that can increase prosperity and sustainability worldwide. At the same time, governments and non-government organizations are working to make our world safer and more equitable. But these organizations won’t survive without help. They need tools that boost efficiency, empower creativity and increase productivity. Exactly the kind of tools Microsoft makes best.
In his first letter to employees, Satya Nadella said, “I truly believe that each of us must find meaning in our work. The best work happens when you know that it’s not just work, but something that will improve other people’s lives.” For Nadella and Gates, improving other people’s lives isn’t about helping Microsoft to “do more;” it’s about empowering millions of organizations to “do more” with a little help.