He’s locked his successor into a plan with little wiggle room
Like a juggler walking away with dozens of objects suspended in the air, Steve Ballmer is leaving his successor at Microsoft not only a tough act to follow but an even tougher act to continue.
During his last months at the company, Ballmer has set in place a string of changes that won’t be anywhere near completion when he goes, even if his replacement doesn’t come on board until next August, the deadline for him to leave.
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That means whoever it is has to come up to speed fast and have the talent to implement Ballmer’s plans or to change them mid-course without having things fall apart.
Here is a look at some of what Ballmer leaves and how it might affect the products and services Microsoft sells.
The big management picture
Ballmer is responsible for One Microsoft, the overarching plan announced in July that that relaxes the divisional separations under which the company was organized before.
“This means we will organize the company by function: Engineering (including supply chain and data centers), Marketing, Business Development and Evangelism, Advanced Strategy and Research, Finance, HR, Legal, and COO (including field, support, commercial operations and IT),” Ballmer said in the memo announcing the changes.
This calls for Microsoft’s disparate products to be seen as part of a larger coherent whole, something not immediately obvious considering they range from gaming consoles to data center infrastructure. “All parts of the company will share and contribute to the success of core offerings, like Windows, Windows Phone, Xbox, Surface, Office 365 and our EA offer, Bing, Skype, Dynamics, Azure and our servers,” Ballmer wrote. “We will see our product line holistically, not as a set of islands.”
Big ideas but even in his overview of how they will be implemented Ballmer leaves a lot to sort out.
For example, Tami Reller is executive vice president of marketing under the new organization, but here’s what Ballmer says about the job: “Mark Penn will take a broad view of marketing strategy and will lead with Tami the newly centralized advertising and media functions.” This begs the question of who exactly is in charge.
There is similar ambiguity with Dynamics, Microsoft’s ERP and CRM software lines. “Kirill Tatarinov will continue to run Dynamics as is, but his product leaders will dotted-line report to Qi Lu, his marketing leader will dotted-line report to Tami Reller and his sales leader will dotted-line report to the COO group.”
Tony Bates runs business development and evangelism but also has some uncertain sway over OEM partners. “OEM will remain in [the sales marketing and services group] with Kevin Turner with a dotted line to Tony who will work closely with Nick Parker on key OEM relationships.”
The new CEO will be expected to execute these sometimes unclear directives or to sort out who’s in charge in particular instances. The structure is flexible, but it leaves some individuals answering to two masters.
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Ballmer’s plan draws management lines, then creates project management rules that cross them. “Each major initiative will have a champion who will be a direct report to me or one of my direct reports. The champion will organize to drive a cross-company team for success, but my whole staff will have commitment to the initiative’s success. We will also have outgrowths on those major initiatives that may involve only a single product group.”
Nokia commitment
Ballmer has locked the company in to a $7.2 billion deal to buy Nokia and make use of its phones, phablets and tablets. While the company’s own Surface tablets could have been discontinued – it took a $900 million write-down for Surface RT tablets – it’s unlikely the board of directors will walk from the Nokia investment.
The practical goal is to sell more phones running the Windows Phone operating system, which held just 3.6% of the market share in the third quarter of this year, miles behind Android (81%) and significantly lagging Apple’s iOS (12.9%). The task is to find a strategy for producing and selling the phones in markets where demand is high but still unfulfilled.
To do so means addressing the dearth of signature apps to run on the phones, an area where Android has a significant lead. Microsoft has kicked off Project Siena to help address the problem. Siena is an app to help non developers develop Windows Phone apps.
OS alignment
Microsoft indicates without much detail that it is somehow bringing its various operating systems closer together in order to promote a common user experience and make it simpler for developers to reuse code when they port a new app from one platform to another. Ballmer has set the company on course to more commonality among Windows (including Windows RT, Xbox and Windows Phone, with some talk of merging Windows Phone and Windows RT into one.
A related but apparently different operating system reform called Threshold has been reported by Mary Jo Foley.
Threshold seems to incorporate a vision he describes in a memo written when he announced One Microsoft. “Our devices must support the same high-value activities in ways that are meaningful across different device types” he wrote. “Developers must be able to target all our devices with a common programming model that makes it easy to target more than one device.”
Project Threshold will ensure that all the operating systems support the same set of high-value activities – personal expression, decision-making and tasks, social communication, and serious fun. That means a common user interface backed by a common service shell in the cloud that delivers the services to all forms of devices. He outlines what he means in the memo, but it’s still pretty vague.
Personal expression seems to incorporate Office 365 – the cloud Office service that includes client software – for more producing and viewing complex documents. “These documents will be readable from a browser, but the experience will be infinitely better if read, annotated or presented with our tools,” the memo says.
“Decision-making and tasks mean different things in personal versus professional lives, yet they are important in both places,” he says in the memo. “Bing, Excel and our InfoNav innovations are all important here.”
Social communication is meant to designate “meetings, events, gathering, sharing and communicating.” But these activities won’t copycat what is already being done via social media. “We can create new ways to interact through hardware, software and new services…We will not focus on becoming another social network for people to participate in casually, though some may use these products and services that way,” he says.
By serious fun he means activities that fully engage participants for a long time during individual sessions. “Interactivity takes engagement and makes things serious; it really requires differentiated hardware, apps and services,” he says, broadly pointing to what it might entail.
No doubt there is a plan for that which has not been made public but which the new CEO will be locked into.
Placating OEMs
Ballmer has launched the second generation of its two models of Surface tablets, changing the names from Surface RT to Surface 2 and from Surface Pro to Surface Pro 2, which is a full-blown Windows 8 PC with a touch screen. These will have to be reconciled with whatever Nokia gear might be seen as redundant.
But the larger question for Microsoft is how to continue making Surface devices and selling (formerly Nokia) tablets and PCs without upsetting its OEM partners even more in order to protect OEM revenue.
This is delicate because Microsoft needs to continue its devices initiative given the money it’s already invested. Yet it still relies on partners to license its operating system to make devices of their own.
The point is that despite Microsoft hardware partners making arguably better Windows 8 products, the company has bought its way into the hardware business at such a high price that it would be difficult for Ballmer’s successor to walk away from his decision. The company has committed to a four-month Surface ad campaign for 2014 and rumors of a Surface Mini coming out sometime next year persist.
Into the cloud
The One Microsoft manifesto Ballmer issued in July sets down the overall plan: create a set of devices that can reach cloud services that include customers’ personal data stored in that cloud.
This cloud shell of services that support all its devices is evolving and embraces Azure, Office 365, Xbox Live and SkyDrive. It represent a lot of parts moving toward the goal of presenting customers with unified and integrated access to all their personal resources.
The process is started and is such a key part of the overall Microsoft mission that the new CEO will not be able to back off it and will be challenged to bring it to fruition as quickly as possible.
Personnel
Ballmer seems serious in his manifesto about Microsoft workers being more collaborative. “Collaborative doesn’t just mean ‘easy to get along with.’ Collaboration means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value,” he says.
Toward that end he eliminated one of the most criticized aspects of working at Microsoft, stack ranking: job performance reviews that pit team members against each other rather than encouraging collaboration. It forces workers to try to stand out individually on collaborative projects in order to avoid bad reviews or even firing. The system could penalize workers unduly or fail to reward them sufficiently because it imposes a bell curve over the performance rankings of each group.
On paper it seems like a good idea to get rid of it as a way to produce better work and better morale, but in practice it’s still uncertain what it will unleash. The impact on Microsoft in general has yet to play out.
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