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Satya Nadella's new mission for the company carries some colorful language; it should be interesting how it plays out in practice

Microsoft Corp. (MSFT) is seeing the first major executive ranks shakeup of Satya Nadella's sixteenth-month reign as CEO, a shakeup intended to "drive engineering alignment against the company’s core ambitions."

Late last week Microsoft's Nadella wrote the latest of several opne letters to staff.  In this latest letter he vowed to show an obsession for customer satisfaction and to bring Microsoft's software to every platform, implying even rivals like Google Inc. (GOOG), and Apple, Inc. (AAPL) were invited to the party.

I. Cha Cha Cha Changes

But before I dig into Nadella's letter, let's first recap what's been brewing the last couple weeks -- executive reorganization.

June's changes follow the heavy executive shuffling that occurred at the end of Steve Ballmer's reign as CEO, back in 2013.  Those effected by the latest shifts include [1][2]:

Kirill Tatarinov -- Executive Vice President (EVP) of Business Solutions
  • Fate
    • Departing
  • Desination
    • Unknown
  • Accomplishment
    • Grew Microsoft Dynamics into a $2B USD business, rivalling salesforce.com, inc. (CRM); was rewarded with Nadella's former position prior to becoming CEO.
  • Reason for Leaving
    • Tatarinov's unit was located in Bellevue’s Eastgate area, away from the company’s downtown Bellevue cluster and main Redmond campus.  It was only unit that failed to integrate into Microsoft's centralization strategy [source].
  • What's Next
    • Scott Guthrie, Executive Vice President (EVP) of Cloud Computing will inherit the Business Solutions unit, inc. Dynamics and will attempt to finish the integration (likely moving the unit).  Guthrie has been with Microsoft since '97 (18 years) and helped to launch .NETWindows Azure (codename: Midori), and Windows Phone efforts.
    • Chris Caposella, a 20 year veteran of the company and its chief marketing officer (CMO), will take over Dynamics marketing responsibilities.
Microsoft Reorg -- Guthrie takes over Dynamics

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Stephen Elop -- EVP of Devices
Microsoft Reorg -- Myerson gets Devices

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Mark Penn -- EVP Advanced Strategy
  • Fate
    • Departing
  • Desination
    • Penn is partnering with former Microsoft CEO and current Clippers team owner Steve Ballmer to launch the Stagwell Group LLC fund.  Stagwell has $250M USD in investment and $750M USD in leverage to make for a total of $1B in investing power.  It will focus on advertising, publishing, media, and other related digital fields firm.
  • Accomplishment
  • Reason for Leaving
    • Parting ways was mutually beneficial.  Penn was one of several strategy-aimed executives, and as his campaigns failed to resonate somewhat, he was in a vulnerable position.  And give his opportunities, Penn was going to make this decision any harder on his employer.
  • What's Next
    • A soft landing at Stagwell.  Jumping into leading a billion dollar hedge fund isn't such a bad fate.  

      Penn comments:
      "Every client is looking for how to combine good advertising creative with good data analytics.  I don’t think they’re getting those answers from the companies they’ve got, even if they’ve got some of the biggest companies in the world.  There’s a lot of room for new blood in the advertising and marketing industry."

      The move places more strategic responsibility in the lap of long-time company veteran and returnee, Kurt DelBene.  In late 2013 DelBene had briefly "retired" from Microsoft to lead an effort to secure and repair the IT presence of "Obamacare".  Having accomplished modest success at turning around the struggling federal insurance marketplace iniative on the IT front, he rejoined Microsoft's ranks in April as its chief of corporate strategy.  Insider chatter indicates DelBene's stock is rising fast in Redmond.
Microsoft reorg -- Penn leaves for Ballmer's Stagwell Group LLC

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Eric Rudder -- EVP Advanced Strategy
  • Fate
    • Departing
  • Desination
    • Unknown
  • Accomplishment
    • Everyone can agree on one thing -- Rudder was brilliant during his nearly three decades (27 years, to be precise) with Microsoft.  After serving as a page in the 1990s to then-CEO Bill Gates, Rudder quickly became a rising star at Microsoft, founding the server and tools business, before transitioning to a role as head of Microsoft Research.  He also carried the title chief technical strategy officer for some time.  Around 2000-2005 many considered him a top candidate to succeed Ballmer as CEO.  But by the 2010 the glow around Rudder was starting to dim as Microsoft struggled in key sectors, such as mobility.  By the time Ballmer left, few considered him a serious challenger for the CEO spot.
  • Reason for Leaving
    • Directly, you could trace it to Rudder being bumped out of his leadership role in 2013 by Harry Shum, a younger cloud-savvy executive from China who had been leading Microsoft's Bing search effort.  Rudder was awarded the title of "Advanced Strategy", but with the return of DelBene, it was unclear how their largely overlapping titles might coexist.
  • What's Next
    • Whether its a relaxed retirement as a venture capitalist, a role at some other prominent firm, or a turn at leading fresh startups, Rudder definitely has the talent to stay on the high-tech stage for decades more.  Microsoft just wasn't his best opportunity anymore, it seems, but there's plenty of demand for talent such as his.

      His departure clears way for DelBene to gain even more power.  DelBene is now Microsoft's undisputed chief strategy office (CSO), in effect, having inherited the roles of the company's two other strategy officers -- Penn's consumer facing CSO nameplate and Rudder's research-leaning "Advanced Strategy" nameplate.  As with the Tatarinov's exit, CMO Capossela also gets extra responsibilities, inheriting the Education marketing role.  Qi Lu (not pictured) also gets additional educations software responsibilities, as well.
Microsoft reorg Delbene gets strategy

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Overall one could observer that Nadella is looking to elevate Microsoft's mobile-centric executives, including Myerson and Guthrie, both of whom played vital roles in launching Windows Phone.  Some also speculate that by putting both devices and OS development under the same roof -- Myerson's new "Windows and Devices Group" -- Microsoft is looking to channel a bit of Apple-like synergy and tight integration.

One thing most have overlooked is that Microsoft may save a bit of dime in terms of vested options, by letting these executives go when it did.  Many, including Rudder had been promised a piece of a $60M USD executives incentive package announced in 2013 as a reward for staying through the Ballmer's reorg that summer.  However, many of those share bonuses would only vest if the employee stayed on a full 30 months. For those counting, it's been about 22 months since then.  So Rudder will likely lose part of his bonus, helping to offset whatever exit incentives he's being given.

The reorg also marks the emergence of a new top three under Nadella -- Myerson, Guthrie, and Qi Lu.  Myerson leads the Windows and Devices Group, Guthrie heads up the Cloud and Enterprise (C+E) team, and Qi Lu will manage the Applications and Services Group (ASG).  Together the three control most of Microsoft's product.

A final note -- these changes will surely run deepere than the announced departures.  This is evidenced by the departure of Jo Harlow, Microsoft's head of phones.  While her departure isn't quite as big a surprise given the Nokia layoffs and the struggles of the Lumia line, it also likely represents the ripple effect these departures will have -- for better or for worse.

II. The Letter

Just over a week after the announcement of the shakeup, Nadella took to the keyboard to offer up words of guidance to the new look leadership and there staff.  The full letter (via Geekwire) is seen below.  I've highlighted some of the interesting bits:

Team,
 
I believe that we can do magical things when we come together with a shared mission, clear strategy, and a culture that brings out the best in us individually and collectively. Last week I shared how we are aligning our structure to our strategy. Today, I want to share more on the overall context and connective tissue between our mission, worldview, strategy and culture. It is critical that we start the new fiscal year with this shared vision on what we can do and who we want to become.
 
Mission. Every great company has an enduring mission. Our mission is to empower every person and every organization on the planet to achieve more. I’m proud to share that this is our new official mission statement. This mission is ambitious and at the core of what our customers deeply care about. We have unique capability in harmonizing the needs of both individuals and organizations. This is in our DNA. We also deeply care about taking things global and making a difference in lives and organizations in all corners of the planet.
 
Worldview. We must always ground our mission in both the world in which we live and the future we strive to create. Today, we live in a mobile-first, cloud-first world, and the transformation we are driving across our businesses is designed to enable Microsoft and our customers to thrive in this world. It’s important to note that our worldview for mobile-first is not just about the mobility of devices; it’s centered on the mobility of experiences that, in turn, are orchestrated by the cloud. That is why we think of these two trends together. What we do with our products and business models has to account for this fundamental transformation.
 
Strategy and ambitions. Our strategy is to build best-in-class platforms and productivity services for a mobile-first, cloud-first world. Our platforms will harmonize the interests of end users, developers and IT better than any competing ecosystem or platform. We will realize our mission and strategy by investing in three interconnected and bold ambitions.
 
1. Reinvent productivity and business processes
2. Build the intelligent cloud platform
3. Create more personal computing
 
These ambitions utilize a unique set of assets that span productivity services, cloud platform, our device platform and our family of devices. There is an explicit path dependence on how we achieve the “inter-connectedness” between the various elements of our strategy to gain momentum.
 
· First, we will reinvent productivity services for digital work that span all devices. We will also extend our experience footprint by building more business process experiences, integrated into content authoring and consumption, communication and collaboration tools. We will drive scale and usage by appealing to “dual-use” customers, providing productivity services that enable them to accomplish more at work and in the rest of their life activities with other people.
 
· Second, all these experiences will be powered by our cloud platform – a cloud that provides our customers faster time to value, improved agility and cost reduction, and solutions that differentiate their business. We’ll further provide a powerful extensibility model that is attractive to third-party developers and enterprises. This in turn enables us to attract applications to our cloud platform and attach our differentiated capabilities such as identity management, rich data management, machine learning and advanced analytics.
 
· Finally, we will build the best instantiation of this vision through our Windows device platform and our devices, which will serve to delight our customers, increase distribution of our services, drive gross margin, enable fundamentally new product categories, and generate opportunity for the Windows ecosystem more broadly. We will pursue our gaming ambition as part of this broader vision for Windows and increase its appeal to consumers. We will bring together Xbox Live and our first-party gaming efforts across PC, console, mobile and new categories like HoloLens into one integrated play.
 
Strength across all the ambitions enables us to deliver high value to our customers while providing us with the ability to differentiate ourselves from our competitors.
 
Culture. Perhaps the most important driver of success is culture. Over the past year, we’ve challenged ourselves to think about our core mission, our soul — what would be lost if we disappeared. That work resulted in the mission, strategy and ambitions articulated above. However, we also asked ourselves, what culture do we want to foster that will enable us to achieve these goals?
 
We fundamentally believe that we need a culture founded in a growth mindset. It starts with a belief that everyone can grow and develop; that potential is nurtured, not predetermined; and that anyone can change their mindset. Leadership is about bringing out the best in people, where everyone is bringing their A game and finding deep meaning in their work. We need to be always learning and insatiably curious. We need to be willing to lean in to uncertainty, take risks and move quickly when we make mistakes, recognizing failure happens along the way to mastery. And we need to be open to the ideas of others, where the success of others does not diminish our own.
 
We have the opportunity to exercise our growth mindset every day in three distinct areas:
 
· Customer-obsessed. We will learn about our customers and their businesses with a beginner’s mind and then bring solutions that meet their needs. We will be insatiable in our desire to learn from the outside and bring that knowledge into Microsoft, while still innovating to surprise and delight our users.
 
· Diverse and inclusive. The world is diverse. We will better serve everyone on the planet by representing everyone on the planet. We will be open to learning our own biases and changing our behaviors so we can tap into the collective power of everyone at Microsoft. We don’t just value differences, we seek them out, we invite them in. And as a result, our ideas are better, our products are better and our customers are better served.
 
· One Microsoft. We are a family of individuals united by a single, shared mission. It’s our ability to work together that makes our dreams believable and, ultimately, achievable. We will build on the ideas of others and collaborate across boundaries to bring the best of Microsoft to our customers as one. We are proud to be part of team Microsoft.
 
If we do all of this, we will achieve our mission to empower every person and organization on the planet. Beyond that, we will make a difference and find deep meaning in our work. We stand in awe of what humans dare to achieve, and we are motivated every day to empower others to achieve more through our technology and innovation.
 
When we come together as a team, with our exceptional talent and the mindset of a learner, we will grow as individuals, we will grow as a team, we will grow with our customers and partners, we will grow our opportunity, and we will grow our business going forward. And, ultimately, we will grow the impact we have in the world.
 
We’ve already started this evolution with things like OneWeek and Hackathon, customer feedback loops, our focus on usage in the engineering teams, our performance review model, as well as our diversity and inclusion efforts including the new unconscious bias training. We will do more and more to support the culture we have and recognize impact when we see it.
 
A good example of our culture in action right now is the work around Windows. span style="BACKGROUND-COLOR: #83f52c">We have approached Windows 10 with a growth mindset and obsession for our customers. We have the opportunity to connect with 1.5 billion Windows customers in 190 countries around the globe. We aspire to move people from needing Windows to choosing Windows to loving Windows. … Certainly we want to upgrade as many of our current Windows 7 and 8.1 customers to Windows 10 as possible through our free upgrade offer. More than that, though, we see this as an opportunity to support and celebrate how people and communities upgrade their world every day. To that end, starting on July 29 when Windows 10 becomes available, employees are invited to volunteer some time and upgrade their communities as part of the broader movement. More details will be available in the coming weeks — our hope is that not only our employees, but customers and partners as well, will get involved and be inspired. Together, we can make a big difference in our world.
 
I believe that culture is not static. It evolves every day based on the behaviors of everyone in the organization. We are in an incredible position to seize new growth this year. We will need to innovate in new areas, execute against our plans, make some tough choices in areas where things are not working and solve hard problems in ways that drive customer value. I really do believe that we can achieve magical things when we come together as one team and focus. I’m looking forward to what we can achieve together in FY16.
 
Satya

While it's not a big surprise to see Nadella plugging Windows 10, considering the anticipation surrounding it, his passionate tone is someone more interesting.

Windows 10
Windows 10 is Microsoft's not-so-secret weapon.

In a way his wording reminds one of past bold tech leaders including Ballmer and Jobs.  Perhaps the quiet cloud guru isn't quite as quiet as everyone thought.

Satya Nadella
Microsoft CEO Satya Nadella speaks at a conference in 2014. [Image Source: AP]

Also the comments about biases and diversity are someone interesting, given the backlash Nadella faced over his comments last year regarding female tech employees and asking for raises.  While he did a relatively good job of clearing up that misunderstanding, clearly diversity and inclusion remain a sensitive topic and one he looks to earn higher marks on moving ahead.

Sources: Microsoft (on GeekWire), via Neowin, Microsoft [official blog] [1], [2]





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