Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Microsoft CEO Satya Nadella: Ready to Think Outside the "Devices and Services" Box

By Anders Bylund - Jul 12, 2014 at 10:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Former Microsoft leader Steve Ballmer wanted to focus his company on a "devices and services" strategy. New CEO Satya Nadella takes the next logical step.

Just before stepping out of Microsoft 's ( MSFT -1.79% ) CEO office, Steve Ballmer set the company to focus on a devices and services strategy. It's a carbon copy of the strategy that made Apple ( AAPL 3.16% ) the most valuable company in the world, and Redmond has been making steady headway toward this goal. The traditional old software sales core is giving way to Microsoft-branded tablets and set-top boxes, with Nokia's mobile expertise thrown in for good measure.

But Satya Nadella, who took the reins from Ballmer in February, is ready to move beyond the simple "devices and services" thinking.


Microsoft CEO Satya Nadella is looking to make some big changes to his company. Source: Microsoft.

In an open letter to Microsoft employees today, Nadella started to narrow down his long-term focus. "While the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy," Nadella wrote.

Working in this "cloud-first and mobile-first world," it's not good enough to simply sell a few products into the cloud and mobile markets. Instead, Nadella wants to rebuild the entire company so that every effort feeds into these two core opportunities.

Microsoft is launching this approach from a strong platform. "We help people get stuff done," Nadella wrote. Redmond's tools are already involved in everything from writing term papers and composing poetry to managing entire cities or fighting HIV infections. Put it all together: "This is an incredible foundation from which to grow."

Nadella promises to always put the customer first, and to equip them with whatever it takes to make a difference in the world. Lofty goals for sure, especially coming from a late starter and fringe player in the mobile space. When it comes to smartphones and tablets, Microsoft's market share is disappearingly tiny next to Apple and Android.

To get this done, Nadella's "customer-obsessed" culture will be paired with a leaner management structure and faster, more data-driven decision processes. It seems appropriate to build big data analysis into the very structure of a modernized business model.

"We will streamline the engineering process and reduce the amount of time and energy it takes to get things done," Nadella wrote. "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." And in the end, "every team across Microsoft must find ways to simplify and move faster, more efficiently."

He didn't explicitly say that the buck stops at the top, but that's the vibe I'm getting out of this letter. If this cultural transformation is successful, Microsoft should end up with shorter and straighter decision routes from top to bottom. Nadella talked about large-scale retraining efforts, and a newfound appetite for experimentation.

At some point, the flatter organization he's investing in should also result in heads rolling among middle management. Again, no direct promises or threats to this effect, but headcount reductions must follow from this strategy. And Nadella did spend some ink on accountability, which should help him make the most of the coming cuts.

We'll know more concrete details on Nadella's emerging vision over the next few weeks. He plans to expand on this letter in two weeks, when Microsoft reports fourth-quarter results. Expect a steady stream of reorganization announcements for the rest of July, and then buckle in for the final details at the Microsoft Global Exchange conference near the end of the month.

I like Satya Nadella's open attitude toward trying new ideas, and I hope he can execute on the promises he made in this letter. Again, we'll know much more during the next few weeks. I, for one, can't wait to see Microsoft repainting its bigger picture.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$165.30 (3.16%) $5.06
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$330.59 (-1.79%) $-6.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
673%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.