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How Microsoft Became Innovative Again

Behnam Tabrizi

microsoft case study strategic management

Inside the cultural turnaround that helped the tech giant think like a startup.

How did Microsoft revive its culture of innovation? For years, the company has been written off for playing defense on its position in the tech world. But, as signaled by its partnership with OpenAI and its challenge to Google’s search supremacy, it has gone back on the offense. The about face was, at its core, a cultural shift, driven by CEO Satya Nadella. He drove this by inviting an existential moment when he stepped into the job, reconsidering the company’s purpose. Then, he laid out strategic changes that would enable the company to think more like a startup, and made business decisions that committed the company to this new direction.

For years now, observers of tech have written off Microsoft as a 20th-century phenomenon, fat and happy from its Windows monopoly. The tech giant hadn’t had a breakthrough innovation in decades. It was rich enough to be a fast follower, but too big and bureaucratic to lead in any market. Jeff Bezos was known to gesture east and admonish his Amazon colleagues not to become complacent like their Seattle neighbor.

BT Behnam Tabrizi has been teaching “Leading Organizational Transformation” at Stanford University’s Department of Management Science and Engineering and executive programs for more than 25 years. An expert in organizational and leadership transformation, he has helped thousands of CEOs and leaders plan, mobilize, and implement innovative transformational initiatives. He has written ten books, most recently Going on Offense : A Leader’s Playbook for Perpetual Innovation (IdeaPress Publishing, August 2023). TabriziBehnam

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October 2017
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The Transformation of Microsoft

Format: Print
| Language: English
| Pages: 15

About The Authors

C. Fritz Foley

E. Scott Mayfield

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The Transformation of Microsoft By: C. Fritz Foley and F. Katelynn Boland

How Microsoft’s innovations made it a technology giant

Table of contents.

Microsoft is an American multinational technology corporation that offers innovative personal computer software and hardware products and services to advance human and organizational achievement.

Microsoft is a household name today and has grown exponentially to become the top producer of computer software, consumer electronics, personal computers, and related services. Hard to believe that it was just a small software company founded in 1975, providing interpreters such as the BASIC interpreter for the Altair 8800.

Microsoft’s market share and key statistics in 2021

Revenue of $168 billion
Operating Income of $70 billion
Workforce of 181,000 employees
Earnings per share of $8.1
Invested more than $20 billion in Research and Development
Stock Price of $336 as of Dec 2021
Market cap of $2.5 trillion
Market share of 73% in desktop operation system (OS) worldwide
Market share of 85% in office suite market

Microsoft’s 47 years long journey has been an incredible series of strategic breakthroughs, enabling the company to redefine the information technology industry and transform itself over the years to usher in the future.

Let’s take a closer look at Microsoft’s tremendous growth…

Microsoft Cements Itself By Offering Essential Software To Prominent Hardware Manufacturers

Before Microsoft rose to dominance in the personal computer operating systems market, it was simply known as a business venture started by two friends – Bill Gates and Paul Allen – who were eager to explore computer programming.

Bill and Paul were both math and programming prodigies who spent most of their time playing with computers and writing programming codes.

The inspiration for starting Microsoft came in 1975 when Paul Allen suggested to Gates that they program a BASIC interpreter for the Altair 8800 developed by MITS ; thereby enabling users to enter and run programs in the BASIC language.

Following the successful development and demonstration of the interpreter which was marketed by MITS as Altair BASIC , Gates and Allen moved to Albuquerque and, in April 1975 , co-founded Micro-Soft - short for micro-computer software.

It was not until 1979 that Bill Gates used the term Microsoft to refer to the company, and since then, it has become the official name that is renowned all over the world.

Microsoft Signs A Strategic Contract To Develop Essential Software

In 1980, Microsoft formed its first crucial partnership with International Business Machines (IBM), which entailed creating an operating system for the in-development IBM Personal Computer (PC) .

Although Microsoft had already been working on developing the BASIC programming language for the IBM PC, it had not yet developed an operating system. Nevertheless, Microsoft capitalized on the opportunity since it knew that Seattle Computer Products (SCP) had developed an operating system called QDOS (Quick-and-Dirty Operating System) which could be refined to suit the IBM PC.

Thus, in July 1981, Microsoft purchased full rights from the SCP for their operating system and further developed it for the IBM PC, which was scheduled to ship in a few weeks. Although the name of the operating system on the IBM PC was the IBM PC-DOS it was wholly developed by Microsoft.

Around the same time, the company became a privately held corporation and moved to Bellevue, Washington as it was hard to recruit top programmers to Albuquerque.

Microsoft Leverages Its Operating System To PC Manufacturers

In its contract with IBM, Microsoft had included a clause that allowed it to sell the operating system it had developed to other companies under the name of MS-DOS . The move paved the way for Microsoft to become the dominant technology company of the PC era.

Before he dropped out to dedicate his full attention to Microsoft, Gates was studying Law at Harvard. He made sure that while the contract between Microsoft and IBM allowed the hardware developer to use and market the software, Microsoft retained ownership of the language.

By 1983, large computer manufacturers who had developed computers similar to IBM standards began using MS-DOS as their operating system. PCs were now being seen as more than just toys, they were serious business tools.

Consequently, at the end of the year, with the growth of the PC market, MS-DOS sold around 500,000 copies . These sales boosted the company’s annual revenue to $69 million (around today after adjusting for inflation).

Microsoft Develops Its Range Of Office Products

During the 1980s, Microsoft developed its most prominent office products and eventually introduced the highly successful Microsoft Office .

Gates was aware of the need for a more user-friendly word program which led to the development of Microsoft Word . The initial product lacked ease of learning, but Gates was adamant about doing market research and strengthening the software’s weak points.

In April 1986, Word 3.0 was released, which became the company’s best seller. However, Gates had already set his eyes on developing a version of Word for Apple’s Macintosh computer.

Sales of this version amounted to 20,000 copies each month and by this point, Microsoft had annual sales of $590 million (around today after adjusting for inflation) and employed 2,800 people .

Gates also sought to offer advanced spreadsheet software which led to the development of Excel for the Macintosh (as Lotus 1-2-3 had already become the standard for IBM). By early 1986, Excel dominated the Macintosh spreadsheet market.

Although half of the company’s profit came from the sales of DOS, Word, and Excel cemented Microsoft’s status as the biggest producer and supplier of software for Macintosh.

In August 1989, the company introduced Microsoft Office - its most successful office product. The office was a bundle of separate, internally developed office productivity applications such as Word and Excel along with rebranded products from their companies such as Microsoft SQL Server .

Microsoft Office eventually became the dominant business suite with its market share considerably exceeding that of its competitors.

Key Takeaway 1: Locate the fundamental source of value and conquer it

Microsoft understood that controlling the operating system was more important as the underlying hardware became irrelevant since it could be cloned by other companies.

The company recognized the true potential of its product and thus introduced the clause that allowed it to sell the DOS to other companies in the IBM contract. Doing so, provided the company with the finances to develop other essential software and ultimately become one of the world’s leading software developer.

Moreover, the contract with a prestigious company like IBM helped to push MS-DOS into prominence and allowed it to dominate the PC operating system market.

Microsoft Embodies A User-First Policy

Gates had talked with Apple executives during the creation of the Macintosh and was impressed by its user-friendliness.

While the IBM PC used letters and numbers to communicate, the Mac had a graphical user interface (GUI) that used small pictures called icons to communicate. Users would click on the icons with the cursor and perform tasks.

Gates firmly believed that the future of computing lay in GUI.

Microsoft’s Success Against Competitors

In 1990, Microsoft launched Windows 3.0 - a new version of its operating system with features such as streamlined GUI and improved protected mode ability. The company sold over 100,000 copies within two weeks .

Despite complaints that Windows 3.0 required advanced hardware to run at an acceptable speed, it generated more revenue than the OS/2, which IBM had asked Microsoft to develop.

Thus, Microsoft decided to shift its focus entirely to Windows, and so the relationship between the two companies declined. Around the same time, Apple initiated a lawsuit against Microsoft, claiming that it had copied the look and feel of the Mac, thereby committing copyright infringement.

Amidst the hostilities, IBM and Apple felt threatened by Microsoft’s emerging control of software and operating systems standards and decided to form an alliance. The fact that two of the industry’s most prolific names would feel threatened by Microsoft was further evidence of its growing influence.

Nevertheless, by 1993, Windows had become the most widely used GUI operating system in the world. It was also dubbed the “ 1993 Most Innovative Company Operating in the U.S. ” by Fortune Magazine.

The year also saw the lawsuit between Apple and Microsoft come to an end, with the ruling being in Microsoft’s favor.

Microsoft’s Broad Differentiation Strategy Drives Competitive Advantage

At the start of the 1990s , Microsoft decided to shift its focus from supplying software to hardware manufacturers to selling directly to consumers .

Targeting consumers was part of Microsoft's strategy to broaden its business and appeal to non-technical audiences . As such the company developed unique products for various market segments: individuals, households, and organizations.

The company released Microsoft Encarta in 1993 which was the first encyclopedia designed to run on a computer. It also introduced Microsoft Home which included Microsoft’s new multimedia applications .

In 1994, the company even undertook a $100 million advertising campaign and changed its slogan to “ Where do you want to go today ?” - hinting at the endless possibilities offered by Microsoft programs and products.

Microsoft continued to release products targeted at consumers: a successful example being Windows 95 . This was the latest version of Microsoft’s premier operating system featuring an original user interface , including a novel start button .

Windows 95 sold more than a million copies in the first four days of its release .

The company continued its momentum and also entered the personal digital assistant (PDA) market in November with the release of Windows CE 1.0 . The new version of the operating system was designed to be compatible with low-memory, low-performance computer-like devices such as mobile phones, digital cameras, handheld computers, etc.

Microsoft’s Diversification Strategy Yields Desired Results

A part of Microsoft's diversification strategy was to broaden and expand into businesses associated with its core franchise.

As the web began to grow in significance and popularity, Microsoft approached a company called Spyglass to license Internet Explorer . The browser was then bundled for free with Windows 95.

Microsoft also began expanding its product line into computer networking and the World Wide Web . As part of this expansion, it launched MSN (Microsoft Network) which encompassed the company’s entire range of online services.

The most prominent of these online services was MSNBC - a joint venture with the NBC (National Broadcasting Company) that was basically a 24-hour cable news television station .

Microsoft’s Value Proposition Captures User Attention

In 2001 , Microsoft released the highly anticipated Windows XP which included the essential features of both its business and home product line .

Windows XP introduced a new GUI - the first after Windows 95. Both the business and personal computers arrived with a full suite of pre-installed Microsoft software. The new operating system was the first to offer a similar user experience regardless of whether it was being used at home or at work.

Windows XP has been heralded as one of the greatest achievements of Microsoft and is remembered as one of the key operating system releases of all time. Microsoft was also aware of its significance which is why it invested $250 million in Windows XP’s ad campaign.

The campaign included a wide variety of events and promotions - even including a special concert with Madonna and Sting at the Windows XP launch party. Such strategies successfully captured the attention of the users.

Key Takeaway 2: Let Consumer Needs and Feedback guide the development of your products

Much of Microsoft’s growth in the 1990s was driven by its commitment to adhering to consumer needs.

The development of user-friendly features such as unique GUIs, pre-installed software, and bundling the web browser for free with the operating system all contributed to Microsoft’s appeal to consumers in the market.

Microsoft strategically expanded its business in keeping with the target of directly accessing consumers and designing its product offerings accordingly. By putting the user first, Microsoft was able to develop products with a strong impact in the market and which allowed it to become a leading tech company.

Microsoft Strategic Focus Aligns With Anticipated Trends

In the following years, Microsoft continued to update its range of products and expanded the scope of its business to become not just a leading software developer but a tech company with a global impact.

Toward this end, Microsoft recognized the need to directly compete with companies in the fields it sought to expand in.

Microsoft’s Product Development Strategy

In the early 2000s, Microsoft leaned into its product development strategy and introduced its own product offerings in new markets.

Microsoft launched the Xbox and officially entered the game console market which was then dominated by Sony and Nintendo . While the Xbox was relatively successful, the Xbox 360 was much more so; although, it too could not outsell the PlayStation 3 - Microsoft’s main rival.

Following the introduction of the gesture control feature by Wii which opened up a new market for video games, Microsoft developed the controller-free Kinect peripheral to boost Xbox’s popularity.

The move was highly successful as Kinect was the fastest-selling consumer electronics product in history as of 2011, with sales averaging 133,333 units per day.

In June 2012, the company unveiled the Surface computer which was the first in history to have its hardware made by Microsoft. The very next month, it also launched the Outlook webmail service to compete with Gmail .

Microsoft’s Business Strategy Focuses On Devices And Services

In 2010, Microsoft laid out its intention to unlock the full value of its software by factoring in how people use devices and services at work and in their personal lives.

Consequently, the company was determined to deliver a broad spectrum of Windows PCs, tablets, and phones. Not only was Microsoft going to develop Windows devices but have the relevant services built into them.

In 2012, Microsoft also made incredible updates to Office for Windows 8 , adding touch and pen capabilities and unlocking new experiences for reading, note-taking, meetings, and communications .

Microsoft had already released its cloud computing service, Azure , in 2008 which, along with Windows Server 2012 and System Center, made up the company’s services offerings.

The company is now focused on helping businesses move to the cloud. In 2014, commercial cloud revenue amounted to a $4.4 billion annual run rate, making Microsoft an indisputable leader in the arena.

To reinforce its device ecosystem and drive its mobile strategy, Microsoft acquired Nokia’s Devices and Services business in 2014.

This acquisition helped create an expanded Microsoft Devices Group that included Nokia phones, Xbox hardware, Surface, Perceptive Pixel products, and accessories .

Microsoft’s Digital Transformation Strategy

As revenue continued to increase across Microsoft’s cloud services, Windows 10, and Office 365 , the company set its sight on a new technology paradigm – digital transformation .

With the onset of digitization across organizations, Microsoft aimed to form strategic partnerships with them by helping them build their digital capability, providing innovative technology to drive new growth, and enabling them to digitize business-critical functions.

In 2018, Microsoft identified cloud computing as being foundational to enabling digital transformation and stressed Azure’s hybrid consistency, developer productivity, and Software as a Service (SaaS) application integration .

Microsoft was also aware of the importance of a business's ability to reason over its data using AI to drive competitive advantage. In order to capitalize on this opportunity, Microsoft Research was dedicated to developing AI technologies and democratizing them with Azure Cognitive Services .

Azure Cognitive Services has the most comprehensive portfolio of tools, frameworks, and infrastructure that enables users to build applications that see, hear, speak, search, understand, and accelerate decision-making.

In 2019, Microsoft brought hyperscale capabilities to its relational database services and offered the most comprehensive cloud analytics through Azure Data Factory, Azure SQL Data Warehouse, and Power BI.

By 2020, Microsoft was pushing the bounds of how AI can generalize learning beyond narrow domains. It was collaborating with OpenAI on a supercomputing platform to train and run AI models of unprecedented scale.

Key Takeaway 3: Anticipate trends to gain an unfair advantage

Microsoft accelerated its growth by anticipating new avenues of technological breakthroughs and developing its products and services accordingly.

It had previously reorganized its strategy to focus on devices and services and built its capacity in those avenues, thereby developing a unique portfolio to cater to diverse needs.

Microsoft anticipated the growing need for digital transformation amongst businesses and organizations and positioned itself as a strategic partner that allows them to achieve digitization. Doing so allowed Microsoft to capitalize on transformational opportunities as businesses sought out its solutions to help them transition toward digitization.

The strategy paid off as well since the company reported strong financial results.

Why Is Microsoft So Successful?

A significant reason for Microsoft’s resilience and why it has retained a relevant and arguably dominant position in a rapidly evolving industry is due to its financial and intellectual resources.

Despite the changes ushered in by the advent of smartphones and the Android operating system, Microsoft was able to adapt to the changing landscape by making its products available on its competitors’ devices and platforms. Such moves allow the company to leverage its brand loyalty more effectively.

Instead, the company has shifted its focus to capitalize on the market demand for cloud computing. Microsoft's aim is to usher in future technologies by breakthroughs in AI, data management, and quantum computing.

Microsoft’s intellectual property – patents and proprietary software code – in addition to the company’s ability to adapt to ever-evolving trends, technologies, and consumer preferences, and willingness to take risks to explore new opportunities make it extremely successful.

Microsoft’s Purpose And Mission Statement

Microsoft is an innovation-based company that continues to grow with time. Its mission is to empower every person and every organization on the planet to achieve more.

The company’s goal is to foster innovation that generates new ecosystems of inventors, partners, developers, creators, changemakers, public servants, frontline workers, and knowledge workers who drive the engines of growth and opportunity in ways that benefit everyone.

Who Owns Microsoft Today?

Microsoft is a multinational software company, with its headquarters at the Microsoft Redmond campus located in Redmond, Washington, United States.

The company has a total of $2.5 trillion market capitalization as of December 2021.

A few of the prominent shareholders of Microsoft are:

1. The Vanguard Group , Inc. It is an American registered investment advisor based in Malvern, Pennsylvania. It owns up to 8.01% of Microsoft’s total shares, equivalent to $156,241,379,413.

2. BlackRock Fund Advisors is an American multinational investment company based in New York City. It is the world's largest asset manager, with US$10 trillion in assets under management as of January 2022. It owns up to 333,373,626, that is 4.47% shares of Microsoft which amounts to $87,167,201,990.

3. SSgA Funds Management , Inc. It is the investment management division of State Street Corporation and the world's fourth largest asset manager. It owns up to 3.94% of Microsoft's shares, equal to a total of $76,756,608,430.

Microsoft’s Growth By Numbers

What is microsoft’s growth strategy.

At the heart of Microsoft’s growth strategy is its cloud platform and which the company seeks to expand in the future.

The company is continually encouraging its partners to embrace cloud technologies to accelerate digital transformation.

Thus, Microsoft is growing Azure in three essential aspects:

New cloud-native experiences
Modernization of applications and data estates
Migration and modernization of infrastructure and mission-critical workloads

It has even introduced the Cloud for Sovereignty service aimed at governments and public sector customers looking to accelerate digital transformation efforts.

The company expects to see significant growth through the Microsoft Cloud because of its differentiated market position, customer demand across its solution portfolio, and consistent execution across the Cloud platform.

With the combination of cloud vertical market specialization and further enhancements of its cloud capabilities, Microsoft is confidently positioned for future growth.

Microsoft’s Innovation Strategy For The Future

Microsoft’s vision for the future involves innovation in a way that will empower every individual.

It is significantly investing in resources that will help in transforming the workplace into a modern one so that business apps can be introduced to improve how people communicate, collaborate, learn, work and play.

The company plans on building and running cloud-based services that help people and companies get new experiences and opportunities.

Utilizing natural methods of communication and AI to understand and interpret the demands of the client in order to drive insights and take action on their behalf, is also a crucial aspect of its vision.

Additionally, Microsoft wants to use Windows to build its cloud business, boost its market share in the PC industry, and promote greater user interaction with services like Microsoft 365 Consumer, Teams, Edge, Bing, Xbox Game Pass, and others.

With their integrated, end-to-end solutions spanning security, compliance, identity, and management, across all clouds and platforms, Microsoft is attacking security from every perspective.

It is also developing innovative gaming experiences that bring people together around their common love of games on any device, as well as pushing the frontiers of innovation with console and PC gaming by creating the next wave of entertainment.

Microsoft has experienced tremendous growth in the few decades since its establishment. From mainly selling software to hardware manufacturers, Microsoft has become a tech giant with a global impact. The company is aiding the digitization of organizations by developing innovative technologies that offer the necessary digital tools for them to enhance their functions. The future of technology rests in the development of AI and Microsoft has already developed a reputable portfolio of AI capabilities and is further enhancing these technologies. As the world transitions towards a new technological breakthrough, Microsoft is strongly positioned to lead this transformation and further reinforce its status as a leading tech company with a global impact.

Microsoft Change Management Case Study

Microsoft is one of the most successful and influential technology companies in the world, having transformed the way people live, work and communicate with its innovative products and services.

But behind this success story lies a series of significant transformations and changes, which have enabled the company to stay relevant and competitive in a rapidly evolving market.

In this blog post, we will examine the change management strategies and techniques that Microsoft has employed over the years, and how these have helped the company to successfully navigate through various transformations and emerge as a global leader in the tech industry.

We will also look at some key lessons that other organizations can learn from Microsoft’s approach to change management, and how they can apply these to their own transformation efforts.

Overview of transformations and changes implemented by Microsoft

Microsoft has undergone numerous transformations and changes since its establishment in 1975. Here are five significant transformations or changes that have occurred:

Transition to software development: Initially, Microsoft focused on hardware development and created BASIC language software for Altair 8800, a popular computer in the 1970s. However, after Bill Gates realized the potential of software development, the company shifted its focus to software, which led to the creation of MS-DOS, Windows operating system, and other popular software products.
Move to the internet: With the emergence of the internet in the 1990s, Microsoft recognized the potential of this new technology and invested heavily in it. This led to the development of Internet Explorer, MSN (Microsoft Network), and various web-based applications.
Diversification: Microsoft was initially known for its operating system and software products. However, in recent years, the company has diversified its offerings to include hardware such as Xbox gaming consoles, Surface tablets, and other products.
Cloud computing: In the early 2000s, Microsoft recognized the potential of cloud computing and began investing in this area. The company launched its Azure cloud platform in 2010, which has become one of the leading cloud platforms in the world.
Open source: In the past, Microsoft was known for its proprietary software and closed ecosystem. However, in recent years, the company has embraced open source technology and has made significant contributions to the open-source community. For example, Microsoft has made its .NET framework open source, and it has released various tools and platforms for open-source developers.

What are those factors that drove changes at Microsoft?

Here are some factors that led to the transformations in Microsoft:

Market changes and competition: As the market for computer technology evolved, Microsoft needed to adapt to changing customer needs and preferences. In addition, competition from other technology companies also pushed Microsoft to make changes to stay relevant and competitive.
Technological advancements: The emergence of new technologies such as the internet, cloud computing, and mobile devices created new opportunities for Microsoft to expand its offerings and reach new markets.
Leadership changes: Over the years, Microsoft has had different leaders at the helm, and each leader brought their own vision and priorities for the company. For example, when Satya Nadella took over as CEO in 2014, he emphasized the importance of cloud computing and digital transformation, which led to significant changes in the company’s focus.
Customer feedback : Microsoft has always had a strong focus on customer feedback, which has played a significant role in shaping the company’s products and services. Customer feedback can also drive innovation and change in the company’s offerings.
Cultural changes: Microsoft has undergone cultural changes over the years, such as the adoption of open-source technology and a more collaborative and inclusive work environment. These cultural changes can help drive innovation and lead to new ideas and products.

How strong leadership caused transformation in Microsoft ?

Strong leadership has played a critical role in all of the transformations made by Microsoft over the years. Here are some ways in which strong leadership has contributed to these transformations:

Clear vision and direction: Strong leaders at Microsoft have always had a clear vision and direction for the company, which has helped to guide its transformation efforts. For example, Bill Gates and Steve Ballmer led the company through its early years, and their vision of putting a computer on every desk and in every home helped to drive the company’s success in the 1980s and 1990s. Similarly, Satya Nadella’s vision of empowering people and organizations to achieve more has driven the company’s recent focus on cloud computing and digital transformation.
Strategic decision-making: Strong leaders at Microsoft have made strategic decisions that have helped to position the company for success in a rapidly evolving market. For example, the decision to shift the company’s focus from hardware to software development in the 1980s was a strategic decision that helped to pave the way for the company’s success in the following decades.
Agile approach: Strong leaders at Microsoft have embraced an agile approach to change management, which has enabled the company to quickly respond to changes in customer needs and market trends. For example, under Satya Nadella’s leadership, Microsoft has shifted its focus to cloud computing and digital transformation, which has helped the company to remain relevant and competitive in a rapidly evolving market.
Employee engagement and empowerment: Strong leaders at Microsoft have recognized the importance of employee engagement and empowerment in driving change management. For example, under Satya Nadella’s leadership, the company has created a culture of innovation and collaboration, and has encouraged its employees to take risks and experiment with new ideas.

The biggest outcome of the successful changes at Microsoft

The biggest outcome of the successful changes at Microsoft is the company’s continued growth and success in a rapidly evolving market. By successfully navigating through various transformations, such as the shift from hardware to software development, the move to cloud computing, and the focus on digital transformation, Microsoft has been able to remain relevant and competitive in the tech industry.

The company’s continued success has been reflected in its financial performance, with Microsoft consistently posting strong earnings and revenue growth in recent years. In addition, the company’s products and services, such as Windows, Office, and Azure, are widely used and trusted by customers around the world. Overall, the biggest outcome of the successful changes at Microsoft has been the company’s ability to stay ahead of the curve and remain a leader in the tech industry.

Final Words

Microsoft’s successful implementation of changes provides valuable lessons for organizations looking to navigate through periods of transformation and change. By adopting a customer-focused approach, embracing an agile methodology, empowering employees, and having strong leadership with a clear vision and purpose, Microsoft has been able to successfully navigate through various transformations and remain a leader in the tech industry.

Additionally, the company’s willingness to experiment with new ideas and take risks has enabled it to stay ahead of the curve and remain relevant to its customers. As a result, Microsoft’s continued growth and success serve as a testament to the importance of effective change management in driving organizational success. Overall, Microsoft’s successful implementation of changes provides a valuable case study for other organizations to learn from and apply to their own transformation efforts.

About The Author

Tahir Abbas

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Please note you do not have access to teaching notes, innovation strategy at microsoft: clouds on the horizon.

Publication date: 16 June 2011

Teaching notes

Microsoft employs 90,000 people and its products affect millions of users around the world every day. Developing the next version of Windows or Office is easy for Microsoft, but the company has struggled when it comes to more radical innovation. Intense competition from Google, Apple, and others threatens a business model that has delivered tremendous success over 25 years. This case highlights the strategic challenges facing Microsoft and provides insights into the organizational, leadership, and operational issues that must be addressed in order to define a successful innovation strategy at one of the world's most well-known companies.

Chao, R.O. and Kavadias, S. (2011), "Innovation Strategy at Microsoft: Clouds on the Horizon", . https://doi.org/10.1108/case.darden.2021.000002

University of Virginia Darden School Foundation

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Microsoft’s next act

In 2014, Satya Nadella was appointed CEO of Microsoft, making him only the third leader in the software company’s 40-year history, following Bill Gates and Steve Ballmer. Since taking the top job, Nadella has doubled down on cloud computing, artificial intelligence (AI), and social networking while also pushing Microsoft to become more innovative, collaborative, and customer focused. In 2017, he published Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone , a book reflecting on his journey from a cricket-obsessed childhood in India to leadership of one of the world’s largest companies.

In this episode of the McKinsey Podcast , Nadella speaks to McKinsey Publishing’s Simon London about organizational change, the role of culture, the danger of silos, and how companies can confront digital disruption by reframing the business they are in.

Culture and innovation

Simon London: Well, Satya, thank you for doing this.

Satya Nadella: Thank you so much for having me.

Simon London: Let’s start with culture change , which is a big theme in the book. Clearly, you decided to make it a big theme for this first part of your tenure as CEO. Why culture change compared with other things you could have focused on?

Satya Nadella: One of the things that I’ve come to realize is that in companies that have been successful, one of the things that happens is the original idea or the concept that became a hit, the capability you built around it, and the culture that implicitly grew as you were growing the business all get into this beautiful, virtuous cycle. But there’s no such thing as a perpetual-motion machine. At some point, the concept or the idea that made you successful is going to run out of gas. So, you need new capability to go after new concepts. The only thing that’s going to enable you to keep building new capabilities and trying out new concepts long before they are conventional wisdom is culture.

I would argue that for a successful company, you will have to overemphasize [creating] the right culture so that you can continue to cultivate new capabilities and new concepts. When I became CEO, we were already a 40-year-old company, and I felt that it was very important for us to make culture a first-class, explicit conversation so that we could then reinvent ourselves and invent new things.

Business units versus capabilities

Simon London: You’ve got this wonderful trifecta of concept, capability, and culture. But can I introduce a fourth “c”—configuration? This is how a company is organized—the lines and boxes—and the business processes that underpin it. Have you made any process or organizational changes to support what you’re trying to do?

Satya Nadella: That’s actually a very good point. Configuration or structure is superimportant. One of the things that I’ve come to realize is structure can help and, in some sense, reinforce the first three c’s, but it should not get in the way of reinvention or coming up with new concepts. That’s the fundamental challenge.

For example, when the business is doing well, in the name of accountability, in the name of efficiency, in the name of lower transactional costs, you get organized by business unit or what have you. This reinforces the next level of productivity gains, efficiencies, and accountability. The issue is that then it becomes hard to reconflate [recombine] some of the capabilities across these divisions to build new products. This is always a challenge. In tech, it’s even worse because we don’t have long periods of stability. If anything, the periods of stability are short and getting shorter. So, you can use structure sometimes in order to reduce transaction costs and improve efficiency, but in the long run, we [in the technology sector] are much more capability driven. I want a silicon capability. I want a cloud-computing capability. I want an AI capability. I want great product aesthetics in devices. Then we want to be able to take [these capabilities] and apply them to different markets at different times. Without this strategic flexibility, it’s very, very hard.

And I would argue that in a world where every business now is a digital business, this is probably one of the bigger challenges. I see this when I talk to many customers who we partner with who have come from, say, an industrial conglomerate or an energy company. It’s very, very hard, because culturally they’re all about business units. But digital recognizes no digital business unit. You need to be able to bring things together. This is probably one of the more transformative changes that many CEOs will have to confront.

Simon London: The move toward functional capabilities at Microsoft was already in the train before you took over as CEO, wasn’t it? Is there anything you’ve done to accelerate that?

Satya Nadella: Yes, I think this was one of the biggest changes that Steve Ballmer made. It has been superbeneficial. Without it, I don’t think we would have been able to change as much as we have done, because it’s a necessary condition. This [functional] configuration allowed us to reconflate. Otherwise, we would have had a lot more institutional resistance to that just because of what people’s incentives and measurements were. So, it has helped us tremendously.

Of course, products and product truth ultimately matters. But to me, what matters is: What are we being hired for? Or customer-in ways of thinking about markets and categories. For example: How are we enabling the modern workplace? It’s not just about Office or Office 365 or Windows or EMS [Enterprise Mobility + Security]. These are all brands and tools and applications we love. But ultimately, we have to deliver to companies the ability to empower their employees so that modern work can happen, they can collaborate, they can communicate in new ways, and companies can get more out of their people. This is very important. We have really changed how we think about customer orientation because of this.

Metrics and compensation

Simon London: I’m guessing that you’ve made some changes related to performance management , for example, or compensation to reinforce this more cross-functional, cross-business unit customer orientation. Is there anything that you can or want to talk about there?

Satya Nadella: One of the big things that we have done at the leadership level is to focus on shared metrics. We make a distinction between what we call “performance metrics” and “power metrics.” Performance metrics are in-year revenue and profit and things of that nature. Power metrics are about future-year performance. They are leading indicators of future success and are more about usage and customer love or satisfaction. We have a blend of metrics that are few but shared. A large part of the compensation for me and my leadership team is fundamentally based on that.

Simon London: So, that scorecard has been reconfigured during your tenure?

Satya Nadella: Correct. In fact, a lot of our own tools have become instruments of changing culture. We track metrics such as monthly actives, monthly active versus daily active ratios, consumption, consumption growth. These are all the things that we measure as much as we measure any end-quarter revenue or profit by segment. And these are tied to compensation. Also, it’s not just the leadership team. In the field, our sales culture has changed a lot because we have put a lot of the sales-compensation levers to also go from just the one-time license or bookings to actual consumption, which means it aligns us much better with our customers and their success in using the products and getting benefits out of them.

I do believe that if you just talk about culture change and customer obsession without tying it to some of these core levers of how you measure performance, the entire program can come to a knot. In our case, we have been able to take action on all of those levers.

Empathy and purpose

Simon London: You’ve talked a lot about the need for a culture of greater empathy because it’s only through empathy that you can really understand the unmet needs of customers. Some of these forward-looking metrics feel almost like “empathy metrics.” Are products getting traction? Do customers love them? Are they using them?

Satya Nadella: That’s correct. All of us are human. However, when you think about culture as all about business and metrics and scorecards, you can get a lot but it just doesn’t invoke that real, innate capability that we all have. Work is a large part of what we do in life. If it was only about achieving some scorecard metrics, I don’t think that would be enough of a deep meaning.

The reason I talk about empathy is that I believe this is the leading indicator of success. Innovation comes only when you are able to meet unmet, unarticulated needs—and this comes from a deep sense of empathy we all have. But you can’t go to work and, say, “turn on the empathy button.” Your life’s experience will give you that passion and understanding for a particular customer, a particular use case. How you can connect [your life experience] to your work is what we want to invoke in the 100,000 people who work at Microsoft. All these metrics, which are real compensation drivers, do relate to this. But I don’t think we make decisions thinking that these two things are connected.

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We as humans all have bounded rationalities, Herbert Simon would say. Therefore, it might, in theory, be correct, but in practice, none of us make decisions thinking of this as connected.

Simon London: Presumably, part of this is related to attracting and retaining talent as well. If you want to attract the very best people in highly competitive fields, they want to go to work feeling and knowing that they’re doing something for a purpose. It can’t just be about the extrinsic motivation of the paycheck because talented people could pick that up in any number of different places.

Satya Nadella: One of the key things, I feel, is that just like individuals, companies have an identity. I talk about it even as a soul. It’s that collective purpose that a company represents. In Microsoft, we talk about our mission as being empowering every person and every organization on the planet to achieve more. Every one of those words, for me, telegraphs that soul.

We think about people and the institutions people build that are going to outlast them as a first-class software construct. We think about this globally—in fact, I’m a product of that, if you will. We think not about the technology we create but about the technology others create using what we create—whether it’s a student writing a term paper, a small business becoming more productive, or a developer writing the next world-changing application.

We think about creating tools for other technologists. That’s why you join Microsoft. In fact, college kids might say, “Hey, I have a couple of different offers; why should I join Microsoft?” I say, “Look, simple. If you want to be cool, go join somebody else. If you want to make others cool, come join Microsoft.” That’s the test. What’s your self-image? What is it that you want to do?

And I’ll go one step further. Business models should be constructed so that they reinforce your core identity. Somebody once said that you can only trust people who think, say, and do the same thing. By the same token, I think you can only trust companies that are thinking, saying, and doing the same thing. That’s the consistency that you need.

Turning artificial intelligence into value

Simon London: Can we pivot and talk a little about AI? What advice do you give to executives that you talk to about how to leverage AI in their businesses?

Satya Nadella: I believe AI is one of the more defining technologies of our time. One of the things I am most excited about is AI technology helping with inclusivity. For example, in the latest release of Windows, we have something called Eye Gaze, which allows anybody who is suffering from ALS [amyotrophic lateral sclerosis] to be able to type just with their gaze. We have learning tools inside of Word and OneNote that allow anyone with dyslexia to improve their reading. It’s powerful stuff, and it’s a very practical way for executives to deploy some of these tools so that more people in their workforces can fully participate, which is important.

But there is no question that automation and the efficiencies of automation are tremendously important. For example, if you go to support.microsoft.com, it’s a bot. It uses some of the latest techniques of reinforcement learning to answer questions that customers may have. And of course, if it runs out of gas, it turns over to the customer-service representative, who is also using the bot to help answer the question.

So, we have the full gamut of technology that is getting deployed. We now really have human-level speech recognition. In January, there was a contest at Stanford University for machine reading and comprehension. Microsoft was number one. This means a machine can read a piece of text and start answering questions, like a reading-comprehension test, without necessarily being fed the answers that are indexed in the text.

The advances are enormous, and they will lead to productivity gains broadly. Therefore, every CEO—every executive—should be thinking about how to get more analytical power or predictive power inside his or her business process or organization. That’s ultimately what’s needed to translate AI capability into productivity.

Simon London: What types of IT configuration and IT capabilities do companies need to do this?

Satya Nadella: I would say there are two big considerations. One of the fundamental things is that there’s no way to create AI if you don’t have data. If the data inside your organization is siloed, it’s going to be a challenge to create AI. This goes back to your point around company configuration.

Take customer connection as an example. In order to be much better at omnichannel customer connection—and it doesn’t matter whether you’re a retailer, a CPG [consumer-packaged-goods] company, or a bank—everything from the log data from your website, to your mobile analytics, to your CRM [customer-relationship-management] system, to all the other data streams, it all has to come together in order to create the next best touchpoint action with the customer. This is both an AI problem and a data problem. One of the things that we like to stress is: how can we help our customers first get their data estate in many cases into the cloud? Then they can reason on top of it and create these transformative outcomes, whether it is connecting with customers, or operational efficiencies, or even changing the nature of their products. This is a super important thing.

Culture for a digital age

I would also add that trust is going to be of paramount importance. Not just the security side of trust but also the trust of the business model. You need to pick partners who are going to help you with your capability building, whose interests are aligned with your interests in the long term.

Simon London: If you’re a senior executive at a big industrial company, for example, there are a lot of different potential use cases for AI . Do you have any generalizable advice about how to look across those use cases and what to go for first?

Satya Nadella: When I pattern match and look at some of the best and easy-to-get-started use cases, it would be anything related to customer experience. This is a good use case. Let’s say there’s omnichannel customer data. The ability to do the next best action, whether it be a sales force, or inside sales, or your website personalization, can come in a variety of different ways.

Connecting with your customers more deeply—using your data and your ability to reason over data—using the latest AI techniques is one use case. The second use case is supply-chain or operational efficiencies. The IoT [the Internet of Things] is a fascinating thing. If you think about it, most of these projects are where you have a good or a service, you’re collecting operational data from it, you’re doing preventive maintenance, and then you’re going to connect it to field service, because once you can predict something, you want to connect it to somebody coming and fixing it before it’s broken. That’s a thing that can drive both top-line and bottom-line efficiencies. That’s a great use case, and we see a lot of it, especially in industrial companies. We also see a lot of deployment of technology to empower people inside the organization. I’m fascinated to see how HoloLens is being used for doing oil-field inspections or training. So, AI can be deployed not just against traditional knowledge work but also in what I will call frontline work.

Sometimes organizations have this “cobbler’s children” problem. They talk about all these great things they’ll do for customers, for [business] partners. Except you also need to do fantastic things for your employees so that they can do all these great things for customers and partners.

Resolving the innovator’s dilemma

Simon London: Something I think you’ve done fantastically well is to bring Microsoft along in its embrace of cloud. In many ways, this was a classic innovator’s dilemma situation—a Clayton Christensen textbook case of a new technology coming along with, let’s be honest, probably a lower margin structure than older technology around servers. Do you have any advice for other executives in this situation? So many companies are facing this now as they are attacked by new digital players with new business models, probably at lower margins.

Satya Nadella: The only generalizable piece of advice is to reconceptualize your business to be non–zero sum. These shifts are tough if they are zero sum—in other words, if all I’m doing is jumping into this new paradigm to essentially regain the business I already have. Especially if [the new paradigm] comes with a lower net margin, then it’s sort of an impossible task. But just imagine a railroad company in the 1930s. If it had conceptualized itself as, “we’re in the transportation business” versus “we’re in the railroad business,” then it probably would have seen the ability to line extend or jump into new businesses.

That’s, I think, what companies have to do. They have to understand more broadly what category they are in, as opposed to defining themselves very narrowly by the technology they’re using today. That’s why I like to talk about a perpetual or a perennial category we are in: the modern workplace. My bet is that the workplace will always remain, and you will always need to be modern. We’re not trying to talk about one tool or one service. Our job is to build new technology for the modern workplace. That’s a better way to think about the future.

Simon London: That reminds me of the John Chambers phrase about having no “technology religion” and also maybe adding no “business-model religion.”

Satya Nadella: That’s right. No technology religion, no business model religion, and the ability to frame things with a broader lens versus a very narrow product definition or category definition based on what has happened in the past.

Simon London: Well, Satya Nadella, thanks so much for talking with us.

Satya Nadella: It’s my pleasure. Thank you so much.

Stay current on your favorite topics

Satya Nadella is the CEO of Microsoft. Simon London is a member of McKinsey Publishing and is based in the Silicon Valley office.

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CASE STUDY: How Satya Nadella overhauled Microsoft's cutthroat culture and turned it into a trillion-dollar 'growth mindset' company

Lehtikuva, Markku Ulander/AP Photo; Yuri Gripas/Reuters; Fabrizio Bensch/Reuters; Ruobing Su/Business Insider

Satya Nadella is the CEO of Microsoft. Steve Ballmer and Bill Gates are the former CEOs.

Microsoft is a trillion-dollar company thanks largely to a culture shift led by Satya Nadella.
Since Nadella became CEO in 2014, he's encouraged the entire company to adopt a growth mindset, or the belief that skills are developed through hard work and challenges are opportunities to learn.
Before Nadella took over, Microsoft was characterized by competition between teams and between individual employees.
Now, in keeping with a growth mindset, Microsoft evaluates employees' performance based partly on how much they helped their colleagues succeed. The company also looks to learn from its former rivals in the tech industry.
Business Insider spoke with a range of company insiders and organizational researchers to get the inside story on how to change the culture of a 150,000+ employee software giant.
Microsoft is a case study in how a growth-mindset culture can help companies succeed in the future economy.
Click here for more BI Prime content.

A cartoonist once drew an illustration depicting Microsoft's organizational chart as warring factions.

Take a look and you'll see three separate gangs: one blue, one green, one yellow. The gangs are assembled in pyramid-shaped hierarchies, with one leader at the top, two or three deputies at the next level, and so on.

A hand sticks out from each pyramid, pointing a gun directly at one of the others. It's clear. This is war.

And then Satya Nadella became CEO.

Nadella described the era of warring gangs in his 2017 memoir-manifesto, " Hit Refresh :" "Innovation was being replaced by bureaucracy. Teamwork was being replaced by internal politics. We were falling behind."

That particular cartoon - drawn in 2011 by a Google employee named Manu Cornet , no less - made changing Microsoft's culture Nadella's No. 1 goal as CEO.

"As a 24-year veteran of Microsoft, a consummate insider, the caricature really bothered me. But what upset me more was that our own people just accepted it," Nadella wrote. "When I was named Microsoft's third CEO in February 2014, I told employees that renewing our company's culture would be my highest priority."

Since becoming CEO, Nadella has been credited with a grand reinvention of Microsoft, exemplified by its market value exceeding $1 trillion, one of just a handful in history to hit that mark. When Nadella first took over, its market value was around $300 billion. The company has shifted from a has-been to a cloud powerhouse.

One of the keys to this transformation is a psychological concept that's become a mantra at Nadella's Microsoft: growth mindset .

Microsoft has traded a fixed mindset for a growth mindset

Growth mindset describes the belief that skills are developed through hard work and that challenges are opportunities to learn. Fixed mindset, on the other hand, refers to the belief that talent is innate and that struggling is a sign of failure. Research on the difference between growth and fixed mindset - and how they predict success - was pioneered by Stanford's Carol Dweck.

Early on in her career as a developmental psychologist, Dweck visited children at school and presented them with a series of increasingly difficult puzzles. Her goal was to better understand how people cope with failure. Some students, she found, weren't fazed by it.

In her 2006 book, " Mindset ," she recalls one 10-year-old boy who "pulled up his chair, rubbed his hands together, smacked his lips, and cried out, 'I love a challenge!'"

Dweck would spend the next five decades trying to figure out the difference between people who relish a good challenge and those who fear failure. Scores of studies published under her name suggest that people who see intelligence and abilities as learnable are more successful, personally and professionally, than people who think they're static.

Recently, Dweck coauthored a study that drew a link between growth mindset and organizational success . Employees who think their companies have a fixed mindset, the study found, interpret the company's culture as less collaborative, less ethical, and less willing to take risks than employees who think their companies have a growth mindset.

Given the rapid pace of technological change , these research findings are hyper-relevant. Across industries, adopting a growth mindset may be the only way to survive, and certainly the only way to thrive. When neither executives nor rank-and-file employees can predict what their jobs will look like next week, they need to embrace the resulting vulnerability, and get excited about learning.

Plenty of companies, in industries from telecommunications to early education, talk about cultivating a growth mindset , and about looking for job candidates who have it . But Microsoft is perhaps the most powerful example of an organization that has used growth mindset, and the psychology behind it, to rebuild its culture.

In many ways, fixed mindset and growth mindset can describe Microsoft before and after Nadella.

Nadella has encouraged Microsoft employees to be 'learn-it-alls' instead of 'know-it-alls'

Gates' successor, Steve Ballmer, also known for an explosive temper, later presided over the atmosphere depicted in that cartoon Nadella was determined to address. Ballmer was known for cultivating a culture in which Microsoft teams warred with each other, as previously reported by Business Insider .

Nadella, who joined Microsoft as an engineer in 1992, came up in this culture, before becoming CEO in early 2014.

By that point, the company's bid to compete in the smartphone market through the purchase of Nokia was proving to be a burden and would lead it to write off nearly the entire $7.6 billion acquisition price. The personal computer market was shrinking, leading to declines in Microsoft's flagship Windows operating system business, and the Xbox One console's poorly received launch made it a punchline.

Microsoft's history as a tech-industry pioneer wouldn't help the company compete, Nadella wrote in an email to employees on his first day as CEO. The company needed a change in mindset.

"Our industry does not respect tradition - it only respects innovation," Nadella wrote on Feb. 4, 2014, in a memo to employees days after taking on the CEO role. "Every one of us needs to do our best work, lead and help drive cultural change. We sometimes underestimate what we each can do to make things happen and overestimate what others need to do to move us forward. We must change this."

Nadella's leadership philosophy evolved into the adoption of a growth mindset. He asked employees to be "learn-it-alls," not "know-it-alls," and promoted collaboration inside and outside the organization. Employees are now evaluated partly on how much they've helped others on their team.

Microsoft introduced a new performance-management framework based on growth mindset

With any company culture shift, executives run the risk of promoting jargon more than action, and of HR representatives being the only ones who know there's a culture change underway.

Microsoft has tried to avoid that fate, not only by training its employees on the psychology of growth mindset, but also by embedding the concept into its daily work flow.

Prompts to adopt a growth mindset appear on posters throughout Microsoft's campuses ( something at which employees sometimes poke fun ). At the start of a meeting, a manager might remind colleagues to approach an issue with a growth mindset.

And in one of the most significant manifestations of growth mindset, Microsoft has eliminated stack ranking .

Stack ranking was famously used by Jack Welch when he was CEO of General Electric. Ballmer used the system at Microsoft to evaluate employees, although he did start phasing it out prior to his departure. Microsoft managers had to rank their employees from one to five in equal measure. Which meant that, no matter how good the employees were, some of them had to get the lowest ranking of a five.

Performance was defined in stack ranking as the quality of individual work, and that emphasis on individual performance was linked to fierce competition among Microsoft employees. It was also a barrier to Microsoft's innovation, since it facilitated a culture that rewarded a few standout team members and even gave employees incentive to hope their colleagues failed.

Microsoft leadership says its new system for evaluating employees instead rewards collaboration. Managers and employees meet often to discuss performance , in keeping with the general trend of companies nixing annual reviews and having managers regularly speak with employees about their work.

"What we really value is three dimensions," said Hogan , Microsoft's chief people officer. "One is your own individual impact, the second is how you contributed to others and others' success, and the third is how you leveraged the work of others."

To use Hogan's examples, maybe a more seasoned employee helped someone new to the team, or a software engineer built on another engineer's work instead of reinventing it.

Microsoft recently applied growth mindset to a new framework for managers : model, coach, care. That's a combination of setting a positive example for employees, helping the team adapt and learn, and investing in people's professional growth.

To measure the impact of these initiatives in real time, Microsoft emails employees with a different question every day asking how they're feeling about the company and its culture.

The shift from competition to collaboration might seem like it would be a breath of fresh air. And on the whole, it has been. But employees say it's presented its own challenges, too.

Nadella pushes Microsoft executives to take on stretch assignments

Adopting a growth mindset can be uncomfortable, he said.

"Growth mindset is a euphemism because it can feel pretty painful, like a jump into the abyss," he said. "You need to be able and willing to confront your own fixed mindset - the things that make you believe something can't work. It's painful to go through personally, but when you get past it, it's tremendously rewarding."

The transition has been edifying, both in terms of his personal growth - Lee was recently named to the National Academy of Medicine - and Microsoft's growth in the industry, as it establishes itself as a meaningful player in healthcare tech.

Microsoft now sees the business case for letting go of its rivalries with other tech giants

Under Ballmer, Microsoft was notorious for prioritizing its Windows operating system and Office productivity applications businesses over the rest of the company - at one point, it even canceled the Courier tablet, which would have been an early, future-looking competitor to Apple's iPad, because it may have undermined Windows.

Likewise, Microsoft once shunned Linux, a free open-source operating system once considered the biggest threat to Windows. Ballmer once called it a "cancer." But early on in Nadella's time as CEO, Microsoft changed tack and proclaimed, " Microsoft loves Linux ."

It wasn't just Microsoft being friendly. There was a strong business case for blurring boundaries. At the time, Microsoft said it realized its customers used both Windows and Linux, and saw providing support to both as a business opportunity on-premise and in the cloud. That would have been unthinkable in the Ballmer years, but it's proven to be a savvy business move: Microsoft recently hinted that Linux is more popular on its Azure cloud platform than Windows itself.

Microsoft's relationship with Salesforce has followed a similar trajectory. Whereas Ballmer had frequent and public bouts with Salesforce CEO Marc Benioff , Microsoft under Nadella put aside its rivalry with Salesforce - which competes directly with Microsoft's customer-relationship-management Dynamics 365 product - in order to ink a big cloud deal that was good for the company overall.

Nadella even invites leaders from companies across industries to Microsoft's CEO Summit so the executives can learn from each other. Ballmer, meanwhile, famously snatched an employee's iPhone at a company meeting and pretended to stomp on it.

Which is not to say Microsoft always plays nice in the Nadella era. The company last summer changed licensing agreements to raise prices - often significantly - when customers choose to run certain Microsoft software on rival clouds including Amazon Web Services or Google Cloud. And it's been trading public barbs with AWS over the still contested $10 billion Pentagon cloud contract.

The Trump administration awarded the contract to Microsoft over AWS, but Amazon is challenging the decision in court, alleging political interference. In February, a judge ruled that Microsoft must stop working on the contract.

The culture shift at Microsoft is an ongoing process

The beginning of Microsoft's culture shift was rocky.

In "Hit Refresh," Nadella recalls a Microsoft manager who announced in the early days, "Hey, Satya, I know these five people who don't have a growth mindset." Nadella writes, "The guy was just using growth mindset to find a new way to complain about others. That is not what we had in mind."

Even today, Microsoft leaders acknowledge that the culture change isn't over . Things have improved under Nadella, but the company culture is still far from perfect.

Diversity is an opportunity for improvement at Microsoft. Much like the larger technology industry , Microsoft still employs relatively few women and people of color in leadership and technical roles.

One of Nadella's biggest gaffes as CEO happened early on in his tenure, when he suggested women should not ask for raises, but rely on "faith" and "karma." After these comments, Nadella sent out an internal memo admitting to his mistake, explaining how he planned to learn from it, and stating his belief in "equal pay for equal work."

Nadella writes in "Hit Refresh" that in some ways he's glad to have belly-flopped in public. "It helped me confront an unconscious bias I didn't know I had," Nadella writes, "and it helped me find a new sense of empathy for the great women in my life and at my company."

Kevin Oakes, who runs a human-resources research company that helped Microsoft with its shift toward growth mindset, sees Nadella as an exemplar of a leader during a transition. That's largely because Nadella practices the growth mindset he preaches. In a presentation at Talent Connect, an annual conference organized by LinkedIn (which is owned by Microsoft), Oakes said Nadella has been Microsoft's "culture champion." Nadella understands that organizational culture is critical to the company's performance, Oakes said.

But today's Microsoft is still far from perfect. The positive contributions of growth mindset have not yet matched up with diversity and equity for Microsoft's workforce, according to some employees. Microsoft is the subject of a gender discrimination lawsuit still pending , which was denied class-action status by a federal judge. Employees have also openly alleged sexual harassment and discrimination.

The company released its first diversity and inclusion report in 2019 to track its progress in hiring - and retaining - a more diverse workforce. Results from that report showed that minorities in Microsoft's US offices earned $1.006 for every $1 white employees earned. A closer look reveals that white men still held more high-paying leadership positions than women or underrepresented minorities.

Meanwhile, Microsoft leadership still has some philosophical differences with employees as it relates to employee activism. Employee groups have protested Microsoft and Microsoft-owned GitHub's relationship with Immigration and Customs Enforcement, and more recently, some employees have said Microsoft's relationship with oil and gas companies is at odds with the company's goal to become "carbon negative" by 2030.

Microsoft has been equally vocal about diversity and inclusion within its customer base, building products that are accessible to as many users as possible. Ben Tamblyn, a 15-year company veteran and Microsoft's director of inclusive design, mentioned Xbox as a prime example. In 2018, Tamblyn helped oversee the release of the Xbox Adaptive Controller , which makes it easier for gamers who have limited mobility or physical impairments to play. (Interviews with Neal and Tamblyn were arranged by Microsoft's public-relations firm.)

Microsoft is a case study in growth mindset

Microsoft's culture shift, and its accompanying business turnaround, is already a case study in business schools and in reports from management consultancies and research centers . That makes sense to Mary Murphy, a professor of psychological and brain sciences at Indiana University and Dweck's co-author on the paper about growth mindsets within organizations.

Growth mindset is essential for innovation in the technology industry, Murphy said, where change rarely happens incrementally. Instead, there are big inflection points from which there's no return. Microsoft, Murphy added, needs to be on the "cutting edge" of growth mindset in order to stay relevant.

Nadella, for his part, has modeled a growth mindset from the top of the organization, not least in his response to his tone-deaf comments about gender and compensation. "I learned, and we will together use this learning to galvanize the company for positive change," Nadella wrote in the memo he sent apologizing for the comments. "We will make Microsoft an even better place to work and do great things."

Got a tip? Contact reporters Shana Lebowitz via email at [email protected] and Ashley Stewart via email at [email protected] , message her on Twitter @ashannstew, or send her a secure message through Signal at 425-344-8242 .

NOW WATCH: How networks treat the Democratic debates like reality TV

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Microsoft’s Market Success Strategy: A Case Study

45 Comments
Published on Sep 12 2023

Microsoft’s Market Success Strategy: A Case Study

From garage to global giant: microsoft's incredible journey, decoding microsoft’s marketing secret: 4p marketing mix, microsoft’s marketing strategies for global tech supremacy.

Every tech giant has its modest starts, and Microsoft is no exception. Today, Microsoft is a name synonymous with advanced software innovation, global tech control, and a universal presence on countless computers worldwide. But how did it all begin? Just like every other successful venture, it began with a dream and a well-thought-out Microsoft advertising strategy.

A Dorm Room Dream: The Birth of Microsoft

In the mid-1970s in the town of Albuquerque, New Mexico, Bill Gates and Paul Allen Dared to Dream , huddling in a small dorm room at Harvard University shared a vision. This vision changed the world of computing forever, an uncertain goal to put a computer on every desk in every home.

Microsoft's first big break came when they signed a contract with MITS (Micro Instrumentation and Telemetry Systems), a microcomputer company, to provide a BASIC interpreter for their Altair 8800. This crucial moment led the success of their BASIC interpreter, allowing Microsoft to expand its horizons. Gates and Allen developed a BASIC interpreter, fittingly named Altair BASIC , for the MITS Altair 8800.

This BASIC interpreter was revolutionary because it allowed users to program the Altair using a high-level language, making it accessible to a wider audience. It became a hit among early computer enthusiasts, and this achievement laid the foundation for Microsoft's future.

Windows: The Operating System Breakthrough

The turning point to their success was the licensing deal with IBM in 1980. IBM was working on a top-secret project: the IBM PC. To meet IBM's request, Microsoft purchased an operating system known as 86-DOS. With a few modifications and updates, it was then named MS-DOS.

This deal with IBM helped Microsoft introduce to the mainstream and making MS-DOS the operating system for the IBM PC. Fast forward to 1985, Microsoft introduced the new Windows 1.0, a Graphical User Interface (GUI) for MS-DOS. Windows was a game-changing operating system with the best known user-friendly experience. Further innovations like Windows 3.0, Windows 95, and Windows XP took Microsoft to the top in the software industry.

Not just Microsoft, about every tech giant with global recognition, including Microsoft marketing mix, owes a significant part of its success to its specifically crafted marketing mix, often referred to as the 4Ps. These Microsoft 4ps, the four pillars, serve as the cornerstone of Microsoft's marketing strategy, encapsulating their approach to reaching millions of customers worldwide. The Microsoft marketing strategy effectively utilizes these principles to connect with a vast and diverse global audience.

Microsoft’s Product Marketing Strategy:

Innovative Software Solutions: Microsoft's product portfolio is a testament to innovation. From the iconic Windows operating system to the versatile Microsoft Office suite and cutting-edge cloud solutions like Azure, their products cater to a vast spectrum of individual and business needs.

Hardware Excellence: Beyond software, Microsoft has ventured into hardware, producing devices like the Surface lineup, exemplifying their dedication to quality and innovation in hardware development. This commitment extends to their Xbox marketing strategy, where they strategically position their gaming consoles in the ever-evolving tech landscape, fostering both innovation and gaming experiences.

Constant Evolution: Microsoft's commitment to product development and improvement is unwavering. Regular updates, patches, and new features keep their software and services relevant and secure.

Microsoft’s Price Strategy:

Diverse Pricing Models: Microsoft adopts a flexible pricing strategy, offering a variety of pricing models, from one-time purchases to subscription-based services. This approach accommodates both individual users and enterprises, allowing them to choose what best suits their budget and needs.

Value for Money: Microsoft ensures that its products and services deliver tangible value. Whether it's the productivity boost from Office 365 or the scalability of Azure, customers often find that Microsoft's offerings justify their cost.

Microsoft’s Place Strategy:

Global Accessibility: Microsoft's products and services are accessible worldwide. Whether you're in a bustling metropolis or a remote village, Microsoft's reach ensures that you can access their solutions.

Partner Network: Microsoft's extensive network of partners and distributors facilitates the availability of their products in physical and digital marketplaces. This network ensures that Microsoft's solutions are never out of reach.

Microsoft’s Promotion Strategy:

Strategic Partnerships: Microsoft has a knack for forming strategic partnerships with other industry leaders. Collaborations with companies like Adobe, SAP, and LinkedIn enhance the appeal of Microsoft's offerings and expand their customer base.

Educational Initiatives: Microsoft invests heavily in educational programs and resources, making their products accessible to students and educators. This not only fosters brand loyalty but also ensures that future professionals are well-versed in Microsoft tools.

Digital Marketing: Microsoft employs a robust digital marketing strategy, utilizing social media, content marketing, and online advertising to reach and engage with their audience effectively. Their presence in the digital landscape is pervasive.

Digital Marketing Masters Program Certification Training

The 4P marketing mix, including product, price, place, and promotion, is the core framework for shaping Microsoft's marketing strategy. This strategic approach, known as the Microsoft marketing mix, plays a pivotal role in guiding the company's marketing efforts.

However, they may also incorporate additional strategies, such as people and processes (part of the 6P), to enhance their marketing efforts. Nonetheless, the Microsoft 4ps, including Microsoft marketing strategy , are the fundamental components of their marketing strategy.

Microsoft's journey to tech supremacy has been marked by astute marketing strategies, including a nuanced focus on the Microsoft marketing strategy , which has set industry standards. These strategies encompass a range of approaches, each contributing to their global dominance.

1. Microsoft's Precision with STP Marketing

Segmentation, Targeting, and Positioning (STP) have been pivotal in Microsoft's success story. Microsoft meticulously segments its vast and diverse customer base, allowing for tailored marketing efforts. By identifying the unique needs of various segments, such as through particular Microsoft market segmentation, they create targeted campaigns and solutions, ensuring that their products resonate with the right audience. Microsoft's positioning strategy, emphasizing innovation, reliability, and user-centricity, solidifies their place in customers' minds as a tech leader.

2. CRM Strategy for Building Customer Bonds

Building lasting customer relationships is a cornerstone of Microsoft's marketing strategy. They utilize Customer Relationship Management (CRM) tools to collect valuable data and insights. This data-driven approach enables Microsoft to anticipate customer needs, personalize experiences, and provide exceptional support. By nurturing these relationships, Microsoft fosters brand loyalty and advocates among its customer base.

3. Events and Sponsorship

Microsoft's presence at major industry events and strategic sponsorships, such as those aligned with their robust Microsoft marketing strategy , is a testament to their commitment to global tech supremacy. They leverage these platforms not only to showcase their latest innovations but also to engage with customers, partners, and developers. These events serve as hubs for networking, knowledge sharing, and building a vibrant tech ecosystem.

4. The MVP Initiative for Community Building

Microsoft's MVP (Most Valuable Professional) initiative is a testament to their commitment to community building. This program recognizes and empowers exceptional individuals within the tech community who advocate for Microsoft technologies. By nurturing this community, Microsoft fosters a sense of belonging, collaboration, and innovation. MVPs become brand ambassadors, driving product adoption and advocacy globally.

1. How does Microsoft's focus on customer-centricity benefit its marketing strategy?

Microsoft's unwavering focus on customer-centricity ensures that their marketing efforts align with customer needs. By segmenting their diverse customer base and offering personalized solutions, Microsoft not only retains its existing customer base but also attracts new ones. This approach strengthens brand loyalty and solidifies their position as a trusted tech leader.

2. What is Microsoft's STP marketing strategy? Mention its impact on their global success.

Microsoft's STP marketing strategy, often referred to as the "Microsoft marketing strategy"—Segmentation, Targeting, and Positioning—are integral to their global success. It allows them to identify distinct customer segments, tailor products and marketing campaigns to suit each group, and position themselves as innovators and problem solvers. This precision ensures that their products resonate with the right audience, driving global adoption.

3. Why are events and sponsorships essential components of Microsoft's marketing strategy?

Events and sponsorships are pivotal components of Microsoft's overarching marketing strategy , serving as critical touch points for the company to engage with customers, partners, and developers on a global scale. These platforms consistently offer opportunities to showcase innovations, foster networking, and strengthen the tech ecosystem. Microsoft's active and strategic presence at such events effectively reinforces its position as a global tech leader in the field of Microsoft marketing strategy .

Whether you're launching a new product or building a brand, a good strategy is the key to success. Having a smart marketing plan, like Microsoft's marketing strategy, is super important. Microsoft's marketing methods are a great example of how to make a successful plan.

Understanding your customers is the first step in crafting a successful Microsoft advertising strategy. Knowing what they like and need helps you create a marketing plan that works. To build a winning marketing strategy , you need to listen to your team and your customers. It makes it much easier to come up with a plan to sell your product. In today's competitive market, having a solid grasp of your target audience's preferences and requirements is crucial for developing an effective advertising strategy.

Microsoft's company marketing strategy, known for its customer-centric approach, offers valuable insights to businesses. By thoroughly comprehending customer preferences, Microsoft equips enterprises to not only survive but also thrive in the ever-evolving tech landscape. This customer-focused strategy stands as a blueprint for success in today's competitive market.

Building a Brand Marketing Strategy, Creating a Social Media Marketing Strategy, all of these are the key aspects that shape your product’s success. To make your way to the top in this digital world, you must understand how to use digital marketing correctly and implement.

Sprintzeal’s Digital Marketing Master’s Program helps you master all the necessary concepts and techniques, helping you gain the knowledge and refine your marketing capabilities. Sprintzeal has trained 20,000+ professionals around the world, helping them make a place in the job market.

Start your career journey with us. Visit Sprintzeal’s official page for further details on the course. Visit Sprintzeal’s all courses page to explore the wide range of professionals training programs offered by Sprintzeal. For further course and certification related and queries, request a call back or chat with our course expert.

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Our technical content writer, Sushmith, is an experienced writer, creating articles and content for websites, specializing in the areas of training programs and educational content. His writings are mainly concerned with the most major developments in specialized certification and training, e-learning, and other significant areas in the field of education.

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Microsoft’s Operations Management, 10 Decisions, Productivity

Microsoft Corporation operations management 10 strategic decisions areas, productivity, computer hardware and software case study analysis

Microsoft Corporation’s operations management (OM) in the 10 strategic decision areas addresses the productivity needs of the information technology and online service business. The 10 decisions reflect the major business functional areas that require coordination to achieve optimal business performance. In the case of Microsoft, the 10 strategic decisions are intertwined with the ability to expand the business. This condition is linked to the global nature of the company’s supply chain and distribution network. As one of the biggest firms in the industry, Microsoft must continually develop relevant operations management approaches to address the 10 strategic decisions for maximizing performance and productivity.

The 10 strategic decision areas of operations management (OM) are effectively covered in Microsoft’s approaches. Business productivity depends on the effectiveness of operations managers in developing solutions corresponding to these 10 decisions to support Microsoft’s computer hardware and software operations.

Microsoft’s Operations Management, 10 Decision Areas

1. Design of Goods and Services . This decision area of operations management deals with the strategies and tactics needed to develop profitable products. Microsoft Corporation initially focused on software design. However, through continuing expansion of the product mix and diversification of the business, the company’s operations managers now make broader strategic decisions. For example, their operational productivity decision-making processes now include computer hardware and software products, along with Microsoft’s cloud computing services. This condition increases the significance of operations management in designing goods and services for the company. The increasing variety of products also reflects Microsoft’s generic competitive strategy and intensive growth strategies .

2. Quality Management . Operations managers are concerned with satisfying customers’ expectations about product quality in this strategic decision area. Microsoft’s approaches to operations management address these operational objectives through continuous improvement and innovation. For example, the company uses feedback systems to collect usage information from customers and integrates such information in the next iteration of computer software products. Also, Microsoft heavily invests in research and development to achieve rapid innovation that keeps the business competitive against other technology firms. These approaches optimize productivity and organizational resilience, given market dynamics. Emphasis on quality supports the aims for helping and empowering customers, as included in Microsoft’s mission statement and vision statement .

3. Process and Capacity Design . In this strategic decision area, companies focus on resources and standards applicable to production processes. In Microsoft’s case, operations management relies on extensive automation to optimize capacity and processes. For example, in computer hardware production, the company automates production capacity allocation to minimize productivity bottlenecks. On the other hand, for software production, Microsoft’s operations managers streamline process design to reduce errors and increase operational efficiency in correcting software development issues.

4. Location Strategy . Proximity and access to resources, markets and supply chains are considered in this strategic decision area of operations management. In software development and distribution, Microsoft Corporation focuses mainly on human resource productivity within its corporate facilities. The company’s computer software products are easily distributed to target markets through the Internet. However, for hardware products like the Xbox, Microsoft must ensure nearness and accessibility to target markets around the world. For example, the company maintains business partners, such as authorized sellers. In addition, the firm adds more distribution channels by increasing the number of its Microsoft Store locations worldwide. Thus, Microsoft’s operations management approach in this strategic decision area involves a combination of virtual and physical locations to reach markets and maximize resource accessibility. These operational strategies are also reflected in the place element of Microsoft’s marketing mix (4P) .

5. Layout Design and Strategy . Operations management optimizes resources in this strategic decision area for the purpose of achieving efficient movement of human resources, information, and materials. Microsoft’s layout design integrates advanced computing technologies to facilitate such efficiency. For example, efficient movement of information is achieved through network technology, such as online computers in the workplace. On the other hand, efficient movement of materials is supported through Microsoft’s automation of production processes. Business partners are also provided with technological solutions to achieve operational efficiency and high productivity. Microsoft’s operations management also uses innovative layouts for ease of employee movement throughout its facilities.

6. Job Design and Human Resources . This decision area of operations management considers the recruitment, retention, and development of human resources. Microsoft’s approach to job design emphasizes innovative thinking and a growth mindset. These characteristics support the firm’s technology innovation and product development goals. The approach also aligns with Microsoft’s organizational culture (company culture) . On the other hand, to develop its human resources, the company uses training programs. For example, leadership development programs are used to identify and support leaders within Microsoft’s organization. Through these approaches, Microsoft ensures productivity and operational efficiency in its expanding computer hardware and software business.

7. Supply Chain Management . Operations managers address this strategic decision area by maintaining streamlined integration of the supply chain with other business activities. Microsoft Corporation’s global supply chain is monitored through computer networks. For example, personnel regularly input current supply status, which is transmitted to regional and corporate offices for monitoring. The resulting data is automatically analyzed to determine necessary changes in Microsoft’s supply chain. In addition, strategic decisions are based on real-time data representing the supply chain, distribution network, and other areas of the business. Microsoft’s operations management approach to this strategic decision area maximizes operational efficiency of the supply chain. The approach also optimizes the productivity of supply chain personnel. The resulting optimization addresses some of the opportunities and threats identified in the PESTEL/PESTLE analysis of Microsoft Corporation .

8. Inventory Management . In this strategic decision area of operations management, inventory costs and holding are set to satisfy organizational needs, customer expectations, and supply chain capacity. Microsoft applies automation for managing its inventory for materials used in maintaining its online systems. For example, the company uses automated systems to determine when to update and upgrade its cloud computing services. The upgrades involve new materials like server components in Microsoft’s facilities. The same operations management approach is used for inventory management in computer hardware manufacturing, although Microsoft outsources production processes. The company’s operations managers apply perpetual methods, periodic methods, and serialized inventory management to maximize operational productivity in this decision area.

9. Scheduling . Intermediate and short-term scheduling to address resources and market demand is covered in this strategic decision area of operations management. In this regard, Microsoft’s objective is to use market conditions to determine the most suitable schedules. The company achieves high productivity in this decision area through decisions based on continuous market analysis. The operational significance of market analyses is their support for relevant decisions that accurately address current concerns in Microsoft’s business. For example, operations managers change intermediate schedules to suit current changes in demand for Microsoft’s Xbox units.

10. Maintenance . Operations management maintains adequate resources and processes in this strategic decision area. Microsoft Corporation needs to maintain its software development processes, as well as production capacity to maximize revenues. In software development, the company focuses on the sufficiency of personnel, such as programmers, to maintain rapid innovation through software design and iteration. On the other hand, in terms of production capacity, Microsoft’s operations management approach maintains high productivity through inter-organizational support. For example, to support outsourced production, the company provides current data to manufacturers. Such current data indicates intermediate changes in production to ensure operational adequacy of Microsoft’s supply chain.

Microsoft Corporation’s Productivity Criteria

Microsoft’s productivity is based on personnel activity, manufacturing processes, software development processes, and equipment maintenance, among others. Operations managers consider these factors in evaluating productivity levels. The following are some measures or criteria Microsoft uses to assess and monitor productivity:

Units per day (Hardware manufacturing productivity)
Servers updated per day (Equipment maintenance team productivity)
Units sold per day (Productivity of Microsoft Stores)
Mendonça, G. D., & Junior, O. F. L. (2023). Artificial intelligence applied to supply chain operations management: A systematic literature review. International Journal of Logistics Systems and Management, 45 (1), 1-30.
Microsoft Corporation – Form 10-K .
Microsoft Corporation – Procurement .
Microsoft Corporation – Segment Information .
Reid, R. D., & Sanders, N. R. (2023). Operations Management: An Integrated Approach . John Wiley & Sons.
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The business case for endpoint management modernization according to Microsoft

Steve Dispensa, Corporate Vice President, Enterprise Management and Windows Commercial
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Is your Chief Financial Officer (CFO) asking you to cut costs? This is a current theme with many of the Chief Technology Officers (CTOs) I speak with. After all, inflation in the United States is now at 8.5 percent, meaning higher input costs for businesses. 1 This includes staff—Skillsoft reported that the number of IT decision-makers facing a talent shortage has grown to 76 percent, 2 meaning wages are increasing for in-demand IT employees. 3 Furthermore, the cost of recruiting and retaining IT staff has increased. Any CTO who can help the CFO with Benjamin Franklin’s old phrase “a penny saved is a penny earned” will win plaudits in the C-suite. 4

Yet the “penny saved” dictum needs to be updated from the 18 th century to be helpful. It is important to not just think about reducing the price of software licenses by a few percent but to understand the total cost of ownership, including the value of employee time and hidden costs, such as ongoing productivity losses caused by security breaches. It’s also important to recognize that business cases may have changed in the past couple of years because of changes in staff costs or the cost of cyber breaches.

Given this context, this blog post proposes some new ways of thinking about the economics of unified endpoint management (UEM). We’ll start by recapping the main savings you’ll see in a business case for UEM, 5 before talking about recent industry trends and how they change how some customers are calculating the value of implementing UEM.

Recapping the business case for unified endpoint management

An independent Forrester analysis 5 described three of the main benefits of Microsoft’s unified endpoint management:

The savings from reduced support tickets due to more automated endpoint security.
The savings from centralizing endpoint management by attaching on-premises devices to the cloud.
Reducing the risk of a security breach and the associated costs from data loss.

Reducing support needs

The first plank of the business case is how unified endpoint management reduces support needs. The logic is straightforward: fewer support tickets result in fewer hours spent by helpdesk staff. For a 2021 commissioned Total Impact™ study of Microsoft Endpoint Manager , 5 Forrester Consulting independently interviewed enterprise organizations to help benchmark the scale of the savings in reducing support needs. The savings can be thought of in terms of the support required at every stage of the user lifecycle. For example, Forrester estimates reductions in the time required to configure a new endpoint or to set up a new user on a laptop. These organizations told Forrester that the time taken to set up a new laptop can be cut by 25 percent for both users and IT admins in some cases, which is significant if it previously took a combined total of six hours to get a new employee up and running. 6 After that, there is the general reduction in support tickets by users who have less need to call the helpdesk (through proactive, automation of issues before the user is even aware, for example). Our customers tell us they have seen a 20 to 40 percent reduction in tickets after the modernization of their endpoints . 5 They also tell us there are further savings in helpdesk staff being able to resolve existing tickets faster by reducing the complexity of the tickets they are handling. All in all, the automation of workflows from unified endpoint management saves IT time, which can then be redeployed to more strategic projects.

Centralizing endpoint management and connecting on-premises devices to the cloud

The second part of the business case is the ability to centralize endpoint management and thus reduce fragmented costs. Allowing IT admins to manage devices from anywhere provides for greater staffing flexibility and economies of scale as IT admins can manage endpoints from one console, rather than separate panes of glass. It also ensures devices are configured and up to date with the latest security patches, whether the device is on a local network or not.

Some of the business case for this will be counted below, in reducing the risk of a security breach. Yet centralization also opens the ability to reconsider spending on overlapping technology and staff costs. For example, this might result in some legacy software savings, either through subscriptions, licenses, or maintenance costs. Additionally, the overhead costs of managing several vendors that support different device platforms or that provide services adjacent to endpoint management may be reduced by consolidating into a single solution. Equally, there might be on-premises hardware costs that can be re-examined. Lastly, customers tell us of staff time savings: onsite IT admins and network engineer hours can both be reduced significantly with this approach.

Reducing the risk of data breaches or non-compliance

Finally, unified endpoint management helps reduce the risk of data breaches. Forrester estimates the lost productivity of a security breach per affected employee at almost half a working day (about 3.5 hours) per year, 5 as they may need to update their device with the latest patch or recover work or data that is impacted by the breach. Reducing the risk of a data breach by 30 to 50 percent (as some of our customers have estimated, especially as part of a broader Zero Trust approach) therefore results in significant enterprise savings. On top of the lost employee productivity costs, there are direct out-of-pocket costs of a data breach, such as the extra work in remediating the breach and possible increases in insurance premiums.

Updating the 2022 endpoint management business case for today’s world of work

So why am I encouraging you to revisit the business case for moving to cloud-based endpoint management? In short, two major things have changed. First, rising IT staff costs mean the relative value of automated solutions is higher than before. Second, the shift to remote and hybrid work has increased the average cost and risk of a data breach for companies, making the cost of not acting higher. 7

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First, statistics indicate an extremely tight labor market for IT talent. In January 2022, there were roughly 340,000 unfilled IT job openings posted by employers, 8 11 percent higher than the average from the past 12 months. 8 Gartner® reports that “IT executives see the talent shortage as the most significant adoption barrier to 64% of emerging technologies, compared with just 4% in 2020.” 8 Further, those already employed in IT are looking elsewhere. An October 2021 survey from TalentLMS and Workable found that 72 percent of respondents in the United States are thinking of quitting their jobs in the next year. 9

These dynamics have resulted in wage inflation. The Information and Cyber Security Salary Guide revealed the median salary for security engineers with one to two years of experience has risen 7 percent in the past year in the United Kingdom, while United Kingdom information security managers with over five years of experience can expect a 9 percent pay rise this year. Across help desk staff, network engineers, IT admins, and security engineers, the more that can be automated, the fewer hours needed (and consequently the less need to hire more IT staff to handle organizational requests).

Second, the cost of a data breach is higher the more an organization has moved to remote and hybrid work environments. According to the Cost of a Data Breach report by IBM and the Ponemon Institute, the cost of data breaches rose nearly 10 percent year over year in 2021. Moreover, the average total cost of a data breach was 28 percent higher when remote working was a factor in causing the breach (USD4.96 million per breach, on average) compared to breaches where remote working was not a factor (USD3.89 million per breach, on average). This discrepancy rises the more staff work remotely. The average cost of a breach at organizations with 81 to 100 percent of employees working remotely is USD5.54 million compared to USD3.65 million for organizations with fewer than 10 percent of employees working remotely.

Despite the big cost impact of a potential data breach, there are small things that you can do or act on immediately.

First, if you haven’t already, proactively engage with your company’s CFO on the topic of strategic value, not just costs and budgets. As I said at the start, the relationship between CTO and CFO is increasingly vital in ensuring an organization performs optimally.

Second, as part of that discussion, I’d encourage you to nominate someone on your team to revisit the business case for UEM in light of staff wage inflation and higher breach costs. To help you along, here is a description of Forrester’s business case for UEM , and Microsoft can help you customize and calculate the business case to your circumstances.

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Home / Case Studies / Dell Technologies

Dell Technologies unlocks new connections and streamlines work with Microsoft Viva Topics

Published on March 1, 2023

Dell Technologies

Among one of the world’s leading technology companies, Dell Technologies is committed to transforming business, shaping the future of innovation, and driving human progress. With more than 158,000 employees, the organization has a vast amount of organizational knowledge and content that its tens of thousands of salespeople around the world consider vital. Dell Technologies turned to Microsoft Viva Topics, a knowledge platform that uses AI to bring knowledge and content directly to employees in the Microsoft 365 apps where they already work.

When Sandra Murtagh, Vice President of Global Sales Learning and Development at Dell Technologies, and Karen Butcher, Head of the Global Sales Learning and Development Transformation Office at Dell Technologies, launched a transformation office within the Dell learning and development organization, the goal was to orient the sales function toward the future. “We’re always thinking about what’s next,” says Butcher. “How can we make the learning experience better? How can we make life easier for our sellers?”

They focused on delivering great experiences and integrating their learning platform with Microsoft Teams, where sellers will be able to access training content at the moment of need. Viva Topics emerged as the next logical step. “Moving forward, we want to integrate more and more information in convenient places for sellers,” says Butcher. “That’s exactly what we’ve started to do with Viva Topics.”

The sales learning and development organization at Dell recognized AI as the most effective way to gather and present large amounts of information. “We’re using Viva Topics because it’s an AI-driven curation engine that pulls together both content and people associated with topics,” says Bruce Sánchez, Global Lead for Sales Learning and Development Technology at Dell Technologies. And because Viva Topics will extend to partner apps, employees will gain a full picture of information gathered from Microsoft sources and beyond. “We’re always on the lookout for partner integrations,” adds Srikanth Ramaswamy, Global Lead for Modern Content and Collaboration Services, Dell Digital Team Member Experience at Dell Technologies. After the success of the pilot testing phase, Dell has recently expanded the use of Viva Topics and embraced a full-scale rollout across its global sales force.

Turning to Viva Topics to uncover knowledge from within the apps they use every day leads Dell sales employees to forge new connections with colleagues. “That’s probably one of the biggest benefits we’re experiencing,” says Murtagh. “Historically, we relied on legacy relationships, but with the combination of Microsoft Teams and Viva Topics, we’re opening up collaboration and relationships across all our functions.” 

The ability to effortlessly create connections is a boon for a global, highly dispersed sales force. “Dell has championed working from home for many years,” says Butcher. “And today, a hybrid approach is at the forefront of our organization.” Creating a flexible, highly mobile experience for sellers is one way the sales learning and development organization supports the hybrid approach for Dell’s sales team. “The ability to easily search for and uncover content natively in Teams and other applications was a big hit,” Butcher continues. “Especially because people have the same experience on mobile devices and desktops, no matter where they work from.” 

“We’ve made Viva Topics a big part of our reimagination of what work looks like for our sellers.”

As the sales learning and development organization expands its use of Viva Topics, it’s also exploring other Microsoft Viva modules, including Microsoft Viva Connections, Microsoft Viva Sales, and Microsoft Viva Insights. It’s an exciting moment. “I’ve been with Dell for 26 years,” says Murtagh. “Where we are now in terms of knowledge management and learning is a massive flip from where we were in the past. We’ve made Viva Topics a big part of our reimagination of what work looks like for our sellers.”

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Microsoft Corporation’s Strategic Management Essay

It is important to note that a proper strategic management analysis requires a comprehensive assessment of all critical components of a business entity, which enables a thorough application of strategic models and plans. The prime organization of interest is Microsoft Corporation, which is one of the largest multinational tech companies based in the United States. It mainly specializes in the production and selling of software programs, but its diverse set of products and services additionally include personal computers, consumer electronics, and other technology services, such as electronic market platforms. Microsoft has been a well-established and attributed company for the last decades, and the company has evolved over time, and changes have occurred to its strategies to keep afloat with the current market trends. It is consistently listed as one of the world’s top five companies to work for, and it is one of the big five American IT companies (Kelly, 2022). It is known to be a highly diversified company that produces different products and services for its consumers. Currently, the majority of the computer systems used in a multitude of organizations are mostly produced by the Microsoft Corporation.

Old Vision Statement

Microsoft’s current vision statement is “to help people and businesses throughout the world realize their full potential” (Gregory, 2022, para. 7).

Revised Vision Statement

The revised vision statement is “to be at the forefront of innovation to bring value to our customers, shareholders, and communities.”

Old Mission Statement

In order to comprehensively assess Microsoft’s relationships between its corporate, business, and operational strategies, it is critical to revisit its mission statement. The latter states that the company seeks to “empower every person and every organization on the planet to achieve more” (Microsoft, 2022, para. 1). The mission can be considered rather generic and nonspecific, which is why it would be more useful to tackle each strategic element separately followed by their interconnected dynamics.

Proposed Mission Statement

The proposed mission statement is “to provide innovative solutions to people and businesses.”

The core reasoning behind the proposed mission statement is rooted in the fact that the given industry is heavily focused on competitiveness through innovation. The process of the creation of sophisticated products, such as software and hardware, is highly dependent on human resources and talent. Therefore, innovation needs to be at the core of the vision and mission statement to reflect where and how the value is generated for both the customers and shareholders.

External Factor Evaluation Matrix

The External Factor Evaluation Matrix, or EFEM, is shown in Table 1 below. It reveals that the top priority issues involve talent and human resources since the company’s products and services are heavily centered around innovation. The current state of Microsoft is that it is static with minimal growth, mostly driven by the tight competition from other large competitors. The industry is fully occupied by few large corporate entities, which means there are no threats from new entrants, and even medium size companies are being bought by the giants (Lee, 2022). In such a tight market of technology and software, the leverage is obtained through new and better products and services since other rivals have the same buying and investing power.

Table 1: EFE Matrix

The Competitive

The competitors.

It is important to note that the market of Microsoft Corporation is oligopolistic by nature, and only a handful of big businesses dominate the market. The competition is tight, and each market share requires a significant amount of investment and risk management. There is no risk from new entrants since they are either quickly bought by substantially larger players or driven out of the market.

Although Microsoft offers and sells a highly wide range of products and services, it is stated that “the company’s largest revenue source is its cloud computing business, and it’s the fastest-growing segment of its business model” (Boyd, D. and Boyd, A. 2022, para. 12). The biggest competitors of Microsoft are Google, Apple, Amazon, IBM, and Salesforce (Hughes, 2022). Thus, firstly, the competitive rivalry in the market is intense and significant because the threat is coming from other large and powerful tech organizations with sufficient resources and capabilities to innovate and grow as well. Secondly, for the supplier power, there is no identifiable supplier for the cloud computing business besides microchips and hardware elements, such as China or Taiwan. In other words, the entire industry is impacted by such a force.

Thirdly, the buyer power is about massive primarily due to the presence of equally capable and resource-rich competitors, especially in the cloud computing business, such as Google and Amazon. The threat of substitution is high because innovation is equally valued across all tech giants, and they are constantly pushing the boundaries of what is possible. However, the threat of new entry is minimal or non-existent because the industry is practically ‘ruled’ by a few large conglomerates, and new startups become bought before they can even rival Microsoft or its competitors.

Google/Alphabet

Alphabet, the parent company of Google and other companies, is a large multinational corporation. It was founded in 1998, and it is currently headquartered in California, US (Forbes, 2022a). The CEO is Sundar Pichai, and the company employs around 156500 people (Forbes, 2022a). It provides a wide range of IT services and software, among which the most prominent ones are the Google Search engine and G-mail integrated services (Forbes, 2022a). YouTube is another major business owned by Alphabet, which is considered to be the second most visited website after Google itself.

Apple is the largest tech company in the world, which provides both hardware and software products as well as services. It was founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, and it is currently headquartered in California, US (Forbes, 2022b). The CEO of Apple Inc. is Tim Cook, who manages approximately 154000 employees worldwide (Forbes, 2022b). Key competitive products with Microsoft include iOS, phones, market platforms, and computers.

Competitive Profile Matrix (CPM)

Table 2: Competitive Profile Matrix for Microsoft Corporation, Alphabet Inc., and Apple Inc.

Primary Implications from CPM

The CPM can be accessed in Table 2 above, where the analysis reveals that Microsoft holds a strong market position with minor weaknesses and strengths compared to its competitors. For the most part, the performance is equivalent among all three companies as expected since they are resourceful, large, and dominant in what they focus on in the market. Therefore, it provides more justification for increasing innovation.

The Financial Statement

The income statement and balance sheet can be accessed in Tables 3 and 4 below, respectively. Microsoft’s both profitability and asset size have been increasing since 2019, which shows that the company is performing well despite the pandemic. However, the latter can be attributed to the tech industry in general, which was minimally impacted by the COVID-19 pandemic disruptions. In other words, the online nature of the business was a key strength for Microsoft during lockdowns.

Income Statement

Table 3: Income Statement for Microsoft Corporation

Balance Sheet

Table 4: Balance Sheet for Microsoft Corporation

Historical Ratios

The historical ratios for Microsoft Corporation can be accessed in Table 5 below.

Table 5: Historical Ratios: Microsoft Corporation

Internal Factor Evaluation Matrix (IFE Matrix, IFEM)

Table 6: Internal Factor Evaluation Matrix for Microsoft Corporation

The Internal Factor Evaluation Matrix (IFEM) for Microsoft Corporation is shown in Table 6 above.

Strategy Analysis

Strengths-weaknesses-opportunities-threats matrix (swot).

Table 7 below shows the SWOT analysis for Microsoft Corporation.

Table 7: SWOT Analysis for Microsoft Corporation

Boston Consulting Group Matrix (BCG)

Internal-External Matrix (IE)

Internal-external matrix by product.

Table 8: Internal-External Matrix by product for Microsoft Corporation

Internal-External Matrix by region

Table 9: Internal-External Matrix by region for Microsoft Corporation

Strategic Position and Action Evaluation Matrix (SPACE)

Table 10: Strategic Position and Action Evaluation Matrix (SPACE) for Microsoft Corporation

Grand Strategy Matrix (GRAND)

Table 11: Grand Strategy Matrix (GRAND) for Microsoft Corporation

Quantitative Strategic Planning Matrix (QSPM)

Table 12: Quantitative Strategic Planning Matrix (QSPM) for Microsoft Corporation

Strategy Conclusion

Firstly, the company’s corporate strategy is highly centered around the divisional organization, which is about having five independent divisions. These include “Windows & Live Windows Group, Server Software, Online Services, Microsoft Business, and Entertainment and Devices” (Stony Brook University, 2022, para. 1). In addition, each division has its own sales professionals, research and development, and customer service staff, which means that all employees of a division are located in one area for efficiency, convenience, and cohesion.

Secondly, the business-level strategy of Microsoft is focused on market excellence through expansion driven by innovation. It is stated that “the company’s business strategy is currently focused on three elements – ‘cloud-first, mobile-first, growth through mergers and acquisitions and exploring business opportunities related to AR/VR (Augmented Reality and Virtual Reality)” (Analytics Insight, 2019, para. 11). In other words, it is evident that the corporation is extensively trying to innovate and grow through the latter.

Thirdly, one should be aware that the current operational strategy is about productivity above everything else. The company wants to perfect and improve ten key areas, such as maintenance, scheduling, inventory, supply chain, HR and job design, layout design and strategy, location, capacity and process, quality, and design of goods/services (Smithson, 2017). From the information above, all three level strategies are cohesively interconnected. For example, it can be stated that each department works independently from the other and the department heads. The operations managers are able to make strategic decisions due to the expansion of the company’s products and services. The diversification of the business allows the managers to make broader decisions in lieu of its future growth and to maintain efficiency. Creating products of proper quality is at the forefront of the company’s values since before an item is introduced into the market, it undergoes rigorous testing by trying to acquire feedback from the existing customers. The given principles are deeply reflected and based upon Microsoft’s mission and vision statement.

Recommendations

For such a large company operating in a strong oligopoly market, growth can only be achieved through innovation. The main reason is that there is no financial or resource-based leverage for Microsoft since all of its competitors are as equally rich and capable as the company. The growth is saturated and maximized by all competitors, which is why the expansion is about new and better offerings. In other words, the goal is to defeat the rivals by taking their market shares with better products or services. The first option for Microsoft is to invest in the acquisition of new startups on a massive scale, which will drive innovation and provide a ready-to-use product. The evaluation of this path shows that it will be costly and expensive because other competitors want to buy new startups as well, driving the price higher. The second option for the company is to focus on its talent and human resource management to cultivate innovation within instead of buying it externally. The given alternative is more reliable and not-easy-to-replicate.

The evaluation of options reveals that the second option of driving innovation within is a better recommendation. The accompanying business objective of cultivation of internal innovation and its justification comes from the expensiveness of the first option and support from research. It is stated that innovation is mainly driven by the cultivation of innovative traits among employees of an organization (Poirier et al., 2017). Research shows that “knowledge acquisition positively affects innovation performance and that HRM moderates the relationship between knowledge acquisition and innovation performance” (Papa et al., 2018, p. 589). In other words, the business objective of attracting the best talent in the labor market, accompanied by superior innovation-focus human resource management, can improve innovation. In addition, Microsoft does not need to implement these changes radically because they are just as effective when integrated incrementally (Agostini et al., 2017). Thus, Microsoft’s business goal is growth through innovation, which should be done internally through the cultivation of innovative improvements.

Organizational Structure

Old organizational structure.

Improved Organizational Structure

The proposed plan is a strategic and organizational one, which is why the key change agents include the top leadership, management, and HRM. The suitable structure for the implementation of the plan is a top-down approach because innovation needs to be encouraged by high-level managers. Since the role of HRM is significant during this organizational shift, the bottom-up framework might not be most suitable due to HR being most influenced by the top management, not employees. In addition, key motivation factors and improvement of hygiene factors can only take place if the management decides to order HRM to do so. Lastly, the framework is plausible because the existing structure requires some restructuring by adding more cohesiveness among divisions to integrate innovation cultivation universally across the entirety of the company.

The implementation plan needs to occur in three phases in accordance with Kurt Lewin’s model of organizational change. It states that change occurs in three stages, which include unfreezing, change, and freezing (Whatfix, 2022). Microsoft needs to address its current talent before proceeding to new talent, which needs to be followed by improvements in organizational cohesiveness (O’Donovan, 2022). Firstly, the company needs to slowly unfreeze its existing frameworks, during which the management can shift its focus from startup acquisitions to internal cultivation of innovation. Secondly, the second half of the unfreeze stage needs to improve hygiene factors relevant to employees and enhance motivators. Thirdly, during the change stage, the company needs to ensure the restructuring of its organization to become more cohesive and uniform to ensure that changes are integrated properly throughout the entire company (David & David, 2017). Fourthly, the most important part is solidifying the changes in the freezing stage, which requires top management’s constant enforcement of the measures until they become the new norm.

The dependency of the plan on top management and their authority over HRM makes the top-down approach essential. It is stated that the key advantages of such a structure are faster implementation, clearer communication, and widespread familiarity with what is taking place (Asana, 2021). In the case of the plan implementation, Microsoft’s leadership needs to show proactivity and reciprocity about the proposed organizational change. It is clear that culture and leadership play a significant role in facilitating implementation at the company (Bovée & Thill, 2007). In other words, the top-down approach is to be utilized to ensure the effectiveness and efficiency of the plan.

Moreover, when it comes to informing and prompting the leaders to undertake such an endeavor, the strategy might include these elements since they need to be properly adjusted and positively tuned for change. Since the latter statements mean that if the leaders and managers are supportive of the proposed measures for improvements, the culture can be sufficiently primed for the continuous increase in innovation. Any form of implementation and integration plan needs to be properly designed in accordance with organizational needs and specificities. The implementation design for the proposed strategic plan is to be calculated, precise, and quantitative (Norton & Wiburg, 1998). The underlying reason is that the comparison mandates precise measurements, and then these can be conducted through innovation to increase values and talent productivity.

The high research and development (R&D) rate is an external technological element that signifies a rapid technological improvement in the mass media and entertainment sectors. In the context of the tech environment, the technological development represents a danger that intensifies competitiveness. Nonetheless, the same distant or macro-environmental aspect presents a chance for Microsoft to expand by deliberately boosting its R&D pace to meet or surpass that of competitors. Additionally, the growing popularity of augmented reality presents a potential for the firm to improve its performance.

Perceptual Map

Table 13: Perceptual Map for Microsoft Corporation

EPS/EBIT Analysis

Table 14: EPS/EBIT Analysis for Microsoft Corporation

Company Valuation

Table 15: Company Valuation for Microsoft Corporation

The Projected Financial Statements

Projected income statement.

Table 16: Projected Income Statement for Microsoft Corporation

Projected Balance Sheet

Table 17: Projected Balance Sheet for Microsoft Corporation

Executive Summary

In conclusion, Microsoft’s competitive advantage in its saturated oligopoly market depends on innovation. The latter can be bought externally, such as startups, or cultivated internally. Buying new startups is expensive because competitors have the resources to drive the prices up. Cultivating innovation from within is more sustainable and hard to replicate, but it requires changes in hygiene factors, motivator factors, and organizational cohesiveness. The plan needs to be implemented in a top-down approach in three of Kurt Lewin’s stages across a two-year period. The majority of internal and external factors indicate the prevalence of opportunities for developing a larger customer base. The development in these areas will allow the company to increase all of its product lines. On the basis of the analysis provided above, the company’s strategic options include the following:

Microsoft should revise its human resource management in accordance with its core objectives by attracting talent with less political agenda.
Microsoft should work on its employee retention methods since the existing workforce is not stable or loyal.
Microsoft should gradually proceed with its differentiation strategy by ensuring that each new product is launched and sustained to maximize its long-term performance.
Microsoft should continue using its industry leadership to penetrate the markets of its competitors to capture some of its market shares.

Agostini, L., Nosella, A., & Filippini, R. (2017). Does intellectual capital allow improving innovation performance? A quantitative analysis in the SME context. Journal of Intellectual Capital, 18 (2), 400-418. Web.

Analytics Insight. (2019). Unveiling business strategy: Microsoft . Web.

Asana, T. (2021). Top-down approach vs. bottom-up approach: what’s the difference? Web.

Bovée, C., & Thill, J. (2007). Business communication essentials (4 th ed.). Pearson Prentice Hall.

Boyd, D., & Boyd, A. (2022). How does Microsoft make money? Finty . Web.

David, F. R., & David, F. R. (2017). Strategic management concepts and cases (16 th ed.). Pearson Prentice Hall.

Forbes. (2022a). Alphabet. Web.

Forbes. (2022b). Apple . Web.

Gregory, L. (2022). Microsoft’s mission statement & vision statement. Panmore Institute . Web.

Hughes, J. (2022). Microsoft competitors analysis: top 5 competitors. Business Chronicler . Web.

Kelly, J. (2022). Massive Microsoft survey of 31,000 people to vibe check the workplace shows a mismatch between managers and employees. Forbes . Web.

Lee, J. (2022). U.K. warns Activision merger gives Microsoft ‘unparalleled advantage’ . The Washington Post . Web.

Microsoft Corporation. (2022). Annual Report 2021. Web.

Microsoft. (2022). Our mission . Web.

Norton, P., & Wiburg, K. M. (1998). Teaching with technology . Harcourt Brace College Publishers.

O’Donovan, C. (2022). Microsoft tries collaborating with unions to avoid ‘public disputes’ . The Washington Post . Web.

Papa, A., Dezi, L., Gregori, G. L., Mueller, J., & Miglietta, N. (2018). Improving innovation performance through knowledge acquisition: The moderating role of employee retention and human resource management practices. Journal of Knowledge Management, 24 (3), 589-605. Web.

Poirier, V., Schwartz, L. H., Eddy, D., Berman, R., Chacour, S., Wynne, J. J., Cavanaugh, W., Martin, D. F., Byrne, R., & Sanberg, P. R. (2017). Thoughts on improving innovation: What are the characteristics of innovation and how do we cultivate them? Technology & Innovation, 18 (4), 319-330. Web.

Smithson, N. (2017). Microsoft Corporation’s operations management, 10 decisions, productivity. Panmore Institute . Web.

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IvyPanda. (2023, July 1). Microsoft Corporation's Strategic Management. https://ivypanda.com/essays/microsoft-corporations-strategic-management/

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1. IvyPanda . "Microsoft Corporation's Strategic Management." July 1, 2023. https://ivypanda.com/essays/microsoft-corporations-strategic-management/.

Bibliography

IvyPanda . "Microsoft Corporation's Strategic Management." July 1, 2023. https://ivypanda.com/essays/microsoft-corporations-strategic-management/.

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Microsoft Cloud strength fuels third quarter results

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REDMOND, Wash. — April 25, 2024 — Microsoft Corp. today announced the following results for the quarter ended March 31, 2024, as compared to the corresponding period of last fiscal year:

Revenue was $61.9 billion and increased 17%
Operating income was $27.6 billion and increased 23%
Net income was $21.9 billion and increased 20%
Diluted earnings per share was $2.94 and increased 20%

“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” said Satya Nadella, chairman and chief executive officer of Microsoft.

“This quarter Microsoft Cloud revenue was $35.1 billion, up 23% year-over-year, driven by strong execution by our sales teams and partners,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Business Highlights

Revenue in Productivity and Business Processes was $19.6 billion and increased 12% (up 11% in constant currency), with the following business highlights:

Office Commercial products and cloud services revenue increased 13% (up 12% in constant currency) driven by Office 365 Commercial revenue growth of 15%
Office Consumer products and cloud services revenue increased 4% and Microsoft 365 Consumer subscribers grew to 80.8 million
LinkedIn revenue increased 10% (up 9% in constant currency)
Dynamics products and cloud services revenue increased 19% (up 17% in constant currency) driven by Dynamics 365 revenue growth of 23% (up 22% in constant currency)

Revenue in Intelligent Cloud was $26.7 billion and increased 21%, with the following business highlights:

Server products and cloud services revenue increased 24% driven by Azure and other cloud services revenue growth of 31%

Revenue in More Personal Computing was $15.6 billion and increased 17%, with the following business highlights:

Windows revenue increased 11% with Windows OEM revenue growth of 11% and Windows Commercial products and cloud services revenue growth of 13% (up 12% in constant currency)
Devices revenue decreased 17% (down 16% in constant currency)
Xbox content and services revenue increased 62% (up 61% in constant currency) driven by 61 points of net impact from the Activision acquisition
Search and news advertising revenue excluding traffic acquisition costs increased 12%

Microsoft returned $8.4 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2024.

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Quarterly Highlights, Product Releases, and Enhancements

Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge.

Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities.

Environmental, Social, and Governance (ESG)

To better execute on Microsoft’s mission, we focus our Environmental, Social, and Governance (ESG) efforts where we can have the most positive impact. To learn more about our latest initiatives and priorities, please visit our investor relations ESG website .

Webcast Details

Satya Nadella, chairman and chief executive officer, Amy Hood, executive vice president and chief financial officer, Alice Jolla, chief accounting officer, Keith Dolliver, corporate secretary and deputy general counsel, and Brett Iversen, vice president of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor . The webcast will be available for replay through the close of business on April 25, 2025.

Constant Currency

Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Financial Performance Constant Currency Reconciliation

Segment Revenue Constant Currency Reconciliation

Selected Product and Service Revenue Constant Currency Reconciliation

About Microsoft

Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

intense competition in all of our markets that may lead to lower revenue or operating margins;
focus on cloud-based services presenting execution and competitive risks;
significant investments in products and services that may not achieve expected returns;
acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;
impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;
cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;
disclosure and misuse of personal data that could cause liability and harm to our reputation;
the possibility that we may not be able to protect information stored in our products and services from use by others;
abuse of our advertising, professional, marketplace, or gaming platforms that may harm our reputation or user engagement;
the development of the internet of things presenting security, privacy, and execution risks;
issues about the use of artificial intelligence in our offerings that may result in reputational or competitive harm, or legal liability;
excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;
quality or supply problems;
government enforcement under competition laws and new market regulation may limit how we design and market our products;
potential consequences of trade and anti-corruption laws;
potential consequences of existing and increasing legal and regulatory requirements;
laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage;
claims against us that may result in adverse outcomes in legal disputes;
uncertainties relating to our business with government customers;
additional tax liabilities;
an inability to protect and utilize our intellectual property may harm our business and operating results;
claims that Microsoft has infringed the intellectual property rights of others;
damage to our reputation or our brands that may harm our business and operating results;
adverse economic or market conditions that may harm our business;
catastrophic events or geo-political conditions, such as the COVID-19 pandemic, that may disrupt our business;
exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange and
the dependence of our business on our ability to attract and retain talented employees.

For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor .

All information in this release is as of March 31, 2024. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

For more information, press only:

Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, [email protected]

For more information, financial analysts and investors only:

Brett Iversen, Vice President, Investor Relations, (425) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news . Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor .

Axel Springer and Microsoft expand partnership across advertising, AI, content and Azure services 

The Estée Lauder Companies and Microsoft increase collaboration to power prestige beauty with generative AI

Microsoft earnings press release available on Investor Relations website

The Coca-Cola Company and Microsoft announce five-year strategic partnership to accelerate cloud and generative AI initiatives

Cognizant and Microsoft announce global partnership to expand adoption of generative AI in the enterprise, and drive industry transformation

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