Although the letter is nominally addressed to All Employees, it’s clearly aimed at a much wider audience, including the press and the investment community.
Much of what’s in this 3000-word-plus missive is corporate rah-rah and a no-doubt-genuine attempt to rally the troops to head in a new direction.
But when the CEO makes a big speech, even if it’s delivered on a Snowfall-style web page, it’s carefully vetted by the company’s brain trust (and by its lawyers). And you don’t have to play Kremlinologist to discern major themes for the next year or two.
Just as it pays to read annual reports carefully, it’s also worth picking out the substance buried beneath the yadda-yadda in a presentation like this one.
Here are five small but meaningful details that caught my attention.
1. Microsoft isn’t doing things Mr. Ballmer’s way anymore.
Nadella introduces the section on Microsoft’s core with a pointed reference to Ballmer’s “devices and services” strategy:
While the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy.
That’s a very direct, almost blunt distancing from Steve Ballmer’s vision. It’s also an implicit criticism that echoes some outsiders’ complaints about Ballmer’s leadership (some of which were clearly shared by Microsoft’s board), specifically a lack of vision and long-term strategy.
A later section also feels, despite the passive voice, like a shot at the previous regime: “Tired traditions will be questioned. Our priorities will be adjusted.”
Ballmer the poker player, who made billion-dollar bets and occasionally took billion-dollar write-downs, is gone. Nadella is trying to portray himself as the chess player, thinking three moves ahead and making strategic moves, not big bets. It's still too early to tell whether the cerebral approach will work where Ballmer's bluster sometimes didn't.
2. Microsoft’s future is about experiences, not products or services.
The two most commonly used words in this long missive are work and experience, often in combination: the phrase “digital work and life experiences” appears no fewer than 10 times. That’s roughly the point when a theme turns to a mantra.
“We help people get stuff done” is the folksy version of that vision. That casual phrasing is much more likely to resonate with consumers, than the dry, MBA-approved productivity. In fact, the word “stuff” is repeated throughout that paragraph with great rhetorical effect, using examples ranging from the purely personal (“chatting with friends and family”) to creative (painting and poetry) to very big business (“keeping an entire city running”) and world-changing achievements (“helping build a vaccine for HIV”).
From a marketing point of view, this is clearly an attempt to connect with the company’s core constituency in the enterprise. Microsoft’s products and services—sorry, experiences—aren’t just for while you’re on the clock. They’re also for the stuff that goes on when you’re not at work or school.
We will think of every user as a potential "dual user" – people who will use technology for their work or school and also deeply use it in their personal digital life.
The vision, ambitious to be sure, is for apps to help us achieve that elusive work-life balance, “to partition data between work and life and with the respect for each person's privacy choices.”
3. Windows 13, Office 2.
If you’re keeping score at home, Nadella mentions Windows 13 times in this roadmap. Windows on the desktop, Windows the device OS, Windows Server, Windows Phone, with Windows Universal Apps tying all those screens together in the Windows ecosystem. It's the single most-mentioned Microsoft brand, which is at least partial evidence that Windows is not scheduled for retirement anytime soon.
By contrast, Azure and Skype each get three mentions, with Skype Translator getting a shout-out as a product that will “change the world.”
Xbox gets six mentions in a longish paragraph containing “thoughts on Xbox and its importance to Microsoft.” The remarks are clearly intended to silence critics who say the company should spin it off:
The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming. We are fortunate to have Xbox in our family to go after this opportunity… We also benefit from many technologies flowing from our gaming efforts into our productivity efforts….
Meanwhile Office and Office 365 are dismissed in a single sentence. That’s probably just a tribute to a smooth-running division that’s generating billions of dollars in revenue, but in this context it’s also an admission that Office will never deliver “a raving fan base” like that of Xbox.
4. If you’re an engineer, prepare for some changes.
Every Microsoft employee is used to frequent reorganizations, usually built around changes in management as executives rise and fall in the corporate power structure. But the next reorg, hinted at in this memo, might be more radical than political. “Over the course of July,” Nadella says, “the Senior Leadership Team and I will share more on the engineering and organization changes we believe are needed.”
That means an even faster pace:
In order to deliver the experiences [there’s that word again] our customers need for the mobile-first and cloud-first world, we will modernize our engineering processes to be customer-obsessed, data-driven, speed-oriented and quality-focused. … We will streamline the engineering process and reduce the amount of time and energy it takes to get things done.
That all sounds very Google-y to me, even down to the notion that every engineering group will have its own set of big data resources to help predict market trends.
And there’s also a tacit admission that political infighting is sucking the life out of the company. “You will see fewer people get involved in decisions and more emphasis on accountability.”
A flatter organization and leaner business processes? Good luck with that.
5. Microsoft increasingly plays on a global stage.
The word world appears in Nadella’s letter two dozen times. It’s a new world, a changing and evolving world, and, repeatedly, a “mobile-first and cloud-first world,” which appears under the bold heading, “Our Worldview.”
It’s a fairly candid recognition that the growth of technology, and opportunities for Microsoft and its shareholders, will come by providing products and services—sorry, experiences—for that next billion devices in emerging markets.
There’s no question that Microsoft expects to continue making profits from its enterprise customers, especially by moving them from on-premises software to the cloud, specifically Azure.
But the biggest opportunities for growth are in the rest of the world, with consumers and small businesses that don’t have enterprise budgets. And this section suggests that Microsoft is perfectly willing to embrace Android:
All of these apps will be explicitly engineered so anybody can find, try and then buy them in friction-free ways. They will be built for other ecosystems so as people move from device to device, so will their content and the richness of their services – it's one way we keep people, not devices, at the center. [emphasis added]
That’s a clear (albeit indirect) shot at Google, which is banking on its dominant search and Gmail services to be at the hub of people’s lives.
As manifestos go, this one isn’t bad. The challenge now is turning the lofty thoughts into concrete actions.