In the wake of Microsoft's reorganization, more questions than answers

In the wake of Microsoft's reorganization, more questions than answers

Summary: Sometimes a top-down reorganization is necessary. But sometimes it works better on paper than in practice.

TOPICS: Microsoft
This terrible photo illustration: Andrew Nusca

While the rest of the world made knee-jerk reactions to Microsoft's announced reorganization yesterday, I waited, read through chief executive Steve Ballmer's memo about it instead and slept on it. Changes like this need at least 24 hours to sink in, I think.

You see, it's not the specific changes that interest me; I'll leave that analysis to the regular Microsoft watchers, who know far better than me what the implications are for Microsoft's various businesses (and the careers of their senior executives).

What I want to know is why the company felt it needed to make such a large change; why it felt the need to do it now, and in this fashion; why it felt the need to tell the world about it; and why Ballmer felt the need to address it in a 2,649-word missive sent from the corner office to the company's 100,000 employees. The theme was "One Microsoft," yet there was only one voice in the memo.

The changes

To summarize, Microsoft has rendered obsolete its five primary business units: Windows, Server and Tools, Business Division, Entertainment and Devices, Online Services. In their place are units distinguished by expertise that span the company: Operating Systems, Applications and Services, Cloud and Enterprise, Devices and Studios, etc. The new structure appears to favor technologies over specific products, further blurring the lines between consumer and enterprise, with the hope that the company's various divisions will be more in lockstep with each other.

"We are rallying behind a single strategy as one company — not a collection of divisional strategies," Ballmer wrote in the memo. "Although we will deliver multiple devices and services to execute and monetize the strategy, the single core strategy will drive us to set shared goals for everything we do. We will see our product line holistically, not as a set of islands."

A brief look at the company's activities over the last few years helps to explain this decision; Microsoft, like nearly every large corporation before and after it, has been criticized for moving too slowly in a fast-changing industry: from Windows Phone to Office 365 to Bing to Azure, the company continues to follow, not lead, the market. Even one of its undisputed winners, Xbox, stumbled out of the gate a bit during the launch of its next-generation console. (In time, we'll see if that really matters.) True, you can build a successful company without winning every race, but there's something to be said about execution if you're regularly playing catch-up to companies of a similar size.

And so we have these changes, which aim to—on paper!—integrate the roadmaps and value propositions of various products that are increasingly interconnected. It is clear to many, for example, that Xbox and Windows Phone and Windows 8 must be on the same wavelength. The question is whether it works in practice.

Better, or just different?

I am not convinced that Microsoft's reorganization enables better execution; it is merely a different way to work. There is no shortage of companies whose divisions and products are more deeply integrated with each other, but there is no shortage of companies who function better as separate entities, too. The grass is always greener on the other side.

The downside to a less integrated approach is obvious: conflicting strategies. In moderation, duplicated efforts are good: they allow a company to iterate solutions to a problem. In excess, they can turn a company against itself. Further, to a public company, duplication can appear to be waste that can be excised without harming the final product.

But there are substantial downsides to more integration, too.

A company of 100,000 people with so many different products and services, not all of them necessarily integrated at a technical level, may find it difficult to move in the same direction, even if the marching orders are the same throughout; the company may be too big to turn.

Consolidation by expertise and not product may accelerate execution for the company's most important products, but it may decelerate support for products that receive less priority. When a Windows 8 project and a Bing project arrive in the same queue, which do you think will reasonably be addressed first? Money talks

In theory, this shouldn't be a problem if centralized groups prioritize with fairness. But there is little incentive to do so. A company's smaller products will always benefit from having their own teams.

Finally, Ballmer emphasized speed in this realignment. "As a company, we need to make the right decisions, and make them more quickly, balancing all the customer and business imperatives," he wrote. "Each employee must be able to solve problems more quickly and with more real-time data than in the past."

He added, almost immediately after that: "Collaboration means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value."

It is not difficult to see that these points can easily be at odds with each other. Rapid decision-making can be achieved with independence at the expense of a unified direction. Interdependence slows decision-making but ensures a more consistent result.

Carpe diem

So why did Microsoft make such sweeping change, suddenly, and announce it in such a declarative, top-down fashion? I believe the company is tacitly acknowledging many of its critics' views that it has been executing poorly relative to its resources. As they say, the definition of insanity is doing the same thing repeatedly and expecting a different result. Kudos to the sane ones in Redmond.

What concerns me, however, is the notion that a reorganization is a solution to the various problems throughout the company's former divisions. Ballmer made it clear that a "single strategy as one company" was key, even though that responsibility has always rested with him. Why Ballmer couldn't police that direction in coordination with his subordinates, and felt the need to institutionalize it instead, is not clear to me. A company's organization should be a manifestation of its strategy, not the other way around. If "One Microsoft" is a new strategy, there is precious little detail on that to justify the sweeping organizational change that is already underway. Every solution needs a problem.

The easy answer, of course, is to say that if it works for Apple, it will work for Microsoft. But the latter is almost twice the former's size. (Even then, Apple's organization has its own issues.)

Finally, the fact that this change comes from the top, all at once, and not from within the various levels of the company over time as needed, suggests that it is more flash than substance. If so many areas of the company were executing less effectively than they should, is it really logical that they should be addressed at the same time? Or is this move more about motivating employees, closing a chapter and insisting that it's a new day?

A company is a living, changing organism that should adapt to its environment—not an apartment to redecorate on a whim.

"Lots of change," Ballmer acknowledged toward the end of his memo. "But in all of this, many key things remains the same." That may be precisely the problem.

Topic: Microsoft

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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  • In the wake of Microsoft's reorganization, more questions than answers

    "What I want to know is why the company felt it needed to make such a large change; why it felt the need to do it now, and in this fashion; why it felt the need to tell the world about it; and why Ballmer felt the need to address it in a 2,649-word missive sent from the corner office to the company's 100,000 employees."

    Standard practice for an organization of Microsoft's size. It keeps things fresh within the company so they can continue to innovate. The blurred lines is to get more revenue so your not dependent on just consumers or business. You get them both. It all works out just like the reorg.
    • I'm more concerned that it doesn't really address the underlying issues.

      Server, client, mobile, and entertainment can not run on a single interface and a single platform and right now Ballmer is under the opinion it can. His one vision and one voice is his vision and his voice. He seems to see Microsoft as this one size fits some technology asset that makes more money the less you have to develop and the more people you can get to buy it. But you can't please all the people all the time and to succeed they will need a Microsoft that is more departmentalized and accommodating specific needs, not using market share to force cookie cutter solutions on OEM's.
    • Thats really odd...

      Most companies form divisions to diversify their holding.

      Those divisions that don't make money get closed - and the funds go to doing something different.

      MS is doing the reverse.. just hiding the losses from investors.
      • Very doubtful that MS can hide any losses from investors,

        and, if you had been paying attention, they've disclosed their losses, including a big dud they purchased a few years back that lost them a few billion dollars.

        Everybody, including the my dog, knows that MS has divisions and some products, and some services, which are not producing as MS wishes right now, and some are actually losing money, but MS has reported those losses in their quarterly reports. The bottom line is that, MS is making oodles of money, from most of their products and services, and some of their new products and services are on the way to being money makers too.

        So, get your head out of the ground, and start noticing what is really happening.
  • One Microsoft Way

    Anyone who takes themselves too seriously is bound to fail.

    The question about Microsoft is not if, but when.
    • When?

      That's an easy one - Never.

      But you know that already, so that's why nobody can really take what you say seriously.
      William Farrel
      • Interesting you should say that

        Because Bill Gates does not share your view. He was asked what he could do to ensure Microsoft would endure forever. His answer was, "Microsoft won’t be immortal. All companies fail. It’s just a question of when. My goal is to keep my company vital as long as possible, of course."
      • Re: That's an easy one - Never.

        Oh, and by the way, were you around when DEC was a star? I was, it was unthinkable they could ever sink.

        Where are DEC today?
  • Reorg

    This reorg seems like many of the "we need to do something but we have idiots in charge" reorganization that companies do shortly before they file for bankruptcy. MS does have plenty of cash so they might buy sufficient time to survive.

    Every product of MS or Apple to some degree competes internally against other products. There is a certain amount of self-cannibalization succesful companies tolerate; they realize "100 percent of 0 is 0". Apple understands this but I do not think Ballmer and cronies at MS do.
    • Exactly right

      The only thing worse they could have done -- and they will eventually, it's always the next step after the WTF reorgs -- is to do Six Sigma or 5S.
      • 6 Sigma

        Actually a well run quality program would help infuse any company with a strong sense of doing everything correctly fhe first time and to find solutions/methods to ensure this happens. This implies managers listening and allowing ideas from the peasants to be implemented.
        • Sorry, not in this case

          Six Sigma, 5S, TQM, House of Quality, all the rest may work on the manufacturing floor, but they've damaged or destroyed every other kind of company they've ever been tried. These names mean anything to you?

          Home Depot
          Merlin Metalworks
          Beckman Instruments

          This isn't my opinion; the case studies are out there.
  • Windows 8 is fixable but this reorg isn't the fix

    I doubt this reorganization will help much. Microsoft could easily identify the biggest problems in Windows 8 with a few hours of web searching. Instead of doing that, they prefer to spend hundreds of millions of dollars marketing an OS that most people don't want.

    Ballmer needs to fix the root cause of the bad design decisions in Windows 8. A big part of the problem is the culture of the Windows group. During the PC-era, Microsoft had a strong monopoly so the Windows group never had to listen to their customers. Now that Microsoft has Apple-envy, they are more concerned about beauty than usability. They want to be bold visionaries instead of making practical software with mundane but necessary features like user-adjustable font sizes.

    Most of Microsoft's customers use a keyboard and mouse so a key requirement for a new desktop OS should be to work well with a keyboard and mouse. For an office worker, lifting their arm to touch a screen all day is neither productive nor ergonomic. On a large screen, hiding all the toolbar buttons doesn't make any sense. Apparently, this isn't obvious to the bold visionaries at Microsoft.
    • What is the reorg fixing

      Since MS is very profitable the question is what is the reorganization fixing? MS does have some problems but they are not the type fixed by a reorganization. Trying to push all their customers into the "Cloud" with Office and force "one OS for all devices" speak to serious lack of understanding of their customers.

      Like most people I use some cloud services when they truly solve a problem to my satisfaction. But I refuse to be bullied into the cloud to improve MS or Adobe's bottom line to my disadvantage. If they want my business they must accept my terms: I want either an install disk or a download I can keep for any software I deem critical. Otherwise they will not get any money from me and I will recommend to others they look at alternatives who will accept these terms.
  • A summary of MS' recent feats ...

    Win 8 ... unprecedented bad reputation of a new Win version. Even worse than Vista.
    WinRT ... a product still nobody comprehends what it's good for.
    SurfacePro ... a disguises quirky laptop nobody is willing to pay $1k for.
    SurfaceRT ... even for free hardly anybody sees a compelling reason for buying it.
    XBox1 ... disastrous product presentation.
    WP8 ... a rehash of WP7 still at a measly 5% market share.

    Can you imagine that a company can mess up so many things in less than 12 months ? (!)

    It's quite comprehensible that Ballmer was in dire need to take some action. The aforementioned list of failures would have killed any other company in less than 1 year or at least have brought it to the brink of collapse. Nokia, BB, HTC, ... to name a few that struggle due to making too many mistakes.

    Will the reorganization work out ?
    Yes but for different reasons many might believe. I think it's not the reorganization itself that will turn things for the better but simply that fact that MS will painstakingly and meticulously analyze all its mistakes and blunders and apply different strategies in the future.
    • You forget the following products:

      Microsoft Office 2013/365: Is another disaster because the bad and ugly UI, the lack of constrast, , no colors in notes in Outlook, no offline mode in Outlook, Office is now cloud center, and more:

      Microsoft Visual Studio 2012/2013: Users are searching for alternatives because the very, very bad user interface makes the unusable. The lack of contrasts in the UI, the upper case in menus, the two color and undistinguished icons, the lack of designers, the lack of Setup & Deployment projects, the lack of much functionality available on previous versions, the bad quality of the product with a lot of bugs, and more, very more. Please read the comments of the following Microsoft blogs and you see that all comments of all users are not satisfied with this new versions of Microsoft Visual Studio. And Microsoft ignores allof the comments:
  • One Interesting Theory... that Ballmer shook up the org structure purely to stymie any standards of comparison. This allows him to cover up his worsening performance for another couple of years, until he can arrange his golden parachute and abandon the sinking ship.
  • Ballmer is CEO

    And the company has been taking its marching orders from him for 13 years. His missive implies that either A) MS has lacked direction during his tenure as CEO, or B) the organizational structure impedes him from implementing it. Neither position would seem to inspire much confidence from investors, customers, or partners. It does not take a company wide re-org to implement a one company, one vision strategy. Ballmer is in a position to clearly define the strategy and work with his senior staff to implement it without any re-org required.

    Given the huge shift in direction, and the uncertainty of what future adaptations will be required, it seems you need to prove the strategy works before re-organizing a successful company around a nebulous, unproven, strategic shift. In an earlier comment, Enticing Havoc did a nice summary of the poor response to MS product releases in the past year. The entire Win8/WinPhone/Surface rollout has been defined by a series of marketing blunders, poorly defined products, lack of customer enthusiasm, and an unprecedented torrent of criticism by customers, vendors, partners, and tech reviewers. Does it make sense to double down on a losing bet by re-organizing the company around it?
    • Common thread

      Historically companies that do sweeping reorganizations on closer examination have serious problems that will not be fixed by any reorganization. The list of lack luster products you referred to indicates MS has serious problems that shuffling the deck chairs will not solve.

      I was talking to a very non-technical friend who now uses both W7 and Linux Mint. She hates W7 and dreads ever using W8 because of the clunky interface and general aggravating behavior while she likes the Cinnamon desktop on Linux Mint and finds it more intuitive. She has been using computers the early 90's from a Mac II through W98, XP, etc. Her primary computer has a dual boot with W7 and Linux Mint. This tells me that MS has no little love from its customer base and is risking losing them enmass and very suddenly. Windows phone and tablet sales seem to bear this out. Consumers are not breathlessly waiting for a Windows phone or tablet and they have other options they apparently prefer. On desktops, it is the applications that keep customers "loyal" to MS because they jobs to do. If the key applications become widely available on Macs and Linux this could spell trouble for MS.

      Ballmer and his cronies should be focusing on why MS, while currently profitable, does not generate enthusiasm from consumers or respect. This is more critical for MS' long term viability than shuffling the deck chairs.