Satya Nadella’s leadership dilemmas at Microsoft begin with Nokia

Paul Hinks

Satya Nadella

Satya Nadella

Satya Nadella became Microsoft’s third ever CEO in February 2014. He faces enormous challenges of change to an economic powerhouse

Since its inception 39 years ago, Microsoft has driven change. Its products have shaped and disrupted the IT landscape. Its desktop and server operating systems have become industry standards. Yet, relentless competition demands further changes. The new CEO recognizes the situation.

‘One Microsoft’

A few months into his appointment [10th July 2014], Nadella published an ‘internal memo ‘ in the public domain entitled: ‘One Microsoft’. The document provides insight into the strategic priorities at Microsoft – as well highlighting deeper leadership dilemmas. “The day I took on my new role I said that our industry does not respect tradition – it only respects innovation.” He wrote.

Changing landscapes and Microsoft’s previous success

Cloud Computing and Mobile technologies were focal points in the memo – repeated references to “a mobile-first and cloud-first world” emphasising where he feels Microsoft’s future lies.

A key dilemma and challenge for Nadella is that Microsoft no longer appears to be dominant in shaping the direction of the IT landscape. Microsoft’s desktop and server operating systems provide examples of different franchises that became de facto industry standards. Today we talk about firms such as Apple, Google and Amazon and how their products and services have momentum – the iPad, iPhone, Kindle, Android phones – as well various cloud services.

It isn’t that Microsoft hasn’t tried to succeed in these new marketplaces – it has. It’s just that Microsoft’s success doesn’t mirror the success of its competitors. Microsoft has attempted to break into the tablet market but Apple still leads the way. Windows mobile phones competes against Android phones and iPhones, but they do not enjoy the passionate following that their competition enjoys.

Microsoft Axes 18,000 jobs

The acquisition of Nokia in 2013 provides an example of Microsoft’s efforts. Nokia was itself a market leader in the mobile telecommunications market before suffering a number of setbacks which saw its products fall out of vogue. Some analyst at the time saw merit and synergy in Microsoft’s acquisition. However on Thursday [17th July 2014] the BBC reported that Microsoft was announcing a loss of 18,000 jobs globally – the bulk of the cuts to be at Nokia:

Microsoft pledged to cut $600m (£350.8m) per year in costs within 18 months of closing the acquisition – cuts that were much more severe than the 6,000 initially expected. Is this acknowledgement that the Nokia deal was ultimately a failure? Or is it an example of how knowledge, know-how and patented technology can be bought lieu of ethical leadership and employees’ livelihoods?

The Future direction of Microsoft?

Nadella and Microsoft appear to recognize the challenges ahead. Change is necessary. Cloud Computing infrastructures are maturing; mobile online access is now ubiquitous – Nedella’s memo acknowledges Microsoft’s need to adapt and respond – repeated references to “mobile-first and cloud-first world” provide a clear indication of where he sees Microsoft’s future. Will change at Microsoft result in the progress needed for Microsoft to remain a dominant force?

Bill Gates’ 1990 vision of ‘Information at your fingertips’, and then his keynote speech at Jan 1995 Comdex of ‘information at your fingertips ‘ provide evidence of how Microsoft’s first CEO led the way and helped shape an industry.

Nadella has one of the toughest jobs in the industry, made more challenging by an expectation that Microsoft can remain creative and innovate. Not an easy task.

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2 Responses to Satya Nadella’s leadership dilemmas at Microsoft begin with Nokia

  1. Jason says:

    I believe that one dilemma Microsoft leadership had was it considered itself a software company rather than a technology company. Other organizations have out-paced Microsoft in innovation by quickly adapting and providing customer-centric products and services. Microsoft has an uphill battle to regain its position in the marketplace.

  2. Paul Hinks says:

    Hi Jason – thanks for the comment.

    I see Nadella as needing to clearly articulate who Microsoft are – or will be.

    The IT landscape is changing so fast at the moment – we’ve changed how we access digital material quite radically over the past 5 years – we’re now very dependent on mobile computing, and we’re not necessarily using Microsoft’s software!

    ‘The Cloud’ is increasingly a generic term which is being banded about and prefixed in front of most IT services – I’m sure Nadella is right when he talks about how Cloud will be the future – I just wonder if Microsoft will lead the way like they have previously.

    Leaders like Bill Gates and Steve Jobs helped shape the IT landscape – can Nadella echo their success?

    By the way – the dilemma isn’t just Microsoft’s – you could argue that other large IT firms have struggled to clearly articulate their vision, making acquisitions along the way which don’t seem to make sense.

    Appreciate the comment – thank-you.

    Paul

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