What’s wrong with an insider?

I am often shocked at how many people believe an insider taking over as a CEO will be more change-averse than an outsider would be.  It just isn’t necessarily the case, though it may be harder for an insider to throw the baby out with the bath water.   And shareholders, particularly those with a long-term focus, will find that a good thing.

Why would anyone think that Satya Nadella agrees with every decision, every process, every cultural quirk, or every anything else that he’s been exposed to at Microsoft over the last 22 years?  Yes he has a deeper more intimate understanding of those things than any outsider could.  But living with them year in and year out also means he’s formulated his own opinions of what is or has worked and what isn’t or hasn’t.

For every three decisions that Bill or Steve made that Satya agreed with I will guarantee there is at least one he didn’t.  For every three ways of doing business that Satya agreed with I will guarantee there is at least one he doesn’t.  For every three proposals he made that were approved there is at least one that wasn’t, and he’ll be looking to revisit some of those.

For the next year or two, any proposal that comes to him that might have gotten rejected pretty quickly by Steve will get a much greater amount of consideration just because the way things work now are not (primarily) Satya’s creation.  He will have a lot of context of why they are the way they are, but not the kind of emotional attachment that Steve might have had.  Nor will he have attachment to processes that were designed specifically to match the way Steve thought about things.  Nor, by the way, will he reject processes that Steve put in place just because they were Steve’s.  In many cases those processes are things that Satya probably finds just as useful as Steve.

I think Satya will make a lot of changes, though probably in a more gradual way than an outsider would have.  In the questions on another of my posts I was asked about a lot of the processes used with Microsoft’s sales force (or more generally, “the field”).  Because Satya is not a sales guy I don’t think shaking up sales governance practices is really on the top of his list.  But he’s going to start questioning some of the practices pretty quickly, especially with FY15 planning getting under way.  And keep in mind he came out of the product groups, and particularly a product group that has long been frustrated over field practices that make it difficult to win large complex Enterprise deals.  So I expect Satya to put a lot of pressure on the field model over time.

There are many other areas where I think Satya will cause change behind the scenes.  Take acquisitions.  He has a lot of experience in this space, though not necessarily lots of big successes.  How he thinks about this area will probably have an immediate impact, and perhaps already has.  What kind of deals should the company do?  What are the metrics that make for a good deal?  When does a deal have to be accretive to earnings and when should he accept a margin hit to set up long-term success?  What changes should be made in integration processes?  Satya took over on a Tuesday and I would bet that by Wednesday he was getting questions about acquisition efforts in process or others being contemplated.  Some acquisitions that Steve might have shot down will now be pursued, and some that Steve would have been a backer of will not.

There are dozens of these things, including product efforts and priorities, that Satya will begin to change almost immediately.  Will he make the big strategic shifts like “kill Xbox” or “kill Bing” that some quarters want to see happen?  Not likely in the short run.  Will he propose splitting up the business?  Again, not likely in the short run.  Will he significantly change the priorities of underperforming businesses and force them to present him with a plan that he believes can lead to success?  Yes.  Will he accelerate the company on the Devices and Services axis?  Yes.  Probably even at the risk of its traditional license revenue businesses.

Lastly let me point something out that many people miss, especially those who haven’t worked in the senior ranks of a large company.  The CEO sets a tone and direction, but his most important role is to bring out the best in organization’s employees as a whole.  Most ideas do not originate with the CEO.  Setting up a culture that encourages people to bring great ideas forward, gives them serious consideration, and then act on those ideas is what the CEO really does.  And this is an area that I think Satya has already started to change.  Much to the delight of a number of employees I’ve talked to.

 

 

 

 

 

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15 Responses to What’s wrong with an insider?

  1. Satya may be a company insider technically but coming from engineering rather than sales is almost as big a difference (in my opinion) as coming from outside the company. There is a big difference in mindset. Marketing types (like SteveB) want to see engineering build the products they want to sell while engineers want to see sales sell the products they want to build. Now neither is good in the extreme of course. Ideally there is a balance but in reality companies tend to tilt one way or another. Steve Jobs always seem to make the balance work with a tilt to marketing that still managed to inspire engineering to build great products. It doesn’t feel like SteveB managed it that well. Perhaps Satya will find the right balance.

  2. dave says:

    From my chair, MSFT has fallen behind in its ability to bring a “wow” factor to the consumer market space. This is where google and apple have both trumped MSFT. It sets the tone. It rallies morale. It excites. It inspires.

    MSFT competes on so many fronts, that being #2 on each front is a sizable and hugely significant achievement in and of itself. But that’s still being #2. It’s not exciting in the way the iPhone was, or google search was.

    In our age, having a lead in non consumer markets is not translating into vision-making in consumer markets. And individualism and the migration of computing power catering to the individual is where we see the computing revolution progressing fastest.

    So, along with finding the next billion dollar business within MSFT, the new CEO needs to ask what can be done to restore some “wow” factor to the software, services and devices that MSFT creates and sells.

    It’s a great company that has the potential to create amazing things. Quality, inspiration and daring to try something new are needed. Can the company culture be stimulated to rise to the challenge?

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  4. ballantine70 says:

    I wonder if there is a broader issue here facing Microsoft and a host of other companies- how do you sustain and evolve beyond the founders?

    An insider might be a sensible approach here – the other tradition is of course the inheriting son/daughter. The anointed one in either case is able to carry the inherited authority alongside the cultural legacy (and that’s legacy in the positive, non-IT sense of the term). Satya will have that in a way that an outsider just wouldn’t have had.

    If the natural life of a company is coming to an end, it’s not a new CEO that arrives- it’s generally an acquisition (see: Digital, Compaq, etc…) or bankruptcy (although there might be the last ditch attempt parachute CEO jettisoned in in the dying days).

    I actually struggle to think of many big, old forms that have comprehensively outlived their founders…

    • halberenson says:

      Well, GE has outlived and thrived long beyond its founder. And you can’t get more iconic than Thomas Edison. IBM, Ford, etc. for old line companies. Though both IBM and Ford followed the inheritance route. Intel is another example. And John Chambers is not one of Cisco’s founders, he was brought in after the board fired one of them and the other quit in protest. Digital’s founder actually piloted the company into the death spiral before the board replaced him. It really is hard to generalize, though it is clear that a transition away from the founder is a difficult one.

      • dave says:

        A CEO is a figurehead. He or she has a certain power to effect change. This is good and right. And in some cases a new CEO can turn a situation around. My belief is the most important job of a CEO is to foster a culture that can prosper beyond the life of the CEO. Like a father instills certain values to a son or daughter. Perhaps my analogy is faulted. But I think you get my general idea. From a distance, it seems something about the Balmer culture has at one time been very successful at building the business, but lacking in capturing the imagination and wonder of the consumer market. In a way, I hope MSFT can bring back some fun to its consumer technology. New, fun experiences that work flawlessly. Easy to say. Very hard to deliver. One man can’t do it alone. It takes an organization that shares the same desires and aspirations. So, that’s my pitch for fostering a renewed culture, focused on some new goals and measures of success. The reorg aims to break some barriers and bonds that have existed. It loosens beliefs that have been long held. It unsets what may have been ossified. While things are more fluid, adjustments can be made. Adjustments that build new associations. New values. New culture. Its a big job. But it can happen.

  5. Mark says:

    Good points. I think it’s sort of moot because even if Satya was averse to change, and there’s not a lot of evidence to suggest he is, the Company’s lost dominance, challenging competitive position (many would say fading) and pent up investor unhappiness after more than a decade of dead money negates the option of maintaining the status quo. I think Satya likely has 2 years maximum to show he can at least put the Company on a path to renewed success. Otherwise, he’ll be gone and the Company parted out to maximize short term stock price for investors. That said, I think they made the right call if the goal was to give MS a chance at a resurgence and I hope he succeeds. The “monopoly” of MS has seemingly been replaced by a duopoly of Google and Apple, both of which in many ways exert more influence than MS ever did, and not necessarily in a good way. It would be nice to see that finally receive an effective challenge from more competitive MS.

  6. Nanda says:

    Satya’s interview with NYT;
    http://www.nytimes.com/2014/02/21/business/satya-nadella-chief-of-microsoft-on-his-new-role.html

    Hal, looks like the changes you have talked about are coming sooner than later. I like the fact he sees beyond the bottom line in terms of how big a given initiative is and should be.
    One thing that I have not seen you mention anywhere is, in my experience Microsoft lacks grass roots innovation and no body is talking about it. By grass roots I mean, what are they doing to get ideas out of regular employees. None of the leadership team asks a low level dev actually working on the product about future ideas or feedback on the product before going out of loop for several months and coming up with a framing memo.
    IMO, they need to build a framework where more employees come forward with crazy/creative ideas irrespective of the bottom line and actually get a chance to work on them.

    • halberenson says:

      I totally agree with you.

      I think the culture used to encourage this more, but of course it was a smaller company with smaller projects and the distance from ICs to senior leaders was negligible. Now its harder. But I still think doable. Three years ago I was managing an organization of about 175 and still had time set aside so that anyone could sign up for a 1-on-1 with me. Same was true when I had 300. And those 1-on-1s weren’t just for people who worked for me, anyone could ask for and get time. I think that’s true for many if not most managers at Microsoft, but then the question becomes how approachable they seem to employees.

      In terms of formal processes to encourage grass roots innovation, Microsoft has tried several. The thing that had the most successful impact was Bill’s Think Week. Anyone could submit something for him (or in later days, others in senior leadership) to read. If he was convinced something was interesting Bill would try to get the responsible organization to take a look at it, or occasionally be more forceful and initiate action. There were other initiatives in play last decade, but I don’t know how successful they were. I have the feeling they encouraged employees to try things, but had no good way to get those into products.

      I have ideas about how I’d organize ways to go after the “crazy/creative” ideas, but I think I’ll save them for someone paying me to help with that problem!

      • NandaL says:

        I have to disagree with you a little bit here (and that’s rare believe me!!! multiple exclamations have to mean something 😉 ) Think-week posed too many restrictions.; and the fact that very few initiates are coming out of this approach should have triggered a trip wire for Bill Gates that something was off.
        Only one out of thousands of start-ups are successful and that means you need to encourage a culture of risk taking; and its something that’s Microsoft is lacking to date.(Read risk taking)

        Garage initiative was most successful in my opinion but whats lacking was MSFT always believed in bottom line and fear based review system. Patrons with breadth knowledge were not rewarded as well as the ones with depth.
        Difference in Garage was that it needed user votes rather than one person review and I appreciated that most. Problem there was it was always tied to bottom line one way or another.

        Bigger point I raise here is that; forget about the new crazy/Creative ideas; MSFT seems to forget that a dev working on the product day in and day out has better perspective than top down push of the framing memo; and top down approach is bound to fail now or later and history proves it over and over again. (Don’t get the historians stated with Egyptian pharaohs here)

        p.s (PPS ans everything else)
        Personally I think Satya should hire you back period. (Does more periods help? ……….. just in case………….. Real data:How many former execs are blogging about MSFT and open to criticism by conforming their name) I personally value PASSION above everything else and passion is rare in this Dollar bound world we are in today. But what can I say I am just another low level guy with zero valued passion..

      • NandaL says:

        I have to disagree with you a little bit here (and that’s rare believe me!!! three exclamations have to mean something 😉 ) Think-week posed too many restrictions and the fact that very few initiates are coming out of this approach should have triggered a trip wire for Bill Gates that something was off.
        Fact is that only one out of thousands of start-ups are successful and that means you need to encourage a culture of risk taking; and its something that’s Microsoft is lacking to date.(Read risk taking looks like bad investment if all you are concerned about is bottom line and share price)

        Garage initiative was most successful in my opinion but whats lacking was that MSFT always believed in bottom line and fear based review system. Patrons with breadth knowledge were not rewarded as well as the ones with depth. Garage needed user votes rather than one person review and I appreciated that most. Problem there was it was always tied to bottom line one way or another.

        Bigger point I raise here is that; forget about the new crazy/creative ideas; MSFT seems to forget that a hands on dev working on the product day in and day out has better perspective rather than the top down push of the framing memo; and top down approach is bound to fail now or later and history proves it. (Don’t get the historians stated with Egyptian pharaohs

        p.s (or pps and what ever)
        I think Satya should hire you back period. I personally value PASSION above everything else and passion is rare in this Dollar bound world in my opinion; but the fact is I am just another low level passionate guy.

        • halberenson says:

          I’m not saying Thinkweek was perfect, but it helped. A lot. The Garage initiative needed to be run differently, and that’s all I’ll say about it. I don’t know what Satya will do in this area, but I do know he is thinking about it. He has a lot more passion around letting ideas germinate rather than stomping them out because you can’t immediately see the $B potential than Steve did.

          And I totally agree with your bigger point. There needs to be a mix of top-down strategy and bottom-up initiatives in all product efforts. I think it is even possible to do in the “Framing Memo et al” methodology, but I always had trouble getting others (outside my own projects of course) to agree with me. Every one of those planning processes should have a pillar (or whatever that particular process calls it) called “Customer Delighters” and allocate a percentage of the project time to it. Every member of the organization should be able to propose things for that bucket, independent of the strategic initiatives being driven by a framing memo. Every one of those should be evaluated for inclusion in the release with an eye towards maximizing the improvements customers see independent of the strategic/marketing goals of the release. Each organization should also have a “Hygiene” pillar, and allocated resources, for code cleanup and similar efforts with no direct customer visibility. And each organization should allocate a modest set of resources for Advanced Development efforts, where people are not working on features for the current release but rather on ideas for a follow-on release or a new product in that space.

          I don’t think the issue with my returning to Microsoft is Microsoft (and certainly not Satya), the issue is me. I’m enjoying being semi-retired, and while I would happily increase my workload over what I have today I am not willing to return to a 60 hours/week kind of job. Well maybe if it was the absolute perfect job, so I never say never. But

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