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.