Microsoft CEO Nadella Declares Primary Focus: Software For Mobile & Cloud

In spite of all the speculation surrounding the next Microsoft CEO, Satya Nadella did come out the victor. I’m not sure if  bets on the side were made regarding this, but if you were part of one and put your money on Nadella, then you’re probably one very happy person right now. But maybe not as happy as Nadella, who is reported to be receiving a $1.2 million salary. On top of that, he’ll have a stock award worth $13.2 million and is eligible for an annual bonus up to $3.6 million.

While Nadella may have the brightest outlook in terms of financial compensation, it seems things are even brighter for him in terms of what the company is going to focus on in the future.

According to a report by AP, Nadella has declared the company’s focus: mobile-first, cloud-first world.

It’s not really that surprising considering that prior to being promoted to CEO, Nadella was known as the “cloud guy”. Elaborating a little on his declaration:

“The question for us is how do we thrive in that world. What innovation can we bring? Everything is going to be connected to cloud and data…All of this will be mediated by software. To me, the heritage that this company has is still very relevant. We have to renew it. We have to do new things. But at the same time we should be very, very confident of  in our capability around software as it comes to these new experiences.”

That does exude confidence, especially considering that Nadella has requested Bill Gates to play a hands-on role as the new CEO’s adviser. And with Gates agreeing to leave his position as Chairman of the Board, this shows solidarity – which can only result in good things.

Maybe a new Microsoft era is indeed dawning.

Innovation vs. Execution

ere has been a lot of discussion on the differences between Steve Jobs' Apple and Steve Ballmer's Microsoft, with a common argument being that Apple innovated and Microsoft didn't. I don't think the facts support that. I'd argue that Microsoft out-innovated Apple during Ballmer's tenure, but Apple out-executed Microsoft.

It wasn't Ballmer vs. Jobs, though -- it was Jobs vs. Gates. During the last decade, Gates proved to be more of a liability than an asset to Microsoft. This isn't to pile on Bill but to point out the brilliance of Satya Nadella's move to change Bill Gates from a problem to part of the solution.



Apple vs. Microsoft


Neither Apple nor Microsoft was first with MP3 players -- S3, Sony and Creative were in market sooner. Microsoft had video first on its devices (Jobs argued video was stupid). It also made them wireless first and figured out how to do music-sharing legally. However, Apple made it simple first and got people to accept the iPod as a standard. That isn't innovation -- that's execution.

Neither Apple nor Microsoft did smartphones first. Ironically IBM was far earlier. However, Microsoft had them before Apple. It got email sorted first, made them manageable first, got developers first -- and for the most part, made a better phone. Apple basically added phone features to an iPod. It got apps right first and got the market -- which had rejected screen phones up until the iPhone -- to accept the iPhone as a standard.

That's not innovation -- that is incredible execution.

Neither Apple nor Microsoft had tablets first. In fact, in a stage appearance with Bill Gates, Jobs once argued that building a PC without a keyboard was stupid.

Microsoft had convertible tablets that would turn into laptops and vice-versa. It got touch and pen input working first, and it got handwriting to work first (though Apple had it first with the Newton). Apple made the tablet make sense by basically making the iPod bigger and got the market to accept the iPad as the standard. It later made it smaller. That's not really innovation either -- it is brilliant execution.

In fact, Apple actually was more innovative before Jobs came back. It had more-varied PC forms, it had printers and cameras, and it was first to market with a PDA: the Newton. Yet it couldn't execute worth a damn and was failing. Jobs realized it wasn't about innovation. It was about refining good ideas that others had -- mostly simplifying them so they'd be easier to sell -- and then resourcing the efforts to success.

Jobs realized that Edison was right and that 1 percent was inspiration (innovation) and that the rest was working your butt off to be successful. If you came up with a lot of innovative products, you wouldn't have the resources to make any successful. Microsoft had more innovation -- but as a result, it didn't resource many things adequately, and most of them failed.

In short, Microsoft needed fewer good ideas so it could adequately resource the ones that were left. Xbox, Azure, SkyDrive and other Microsoft products were successful because they were well resourced. It's execution, not innovation, that is the key to success.



The Gates Theory

Here is my working theory about what happened to Steve Ballmer and Microsoft last decade. Gates hired Ballmer, who graduated at the top of his class at Harvard, to do the things he couldn't in terms of building the business. Gates was the product guy, Ballmer the business guy, and Microsoft's rise showcases just how incredibly well that partnership worked.

Then Microsoft got really arrogant and thought that it was above the law and kind of lost track of its customers at the same time. Bill was taped in a deposition where he clearly thought he was smarter than the attorneys and they made Bill look stupid. Now if you've ever met Bill, you'd know that in his mind, stupid is as low as it gets.

He lost heart and effectively moved on. He seemingly passed the baton to Steve Ballmer, while retaining the product role of chief architect, but he kind of checked out at an increasing rate. The only thing was, he wasn't gone -- so he wasn't really backfilled. Eventually, Microsoft hired Ray Ozzie, but Ray didn't work well with large teams and he wasn't really a consumer product guy. Bill was still chairman so he wasn't gone either.

Steve was still doing his job very well, and Microsoft looked like it had a product guy -- but it didn't, and products just didn't get the focus and resources they needed. They failed one after the other. Put another way, Ballmer got the title of CEO but he didn't get a critical part -- the product part -- and he arguably lacked the skills to do that part of the job. He couldn't fix the problem, because it looked like someone still had the job. (This is often referred to as retiring in place).

In short, because Gates was and wasn't there, it was his side of the business that suffered. There were a couple of exceptions: the Yahoo acquisition, which was a massive mistake; and Ballmer's decision to defund most of the corporate image programs (AR/PR/marketing). Still, most of the problems can be traced not to a lack of innovation or bad core business practices, but to an inability to execute -- or create -- a winning product strategy. Gates' old job just wasn't getting done.

There were a lot of related causes: the forced ranking policy that pit employee against employee; horrid internal and external intelligence, which effectively blinded Steve Ballmer; no real CEO mentoring; and some incredibly bad advice on how Steve should behave in public. The biggest issue, though, was that Microsoft never seemed to grasp that Gates was gone because it looked like he -- or someone like him -- was still there.





Conclutions: Satya Nadella's Brilliance



This is what makes Satya Nadella's move with Gates brilliant. With Gates stepping down as chairman, Satya gets a trained mentor in John Thompson. (IBM formally trains executives, including mentoring -- and like me, Thompson is ex-IBM.) Gates is focused back on products, so that whatever his influence is, it is targeted at the problem.

However, Gates is part-time, leaving Satya free to backfill him -- and Satya is a product guy himself. Thompson helps him pick up the skills he loses when Ballmer leaves, and he doubles up on the product skills Ballmer's Microsoft lacked (Satya + Gates). Oh, and forced ranking is gone, the company appears to be resourcing corporate AR/PR and marketing again, and Thompson should be able to call BS effectively on the bad advice.

Rather than Ballmer without Gates, you get Gates + Satya -- and Thompson filling in for Ballmer until Satya is trained and the team is again complete. That looks pretty brilliant to me, and it should eventually turn Microsoft back into the power many of us knew it could be. I wonder if it will take Apple a decade to figure out it actually needs to backfill Steve Jobs?