Microsoft’s New CEO Nadella on how to organize for innovation

In a wide-ranging interview with the NY Times, Nadella explained his views on how to organize for innovation.

Q. Your company has acknowledged that it needs to create much more of a unified “one Microsoft” culture. How are you going to do that?

A. One thing we’ve talked a lot about, even in the first leadership meeting, was, what’s the purpose of our leadership team? The framework we came up with is the notion that our purpose is to bring clarity, alignment and intensity. What is it that we want to get done? Are we aligned in order to be able to get it done? And are we pursuing that with intensity? That’s really the job.

Culturally, I think we have operated as if we had the formula figured out, and it was all about optimizing, in its various constituent parts, the formula. Now it is about discovering the new formula. So the question is: How do we take the intellectual capital of 130,000 people and innovate where none of the category definitions of the past will matter? Any organizational structure you have today is irrelevant because no competition or innovation is going to respect those boundaries. Everything now is going to have to be much more compressed in terms of both cycle times and response times.

So how do you create that self-organizing capability to drive innovation and be focused? And the high-tech business is perhaps one of the toughest ones, because something can be a real failure until it’s not. It’s just an absolute dud until it’s a hit. So you have to be able to sense those early indicators of success, and the leadership has to really lean in and not let things die on the vine. When you have a $70 billion business, something that’s $1 million can feel irrelevant. But that $1 million business might be the most relevant thing we are doing.

To me, that is perhaps the big culture change — recognizing innovation and fostering its growth. It’s not going to come because of an org chart or the organizational boundaries. Most people have a very strong sense of organizational ownership, but I think what people have to own is an innovation agenda, and everything is shared in terms of the implementation.

Source:  NY Times

AOL tries to reinvent its business model

AOL, whose dial-up internet business was destroyed by fast cable, DSL and not mobile phone internet connections connections (see graph) is trying to reinvent itself as a content company. It was to write local news and take the Huffington Post global.  Read details on Economist.com:  AOL’s second life.

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Why Dell is going provide to turn-around its business

Michael Dell believes that the stock market will be able to stomach further profit declines that are required to make investments for the turnaround.

Mr. Dell told the board that the only way out involved changes in the company’s business model and expensive investment in new products and services. “Implementing such initiatives would require additional investments that could weaken earnings and cause greater volatility in the performance of the common stock,” the filing said Mr. Dell argued in a Dec. 6 meeting.

“Mr. Dell stated his belief that such initiatives, if undertaken as a public company, would be poorly received by the stock market because they would reduce near-term profitability, raise operating expenses and capital expenditures, and involve significant risk.”

Source: WSJ.com

 

Michael Dell: I did not see rapid decline of PC market coming

To win more time to turn around Dell, Michael Dell with the help of a private equity partners is taking Dell Computer private again. One of the reason the turnaround since 2007 has not been sufficient is that tablets have eaten into the market for PC in a way that Dell did not expect. The WSJ reports: “When asked in a 2011 interview with The Wall Street Journal what surprised him most since he returned as Dell CEO in 2007, Mr. Dell said the rise of tablets had been unexpected for him.

“I didn’t completely see that coming,” he said, before adding that he didn’t anticipate business users would give up PCs soon.”

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Microsoft Offers Office in the Cloud and a New Price Model

The WSJ reports: “Microsoft’s newest version of Office, available starting Tuesday, is a radical change from the past. For starters, Office 365 has a surprising new price model: It is available as a subscription that can automatically renew each year, if you choose. This new system constantly updates program features year round. Every time you open a program in Office, you will be running the latest version.”

How HP got duped into overpaying billions for Autonomy

HP once was the icon of good management. But for the past 10 years it has gone through several CEOs and the middle of a turnaround has to write off $9 billion dollars because it acquisition of Autonomy turned out to be a fiasco. HP alleges that Autonomy mis-represented its financial worth. The founder of Autonomy claims that HP destroyed Autonomy within one year.
Read the stories in

Dealbook New York Times

WSJ.com

Economist.com

But here is also a voice that articulates that if you are buying a company to secure your future, many deals will go wrong but some may go right and prevent you from becoming irrelevant.
Acquisitions is like doing R&D with a high failure rate.

Newsweek stops print edition after 80 years

You may not have heard it. Magazines, unlike newspapers, are continuing to do well in the age of the internet. But this is apparently not true for News Weeklies in the USA. Newsweek today announced that it will stop its print edition and focus on an electronic edition. The LA Times provides the details.  Read Story.

Microsoft Rumored to Become more like Apple in major Strategy Shift

Microsoft is rumored to imitate Apple’s strategy of making both software and hardware.

Microsoft (MSFT) is currently in the midst of a major transition unlike anything the company has dealt with in the past. According to our own sources and multiple subsequent reports, Microsoft is working on its own smartphone. While this would mark the first time Microsoft has launched a self-branded smartphone (we’re not counting the KIN), the implications for the company are much greater than just a phone. Noted industry insider Eldar Murtazin has written a lengthy piece on the company’s upcoming Windows Phone plans, but has also explored some of the reasons why Microsoft is being forced to make its own tablets and smartphones, and most likely its own laptops and desktops as well in the near future.

Source: Yahoo News

Meg Whitman is trying to turn HP around

HP has been falling behind Apple and Google and the race to be the leading Silicon Valley company. Now Meg Whitman is trying to turn this former star company around. The NYT reports.

So now Ms. Whitman is focusing her energy on H.P., the company founded by the tech legends William Hewlett and David Packard. Bill and Dave, as they are referred to at the company, spawned Silicon Valley. Last year, H.P. posted revenue of $127 billion. It employs 320,000 people directly, and easily that many again through a network of manufacturers and computer resellers across 170 countries.
TWENTYyears ago, people like Steve Ballmer at Microsoft, Larry Ellison at Oracle, and John Chambers at Cisco Systems heard Kenneth Olsen, then the leader of Digital Equipment Corporation, deride the PC as unsuited for business. Within a few years, DEC had been gobbled up by Compaq Computer. Everyone knows viscerally how fast change can overtake a legacy business — and how hard it is to change.
There’s little glory in managing decline, particularly in an industry in love with what’s next. Apple’s tablets are taking share from PC makers like H.P., but only after Apple had a near-death corporate experience that ended with the return of Steve Jobs. He created a new reality for Apple with its retail stores, something that H.P. can’t copy to sell PCs. I.B.M. also transitioned successfully after billions in losses and years of cuts. Most others ended like DEC.

Full Story

Home Depot changes its strategy in China after failing to achieve its targets

Home Depot is not the first company to find out that the strategy that worked well back home does not work in a foreign country. Wal-Mart failed in Germany not realizing that the competitive landscape was different. Starbucks failed in Australia, closing most of its shops because the Australian consumer was used to much sophisticated coffee. The WSJ journal reports on the changes in the Home Depot China strategy after failing to implement the previous one successfully.

Home Depot Learns Chinese Prefer ‘Do-It-for-Me’
The largest U.S. home-improvement retailer, which entered China in 2006, has struggled to gain traction in a country where cheap labor has stunted the do-it-yourself ethos and apartment-based living leaves scarce demand for products like lumber.
Home Depot conceded that it misread the country’s appetite for do-it-yourself products. “The market trend says this is more of a do-it-for-me culture,” a Home Depot spokeswoman said of China.Home Depot is shaking up its strategy by focusing on specialty stores. Three months ago, it opened one paint-and-flooring store and one home-decorations outlet in the northern port city of Tianjin to cater to specific needs and shopping preferences shown by Chinese consumers, the spokeswoman said. It also plans to launch online operations with a Chinese partner, she said, without naming the company.

Home Depot debuted in China with a 12-store acquisition six years ago and the number has since dwindled as it found that Chinese consumers differ from their global counterparts. As Swedish furniture giant IKEA discovered, Chinese consumers will pay for people to do the work for them. Several years ago, the furniture store added services to help customers assemble their furniture.

Home Depot’s closures will cause the company to take a $160 million after-tax charge in the third quarter, a company statement said. The charge will be equal to about 10 cents per diluted share, and will include the impairment of goodwill and other assets, lease terminations, severance and other charges associated with closing the stores.

Full Story

Honeywell’s spectacular turnaround

The Economist reports an amazing on an amazing turnaround of Honeywell. It appears to be a great example of strategy implementation.

Honeywell likes its meetings short but plentiful. Every production cell, as the smallest shop-floor unit is called, starts the day with one. The aim is to try to identify problems and ideas for improvements, which are then pushed up to senior managers. Even the lowliest worker is expected each month to come up with two implementable ideas for doing things better. As an illustration of the firm’s devotion to “continuous improvement”, this is one of the pillars of what has become known as the “Honeywell operating system” (HOS).

This new production system, introduced over the past eight years, has helped transform Honeywell from a troubled giant to one of America’s most successful companies. Honeywell’s sales in 2011 were 72% higher than in 2002, and its profits doubled to $4 billion. A new emphasis on generating cash also means the firm has more money in the bank for every dollar declared in profit.

Full Story at Economist.com

What it takes to do a corporate turnaround

John John Baldoni writes on CBS.com.

Enter Sergio Marchionne. With Fiat was on the brink of solvency in 2004, Marchionne was named CEO and completely revamped the enterprise. He would later do the same at Chrysler. As Clark writes: “Marchionne’s unusual ability is that he can see what actually needs to be done, and then cajoles and goads his flat management structure of dozens of direct reports in weekend meetings to achieve the goal.” “Marchionne doesn’t let go,” A UBS analyst adds. “That’s what his strength is. He is good at strategy and at execution.” Under Marchionne, both Fiat and Chrysler have turned the corner (at least for now).

The balance between vision and execution is akin to right- and left-brain thinking. A visionary thinks about what can happen. He or she has a highly specific vision of the future—and not simply as a set of desired outcomes, but rather in terms of what must occur to produce those outcomes. By contrast, executing the vision requires putting the right people in place and providing them with the necessary resources to succeed. It also means holding people’s feet to the fire. Marchionne is known for firing people who aren’t up to the task. It’s never pleasant, but it is imperative.

Read Full Article on CBSnews.com

 

Blackberry has difficulty adjusting its strategy quickly to a changed environment

The leaders of Blackberry did not realized that the iPhone was a real threat until their marketshare had been decimated. The smartphone market is moving so fast that leaders quickly quickly becomes losers because the cannot change quickly enough.  The NY Times reports today:

At the time the first iPhone appeared in 2008, RIM had successfully moved the BlackBerry into the broad consumer market from its base of government and corporate customers. But the company was totally unprepared for the popularity of a phone that lacked a physical keyboard and ran thousands of applications — in effect a versatile Web-connected handheld computer.

RIM’s co-chief executives were initially dismissive of the challenge from Apple, and Mr. Balsillie boasted that the iPhone would enhance RIM’s fortunes by increasing awareness of smartphones.

But the iPhone introduced two broad changes to the smartphone market that had severe consequences for RIM and other phone makers, including Nokia.

The iPhone and its apps shifted the emphasis from hardware to software. Then, the iPhone’s popularity led corporate information technology departments, which once allowed only BlackBerrys to connect to their e-mail networks, to support employees’ iPhones. The arrival of Android-based phones from a variety of manufacturers only compounded RIM’s woes.

Read full story here.

Related: The New Yorker on BlackBerry’s troubles.
Click on “More” for an video message of the new CEO to employees.

 

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Strategic Management 4

Topics

Decision Making

Economic Logic Analysis

Turnarounds

New Business Model

Management Process

Networking