Mini-Case Response – Mini-Case # 20

Introduction:

The following mini-case response revolves around mini case #20: “Microsoft: From Gates to Satya Nadella”. This case provided through MindTap discusses Microsoft’s reactions in the fourth industrial revolution. Between the emergence of The Cloud, technological advancements such as mobile devices including tablets and smartphones, emerging competitors from different aspects of innovation (the internet or videogames becoming a market), and how they balanced competition and cooperation with their fellow competitors, Microsoft underwent some major adaptations due to the impact of the fourth industrial revolution. The idea of competing and cooperating was produced not only through typical business partnerships, but also their development into new innovations as well. Since Apple and Android had taken a step ahead in the game, Microsoft decided to catch up through the use of compatibility. Creating services like Microsoft Office that could be used on Apple products began to turn the tables on Microsoft’s products being substitutes for Apples, and rather made them appear as complements. Some may argue this fact due to Apple releasing a substitute Office suite, the iWork productivity suite, but this case confirms there were no substitutes to Microsoft’s Office suite at this time. Appeal also grew from the ability to use Microsoft Office on Apple or Microsoft products, enabling a fluent transfer of documents with assistance from programs like One Drive. Microsoft proceeded to establish their infrastructure and specify focus on primary and support activities. After establishing external relationships with competitors, their internal management needed work in producing effective human resources so that programmers were willing to work together and improve creations rather than starting a new one after every finished product. Focusing on primary activities, Research and Development and Marketing and Sales, while hiring in management for support activities, infrastructure and Human Resources, caused the company to excel.

The emergence of the Internet and a few changes in high management caused a few more falters in Microsoft before they established a strong strategic plan. At first, Microsoft exceled due to learning about the Internet prior and utilizing that knowledge. They gained advantage through offering free internet, considering it a package deal in advertising, and whether they intended to or not, they gained advantage through compatibility as they lost their law case and offered competitors their information so that they could make their programs suitable to work on Microsoft products. The hierarchal management Microsoft produced to enable programmers to work well together soon became unnecessary with all of these advancements. The company benefited by establishing a simple hierarchal management and “flattening” the company, losing unnecessary components. Although Microsoft went through the innovation of The Cloud and the Internet, and established a type of lean management to help their reactions to these innovations and adaptations in the future, technological innovation continued to get in their way. Focusing on the core, their operational systems, or diverse products, the Xbox became their first hurdle as they struggled with marketing to their consumers in deciding whether to establish the system as all purpose or focus on the gaming market. Then a struggle came out of getting their search engine, now known as Bing, into the market and on the same level or past Google. Finally, tablets and smartphones began to overrun core processors. Microsoft focused too keenly on their operational software at this time causing them to fall behind in so many innovational markets. Therefore struggles such as an acquisition with Nokia and glitches and security problems, as in Vista, began to show up in rushed products as Microsoft tried to catch up with competition. After Sinofsky flattens out the work force once again, Windows 7 is made properly and has a better release with consumers, The Metro system in Windows 8 for tablets gained glitches and security issues as well, portraying Microsoft has a problem with time management and maintaining lean management. Finally, Satya Nadella established that Cloud services should become the companies main focus as they’re spreading themselves thin for operational systems that aren’t selling as well as they used to. “Mobile-first, Cloud-first”, is Nadella’s motto as he reinforces the lean management strategy and covering more primary activities more effectively like customer service. This would enable the company to become more efficient and effective.

Some Threats that Microsoft should focus on in this mini-case are as follows:

• Focusing solely on innovation or adaptation – Microsoft has had several errors due to focusing on one or the other, when there should be a balance between the two. If they focus solely on innovating they lose knowledge of their competitors findings, and if they focus solely on their competitors findings then they have no innovative product to match their competitors.
• Focusing too keenly on certain primary activities – Microsoft’s downfalls could be produced from focusing on Marketing and Sales and R&D while ignoring the other primary activities. I believe this due to Nadella’s emphasis on the need for customer service. Focus on all primary activities may not need balanced, but their should be some focus on all primary activities.
• New competitors and technological advancements emerging – With the fourth industrial revolution, technological innovations are bound to keep emerging and fluctuating the market for Microsoft. They should be prepared for these innovations and hold the ability to maintain their infrastructure, as it seems they’ve struggled with in the past.
• Failing to maintain and recognize their company maturity – Microsoft’s operational software still held high revenues, but they were criticized in their industry for depleting stocks and couldn’t understand why. I believe this is due to their operational software hitting a mature state, they need to move on to a new market such as developing in the cloud. If they had recognized this sooner than Nadella, they would be better off as a business.
• Not clearly establishing multiple markets – Microsoft has connected The Cloud as a type of add-on to operational systems, and I believe this is why they struggled with it for so long. They should’ve been viewing The Cloud as a new market, then they could develop their operational systems and processes for The Cloud without comparing the two and pushing themselves backwards due to participating in a market they haven’t clearly defined.
• Security and time management issues – Glitches have arisen out of time management issues in pushing a product out to market in order to keep up with trends. This has caused consumers to be skeptical about Microsoft’s claimed security, and turned them away from the product also due to frustrating glitches.

Thesis statement:

Microsoft seems to hold a hard focus that deteriorates their company’s progress because they’re dropping focus completely from essential components. Microsoft should enable a focus on adaption, market research, and creating a solid infrastructure. But they should still establish some focus on all the other components of running a business. A company is doomed if they resort to piling all of their focus into one category, a machine can not run without many cogs it uses to operate. Nadella is currently taking a step in the right direction as he develops focus in Customer Service. The success of Microsoft in the future will only be determine by whether or not Nadella has success in maintaining Lean management and distributing focus on primary and support activities as necessary. So far Nadella has proven his strategy works well for Microsoft, but only the future holds if it’ll be maintained.

Background:

The details in Microsoft’s history provides us with the faults in their strategic process. The shifts in management and their particular external strategies all come into play when regarding their lack of focus, or rather their extreme focus clouding the fact they’ve dropped focus from other important components.

The emergence of the cloud established three conflicts throughout time with Microsoft. The question raised of whether they should focus on the core, their operational software, or diversity, platforms like Xbox. Trying to develop Bing to the level of attention Google had garnered. Finally, tablets overtaking traditional computers, an acquisition developing with Nokia, and the production of the Surface tablet. Each of these conflicts has progressed after a change in management or a management strategy was implemented to pull the company to a resolution.

Developing core verses diverse systems became a struggle to Microsoft because as Steve Ballmer entered the video game market, Bill Gates was smitten with the idea of interactive tv that was internet enabled established in the average families living room. The company also had the background in gaming to enter this market as they held a popular gaming website and best selling PC games, one example being Age of Empire. Outsourcing reliably provided hardware for the Xbox, but steady competition was demanded from Nintendo and Sony as they produced the Wii and PlayStation. Xbox had setbacks in faulty systems often known as “The Red Ring of Death” in 2007, the poor-quality consoles mentioned in the mini-case. But Xbox Live was able to pull them out of this rut, as they wrote off the damages for the poor-quality consoles and gained an influx of revenue through online subscriptions offering internet services and free monthly games. They continued this positive progression with releasing the Xbox Kinect to compete with the Wii, it registered well with consumers. Their downfall came in diverging from Sony competition and advertising the Xbox One as an all purpose device, while Sony focused on the PlayStation being a gaming device. I believe there could also be an uncontrolled variable in the controllers design because the Xbox One held a major renovation many were not happy with. Nadella is now focusing on Xbox One’s gaming capabilities and their Halo and Call of Duty franchises, a sound strategy.

Bing gaining the level of attention Google garnered became Microsoft’s next conflict to overcome. The development of Internet search engines also occurred during Ballmer’s era. By underestimating the demand in a search engine, Microsoft fell behind. Search Engine Optimization and keeping the engine “pure” through separating paid and organic search results pushed Google ahead in search engines. Google stepped competitively onto Microsoft’s territory through search engines, free internet browsers, and entering the mobile industry. Microsoft was able to gain a benefit in this situation through partnering with Yahoo, the second US search engine in the market while Bing was the third.

The introduction of tablets, acquisition with Nokia, and the release of the Surface tablet is the last covered diverse issue Microsoft had to overcome. Apple became fierce competition in the smartphone and tablet industry. The compatibility, accessibility, and simplicity  of Apple products drew in consumers. The Metro interface was created as a solution. It was adequate while Microsoft went through a merger with Nokia due to them holding the most business with Microsoft smartphones and Microsoft wishing to maintain this factor. Nokia had also been damaged by Apple’s competition. The tablet business was also developing, which introduced Microsoft’s Surface tablet. The Surface was a combination of a laptop and tablet, these tablets hadn’t kicked off until 2014.

Overall, these details provide us with information on the trials that Microsoft struggled with. It’s determined where Microsoft was halted when it came to The Cloud and new technological innovation. They’ve made it through varying competitors and circumstances, but it also becomes clear that a few issues have been repeating themselves in the core of Microsoft’s technology.

Alternatives:

This case follows Microsoft’s history closely, and details how they’ve come out on or near the top through their progressions. But it fails to determine why they must keep altering their strategic process in the same way repeatedly. Why does Microsoft keep falling into the same issues? Is it due to them appearing different because problems emerge within different markets? In that case would focusing evenly on primary activities prove to be more beneficial than focusing on specific primary activities? These questions can only be answered once Microsoft defines purpose within their markets. The following alternatives should be considered:

1. Dropping focus on core operating systems – If Microsoft were to establish focus on their core operating systems, instead of dividing attention between their older systems and newer innovative products, they might be able to push their operating systems back into the market. Developing partnerships throughout competitors and making their software compatible across all devices as they have done in the past may even put them on a different platform as it turns their competitors substitutable products into complementary products. But focusing on just their newer models also provides a type of lean production, such as the lean management they’ve been implementing that has been beneficial. If production was strategically transitioned to a lean system it may boost the company ahead once again. It would also help them put in place a solid infrastructure as they have a solid focus on what they’re producing, so it becomes easier to establish systematic processes that work best for the industry.
2. Establishing Cloud services as a second market – Microsoft could also establish their Cloud services as a second market, and continue to sell operating systems in their original market. Microsoft has grouped together Cloud services with operating systems, but they’re a whole step above in technological advancements. They should be considered a separated market and R&D should recognize this. They would gain benefit in continuing to make revenue from older operating systems, while Cloud services and new renovations gain stocks from interested consumers. This would push Microsoft back to the top of the industry, and enable them to continue working with all the products they currently do. The only change would be a more defined focus as they recognize these products as two separate markets and appropriately segment them in order to get a better read on their consumers and their competition.
3. Dismissing Cloud services and trying to maintain core operating systems – The final alternative is to drop Cloud services and focus entirely on their core operating systems. Just as the first alternative provides benefits in lean production and focusing on their industry, so does this alternative. But by focusing on their older systems they are stuck with the situation of depleting stocks. Older systems would require innovation of some sort in order for Microsoft to stay in the market. I don’t believe this would be impossible, but I also believe it would be the most difficult of the options. It’s entirely up to chance as to whether or not Microsoft could make a break through big enough to step ahead of today’s innovations after taking a step back or whether they’d get lost in the past. This alternative holds the highest risk out of the three.

Only implementation could tell which of these alternatives would be beneficial to Microsoft. But one of these alternatives must be selected in order for Microsoft to gain a solid understanding of their strategies and implement the most efficient and effective process. Once one of these alternatives is chosen, Microsoft would gain a better understanding of their competitors, their own company/product, and how their past strategic processes may help them implement a strategy for the future.

Proposed Solution:

Deductive reasoning concludes that the best solution is to open up into a second market for Cloud services. If Microsoft opens a second market they may continue to sell their original operational software across platforms along with their new innovative Cloud services. They may be able to take over the industry this way if they were able to achieve cross compatibility through various partnerships.

Setting up a second market for Cloud services would not only be beneficial externally through partnerships and competitive research, but it would also prove beneficial internally through sufficiently balancing support and primary activities and establishing an effective infrastructure. Lean management and production would become clearly needed throughout this process and examination of past conflicts. It would push the company forwards in a time management aspect as well due to less scattered management resulting in firmer decisions quickly. Focus on support and primary activities could be balanced more fluently as a hierarchy is established on what is most important reflecting the market. This would still ensure that primary activities gain more focus. Older operational systems may be able to be cut down just to support activities since the sales aren’t doing well and the market remains solely for additional revenue. The older operational software market has also matured, so focus on primary activities would be better spent in the entrance of the new Cloud services market.

It becomes apparent that separated these products into different markets could be influential because they may require different infrastructures. Since both products are at different growth periods and they have different competitor knowledge and consumer demands, establishing them as two different markets would dramatically benefit Microsoft. Refocusing support and primary activities in a way that’s best for the company and each individual product could boost production tremendously.

Recommendations:

Many of the recommendations I’m about to provide stem from obvious solutions that emerge repeatedly out of Microsoft’s past conflicts. Microsoft must implement the following solutions continuously so that they may thrive in this fourth industrial revolution:

1. Maintain lean production and management – By establishing lean processes Microsoft loses unnecessary assets that complicate their company with political warfare. They improve their time management by the lack of conflict in arguing parties due to scattered management. Lean production would enable them to respond faster to incidents such as ‘The Red Ring of Death”, ensuring their consumers happiness and avoiding law suits or write offs.
2. Balance innovation with other primary activities – By worrying about innovation in R&D Microsoft can gain an edge in their competitive environment in technological innovation. But they tend to fall behind due to the lack of a balance in other primary activities. While Microsoft focused on Marketing and Sales and R&D, they ignored other key factors such as Customer Service. Nadella has already began to further balance out Microsoft’s primary activities in this way by stating more emphasis needs to be put on Customer Service. If Customer Service had more focus than a support activity, it’s possible “The Red Ring of Death” or the dissatisfaction with the Xbox One’s controller could’ve been dealt with in an efficient and effective manner.
3. Recognize adaptation, new markets, and technological advancements – By recognizing these factors, Microsoft can gain stability within their industry. Ripples will continuously cause effects inside the industry of technological innovation, but by recognizing when an adaptation is coming and how they can work with it, establishing when an innovation has changed enough to be considered a new market such as The Cloud, and working on relative technological advancements of their own Microsoft can create some form of stability for their company.

These recommendations are applicable to anyone in a fluctuating industry. Causation can provide stable ground as you try to make it in an innovative industry. Microsoft has used almost all of these recommendations at one point, and it always proves to be beneficial for the company. But it seems as if they have troubles maintaining these recommendations. Only time will tell if Nadella has better luck reading the market and providing that stability, but he seems to be making a satisfactory impact now.

Conclusion:

This case has covered various issues that Microsoft has dealt with and overcame over the years. But the case leaves off on the minimal improvements Nadella has achieved. In the future, we can determine whether Nadella has had a successful time maintaining lean production and management, and distributing balance between supporting and primary activities. The preferred solution is the most acceptable way of making this happen by deductive reasoning, but it seems Nadella is following the first alternative as he goes all in on Cloud services. Regardless these alternatives hold risk, and it is commendable that Nadella is taking them in appropriate ways as he focuses on internal and external aspects of the company.