Culture Eats Strategy for Breakfast: Good Luck, Microsoft

Culture Eats Strategy for Breakfast: Good Luck, Microsoft

A few days ago, Microsoft announced its new CEO, Satya Nadella. The changes don’t just stop there, though. Bill Gates will be stepping down as chairman of the board and taking on a new role as “technology adviser”.

In the past, there has been no shortage of criticism of Microsoft’s outgoing CEO, Steve Ballmer. He famously dismissed the Internet, thought smart phones were a passing fad launched mobile devices that no one seemed to buy.

But these are all symptoms of a greater issue, and they are faced by many companies large and small.


When a company has been so successful for so long, it is hard to respond to external change.

This is the real underlying issue that Microsoft faces, and Nadella’s job isn’t so much to establish a whiz bang strategy, but to rally the troops around a few core cultural changes necessary for the company to return to growth.

The lessons learned by Microsoft are applicable to many businesses, and so are the challenges that its new CEO must now face; these include changing a culture built around the following:

  • Change is scary, and when in fear, people return to what they know
  • By its definition, change makes yesterday’s knowledge less helpful in addressing tomorrow’s issues
  • With a new normal and in need of new skills, people often worry about their job prospects
  • When people worry, they avoid risks and try to keep their heads down
  • This is exactly the opposite of what needs to happen for innovation to take place
  • Innovation—across people, products, business processes and culture—is exactly what is necessary to succeed

No matter how complex the details are, most agree that Nadella is going to pursue a strategy oriented around software, hardware and services. Historically, software has been the cash cow, and sales people and product engineers haven’t been rewarded for working on things that might take revenue away from those income streams.

Nadella’s task at hand is easier to outline than it is to implement. He needs to establish a market for competition and innovation inside the walls of Microsoft. He needs to change the culture so that Microsoft employees compete with one another before an external company does.


At the same time, Nadella needs to create a set of processes where people feel safe for competing with one another and are rewarded for doing so—all while maintaining a unified sends of community, lest Microsoft turn into the wild west where everyone is out for him or herself.

In the coming weeks and months, there is no doubt that Nadella will be making announcements on this product or that service, referring to a longer-term strategy in which those moves make sense. For those interested in the future of this tech giant—or how lessons learned might be applicable to their own businesses—it might be more interesting to look behind the scenes and try to discern how those announcements will be supported by the cultural, organizational and motivational systems necessary to make them successful.

Like what you read? Feel free to subscribe to my Lateral Thinking Newsletter. I try to blog once a week, and my entries are delivered once a month to your inbox. Registration is free, and I will never share your email address. You can register here.

Tags: , ,