Eight things CEO Nadella needs to do to jump-start Microsoft

Microsoft could use a little shake-up to break out of its stagnant pattern. CNET offers eight friendly suggestions.

Satya Nadella wearing a hoodie
Microsoft said Satya Nadella would be its third chief executive Tuesday, succeeding Steve Ballmer. Microsoft

For Microsoft, new CEO Satya Nadella represents the first opportunity for a fresh start in nearly a decade and a half.

It's hard to knock a company that last quarter generated $24.5 billion in revenue, but Nadella takes the reins at a time when there are increasing questions about Microsoft's direction and future source of growth.

Let's face it: Microsoft has been in a rut. The reception to Windows 8 has been lukewarm at best and has failed to reinvigorate PC sales at a time when consumers are keener to spend their limited dollars on phones and tablets. Windows Phone, meanwhile, has slowly made progress in the mobile world, but remains a speck relative to larger Google and Apple.

Which is where Nadella comes in. CNET's writers and editors brainstormed some ideas that would reinvigorate Microsoft. Here are eight:

1. Three's company. Microsoft juggles three operating systems: Windows 8; Windows RT, which is a stripped-down version compatible with more mobile-friendly (and power-efficient) chips; and its smartphone OS, Windows Phone.

Do you know anyone that bought a Nokia tablet? CNET

That's one too many operating systems, with Windows RT as the odd man out. There were few takers who built a Windows RT device when Windows 8 first launched, and only the Surface RT and Nokia's Lumia 2520 used the OS in 2013.

Microsoft's partners don't like it and customers evidently aren't big fans, so one of Nadella's first moves could be clarifying where things go with Windows RT. Does it get killed off? Or does it merge with Windows Phone -- which runs on the same mobile chip architecture? Either way, Microsoft needs to slim down to two operating systems.

2. Break down the bureaucracy. It happens to every large company: The sheer amount of people and agendas grows to unwieldy proportions, creating an organization ruled by politics and bureaucracy. That's not exactly the culture a tech company should be fostering, and it's become Microsoft's baggage.

Nadella seemed to acknowledge that in his first "interview" posted on Microsoft's Web site.

"I will ruthlessly remove any obstacles that allow us to innovate," he said, suggesting a push to move forward.

3. Rethink pricing. You want to really inject a shot of excitement into Windows? Stop charging such high prices for the software.

Windows 8.1 is $120, while Windows 8 Pro is $200. A subscription to Office 365 is $100 a year, while Office Home and Student is $140.

CNET's Cheapskate columnist, Rick Broida, appropriately suggested that Microsoft lower Windows to $20 and Office Home $30.

"Stop making customers feel like they're being overcharged at every turn," he said.

Apple, for instance, now gives away its OS and essential tools; although, the company generates most of its revenue from device sales. It's admittedly a different situation.

On the manufacturing side, Microsoft could also lower its licensing fees to stay competitive with Google, which doesn't charge partners for its Chrome OS software. There's a reason Chromebooks are starting to make a dent with cost-conscious consumers.

"Google is taking them to the woodshed on the low end because installing Chrome OS is free -- never mind that Windows 8.1 can do far more," said CNET writer Seth Rosenblatt.

4. Follow through on cloud and mobile promises. Well, this shouldn't be difficult for Nadella, who was in charge of the company's cloud and enterprise group.

Nadella made the point himself: We're all moving to a mobile and cloud-centric world. Nadella needs to accelerate that trend with its software and services.

"I love the fact that Microsoft picked a cloud guy," said Lopez Research analyst Maribel Lopez. "The world has changed."

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Mobile, the other half of the equation, is just as critical to Microsoft's success. The company has made slow, minor progress with Windows Phone, and Nadella needs to pour more resources into improving the software and marketing it to consumers.

As I previously wrote, figuring out the mobile strategy will be Nadella's biggest challenge.

Nadella will have to walk that fine line between a partner to companies looking to use Windows Phone and a hardware device maker with its Nokia devices arm.

5. Who are they selling Microsoft to? Nadella needs to figure out Microsoft's branding strategy. Companies such as Apple and Samsung have figured out how to create highly coveted brands and products that elicit mass appeal and interest.

Microsoft, meanwhile, is marketing itself to the average Joe, which is great on paper, but doesn't get anyone excited about its products.

"They need to find a way to sell to the Everyman but advertise to the elite," said CNET senior writer Daniel Terdiman.

6. Keep rocking that hoodie. The early impression of Nadella is of a person who is far less intense than his predecessor, one just as comfortable with a hoodie sweatshirt as he is wearing a suit jacket and button-up shirt.

The perception of tech companies is often tied to their CEOs. Steve Jobs and his famed reality-distorting bubble is the quintessential example, but Larry Page's geeky scientist image works perfectly with the try-anything Google, while super-cool Elon Musk is intimately tied to the Tesla brand.

Nadella needs to craft his image differently from Ballmer or Bill Gates, and make it his own. And, as CNET Senior Managing Editor Kent German put it, he needs to "not sweat as much as Ballmer did on stage."

7. Keep the Xbox unit. Nadella should ignore the critics and backseat CEOs and cling to the Xbox unit. Some skeptics have expressed concern that Microsoft has become too unwieldy to manage, with the company going in too many disparate areas.

Microsoft's Xbox One.
Microsoft's Xbox One. Microsoft

The Xbox unit shouldn't be sacrificed in the name of streamlining a business. The console is one of the rare bright spots in Microsoft, and the Xbox One has continued its run with sellouts throughout the holidays.

More importantly, the company has been positioning the Xbox One as the potential hub of the home. At a time when Apple and Google are trying to find a way to get into controlling the TV and living room, Microsoft already has been there with its Xbox franchise and Xbox Live.

There's too much potential there to give up.

8. Let's see some moon shots. When was the last time Microsoft did something that excited you? The company needs to get back to creating and experimenting on novel products and services, and not let its legacy attachment to Windows restrict its ability to innovate.

"Don't say you want to innovate, but only fund the cash cows," Lopez said. "Don't say you want innovation and refuse to cannibalize any part of your business."

In other words, Microsoft can't play it safe. Nadella talked a bit about Microsoft's ability to innovate, creating products and services that allow people to do more.

"We have the best platform to change the world," Nadella said.

Let's hope that's more than empty words.

 

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