Steve Ballmer remakes Microsoft one more time

Maybe the new organizational structure will better the odds of achieving breakthroughs, but it will take all the CEO's willpower, tenacity, smarts, and positive energy to keep the ship steaming ahead.

Microsoft CEO Steve Ballmer at the Windows 8 launch in New York in October 2012. Microsoft

It's a new day for Microsoft. Or at least yet another reorganization . CEO Steve Ballmer has launched a restructuring of teams along functional, rather than product, lines, stressing that Microsoft has to focus on a single strategy and to work together with more collaboration and agility around common goals.

Of course, the single strategy and common goals are broad, aspirational and not much different from those of any other tech company.

"Going forward, our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most," Ballmer wrote in a memo to Microsoft's employees Thursday.

As Microsoft restructures around functional areas, such as engineering, finance and marketing, devices and services come to the foreground. Microsoft

The question that will remain unanswered for many months is whether the reorganization, even one that reduces energy-sapping internal turf battles, catalyzes any major, disruptive innovations, increased product velocity or newfound customer love to the company.

Microsoft is promising major innovations in the coming months. During a keynote presentation at the company's Worldwide Partner Conference on Wednesday, COO Kevin Turner told the 15,000 attendees that Microsoft is all about pumping out innovations.

"If you bet on Microsoft, you are not going to ask anymore, 'Hey, where is the innovation?' The challenge going forward is how do we keep up with it," Turner said. The COO also said that Microsoft is delivering innovation faster than anyone can embrace it, and that the company's new fiscal year, which began July 1, will be the biggest year of innovation in its 38-year history.

Microsoft has always innovated faster than businesses can invest in or deploy new technologies. Many companies are currently moving from the ancient Windows XP to the aging Windows 7, not Windows 8. The same isn't true for consumer technology, where Microsoft was asleep at the wheel while Apple, Google, Samsung and others launched the smartphone and tablet revolution in the last five years. Business users are bringing iPads into the office, not Microsoft Surface tablets.

Microsoft's biggest innovation of late is Windows 8, a monumental new version of its decades-old operating system that spans nearly every device and service in Microsoft's latest family of products. It's a major step forward for Microsoft, and an essential foundation for embracing the world of devices and services, rather than PCs and servers. On June 26, Ballmer introduced Windows 8.1 , a critical update due to launch in August that addresses many user complaints that surfaced when Windows 8 was first unveiled in October 2012. But so far, the uptake on Windows 8, as well as the related Windows Phone platform, has been slow.

The legacy PC business that feeds Windows sales is slowing, with PC sales declining for the last five quarters. Worldwide PC shipments dropped 10.9 percent from the same period last year, Gartner reported this week . Windows Phone uptake is growing but way behind iOS and Android and hasn't become as coveted by buyers as devices from Apple and Samsung.

"It's a Windows Phone challenge," Nokia CEO Stephen Elop said in an interview with CNET . "There's tremendous responsibility to help everyone understand what that third alternative stands for."

Stephen Elop and Nokia Lumia 1020
CEO Stephen Elop and the Lumia 1020 at Nokia's July 11, 2013, event in New York. Sarah Tew/CNET

Nokia's new Lumia 1020 smartphone introduced Thursday may do something to associate mobile innovation with Microsoft and provide a bit more sex appeal for Windows mobile devices. Available only for Windows Phone, the Lumia 1020 smartphone features a 41-megapixel camera that CNET's reviewers suggest could replace a dedicated point-and-shoot or even a digital SLR camera.

Nokia's Lumia 1020 may do more than Microsoft's in-house hardware, the innovative Surface tablet/laptop, to attract attention. Apple's iPad or Google Android devices continue to dominate the tablet space, and the MacBook Air garnered 56 percent of U.S. thin-and-light laptop sales in the first five months of the year, according to the NPD Group.

In typical fashion, Microsoft, with its deep pockets and legendary persistence, is taking the fight to Apple, Samsung and other competitors, introducing new Surface devices. In addition, Microsoft partners are developing Window 8-based "2-in-1" dual designs that will be ready for the fall buying season.

But a reorganization doesn't bring much ammunition to that fight. Microsoft quickly needs to produce devices and services that dramatically change the sentiment about the company and its Windows platform.

As a 38-year-old, highly profitable company with 100,000 employees and $74 billion in revenue, it's hard to be nimble and innovate at the speed of smaller, more fleet competitors. Google, at nearly 15, continues to push boundaries with Glass, driverless cars and Google Now, and at the same time competes with Microsoft for enterprise customers with Google Apps. Apple is of similar age to Microsoft, but never grew up as Microsoft did. When Steve Jobs came back to lead the company in 1997, he reasserted his singular vision, resulting in the iPod, iPhone, iPad and MacBook Air. Samsung latched onto the Android mobile platform and managed to become what Dell once was to Windows.

Microsoft is big spender on R&D, but doesn't have a track record recently of breakthrough products or ideas that lead to regeneration. For years Microsoft researchers demonstrated a large, interactive, touch surface device, formerly called Surface but now PixelSense. It was unveiled in 2007, the same year as the iPhone was introduced, but it never led to a mass market tablet like the iPad.

The company has allotted $10.1 billion in R&D for 2013. Surely, there is budget to push out some more compelling devices and even moonshots to dazzle the tech community with Microsoft awesomeness.

Microsoft has significant challenges to get its battleship fully turned, calibrated and moving at faster speed. First, in the mobile world, Windows Phone, with its unique tile rather than icon-based interface, is a very distant third. Microsoft has to deliver Windows for phones and tablets with unique features and apps that match or surpass the competition, as well as super hot hardware like the Nokia Lumia 1020.

In his memo to the troops, Ballmer gave a vague glimpse of the grand challenge that all tech companies face in redefining the user experience and the relationship between people and increasing smarter, smaller machines.

"As devices become further integrated into everyday life, we will have to create new and extraordinary experiences for our customers on these devices. We are going to focus on completely reinventing experiences like creating or viewing a creative document and what it means to communicate socially at home or in meetings at work."

Microsoft also has to rationalize its dependence on third-party partners to make Windows devices more desirable while also following the Apple model as it did with Surface in making its own devices.

Ballmer encapsulated the 2,700 words in his memo into the follow phrase: "One strategy, united together, with great communication, decisiveness and positive energy is the only way to fly."

Word cloud of Steve Ballmer's memo to Microsoft employees about the reorganization. Wordle.net

It's the right message from the CEO. Maybe it's even the right structure to iterate faster and better the odds of achieving breakthroughs. But it will take all this CEO's willpower, tenacity, smarts and positive energy to keep Microsoft on an even keel as the company redefines itself.

 

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