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Microsoft

Strategic Change Management

Written: 24/11/2021


Executive Summary

Since its conception Microsoft has seen a meteoric rise in the technology industry. Currently 15th on the Fortune 500 list, the company is focused around their customers and empowering them to recognise their potential. In 2014, Satya Nadella became CEO of Microsoft and with his leadership came multiple changes. Microsoft’s need for change is explored by conducting a SWOT analysis, whereby the weaknesses and threats present the major cases for change. Most notably, Microsoft has a need for change in their cybersecurity, acquisitions, and innovation skills. Two change management models, Prosci ADKAR and the Kaizen continuous cycle, are presented aligning each model to a case for change, respectively in changing the organisation culture and performance management; and addressing the cybersecurity issues. Three major changes are discussed in recent times with their barriers or supposed barriers to change being discussed. Lastly, recommendations are given for addressing Microsoft’s weaknesses such as lack of innovation and cybersecurity issues.

1. Introduction

Microsoft is one of the world’s most recognised brands, a leader in the technological industry, with a deep-rooted history in adapting to changing technology and times, the company has seen a meteoric rise placing it 15th in the Fortune 500 list. The company’s vision and mission are focused around people and businesses and empowering them to realise their potential, ultimately helping them achieve their potential. Microsoft’s mission is “to empower every person and every organization on the planet to achieve more”, with their vision being “to help people and businesses throughout the world realise their full potential” (Microsoft Corporation, 2021) (Gregory, 2019).

Since its inception, Microsoft rapidly developed their operating systems and programs that allowed them to outperform their current rivals at the time. As the Internet began to evolve, Microsoft created their landmark program Windows NT, quickly taking over the majority of the market share from then leader Novell NetWare. Although the company tried to maintain a monopoly on the industry, Microsoft’s ability to adapt to its ever-increasing challenges were seamless and allowed them to maintain market share (Hall, 2020).

As the 21st century began, Microsoft branched their offerings into the gaming and mobile phones industry. As the Xbox was developed and introduced to the industry, Microsoft has quickly risen to become market leader in the gaming industry constantly competing with current rivals Sony and Nintendo. With the rise of Google, Microsoft looked at adapting the company and purchasing Yahoo! and subsequent subsidiaries to improve their search engine to compete with the likes of Google. Furthermore, as technology advanced and cloud computing has become the forefront of the industry, Microsoft adapted and built their own service Azure to compete with Google and Amazon who are the market leaders in the cloud computing and infrastructure space. Subsequently, as the company was taken into the Fourth Industrial Revolution, the leadership of the company changed, with Microsoft’s current CEO, Satya Nadella, being appointed as CEO in 2010 (Hall, 2020).

With each advancement and change seen in Microsoft, whether it was an internal change, or change to business strategy, the company has seen drastic increase in revenue, market share, and industry ownership, ultimately becoming a market leader within that sector itself. Microsoft is not scared to adapt and change as technology and time does to ensure that they remain competitive, and a market leader. Most notably, after Satya Nadella’s appointment, in 2014, Microsoft’s future seemed to be on a downward trend with sales and services becoming outdated and old. Nadella’s approach and change focused around digital transformation affected the company in a drastically positive manner, resulting in a trillion-dollar gain (Denning, 2021).

The consistent changes in the company has allowed Microsoft to break through financial predictions and navigate the COVID-19 pandemic successfully by adapting to the circumstances. This was done through increasing current capabilities to provide real-time response for hospitals, using technology to reduce transmission of the virus, supporting education through their programs and partners, and further supporting global communities through donations and connections (Edmond, 2020).

2. Need for Change

In order to understand the need for change in Microsoft, a SWOT analysis can be undertaken to identify the various factors to assist in strategic decisions for the future of the company. The strengths identified will be the factors Microsoft can continue to capitalise on to ensure sustainable growth, whereas the weaknesses identified will be contributing factors to the case for change. Subsequently, the opportunities will contribute to the case for change as this will identify areas where Microsoft can implement something new or alter ways of working to benefit the company. Lastly, the threats identified will be a deciding factor on the case for change to see if any changes implemented will assist in minimising or eliminating the factors identified. Figure 1 presents a high-level SWOT analysis of Microsoft in recent history and currently.

2.1. SWOT Analysis

Figure 1
Fig.1 - Microsoft SWOT Analysis (Bush, 2016) (Jurevicius, 2021) (Parker, 2021)

Based on the SWOT analysis done in Figure 1, Microsoft has a multitude of opportunities to strive towards, and a strong foundational set of strengths that they can continue to build on. However, the identified weaknesses and threats present to them outweigh the company’s current strengths. Microsoft’s need for change stems from the identified weaknesses and some identified opportunities.

The high-price point combined with the threat of open source projects presents Microsoft with a major case for change. Although the Windows operating system and the Microsoft Office suite are widely preferred and used; there are multiple open-source options available and becoming increasingly popular such as Linux’s operating system and Google suite (Bush, 2016). Furthermore, the hyper-competitive technology industry is a constant threat to Microsoft, with major tech giants such as Apple and Google having just as much of a global reach, impact, and influence. Combined with rival companies, open source software produces provide many alternatives to Microsoft and their offerings (Parker, 2021).

Microsoft has seen substantial growth through successful acquisitions such as that of LinkedIn, however not all acquisitions are as successful. This is one of Microsoft’s biggest weaknesses, by investing and making poor decisions in acquisitions like LinkExchange, Massive, Danger, and WebTV, the company is forced to re-evaluate these decisions resulting in divestitures (Parker, 2021).

The Windows operating system is majorly criticised for its weakness against various virus attacks, currently being the least protected when compared to competitor operating systems (Jurevicius, 2021). This extends to scam calls and such increasing the cybercrime cases against Microsoft and the operating system. With an increase in the number of cybercrimes, Microsoft needs to change their way of developing security measures for their customers to ensure that users’ privacy is kept. Should this not be attended to, it can increase the number of legal proceedings that Microsoft already face.

The company is many and constant legal battles based on unfair practices such as attempting to monopolise the industry in certain regions, or infringing on certain patents (Parker, 2021). Over the last two years, 3% of Microsoft’s revenue is dedicated to “General and Administrative” expenses which include that of legal fees (Microsoft Corporation, 2021). Given that Microsoft has faced many legal battles and lost various large-scale lawsuits, this poses a major case for change in the organisation, as this can form part of a strategic initiative to alter the way of operating to reduce the probability of future expensive lawsuits (Jurevicius, 2021).

In addition to this, Microsoft is slow to innovate, for example, the company had the necessary technology and resources to enter the mobile phone industry in a timely manner. However, due to the lack of innovation from the organisation, the industry is now dominated by Google and Apple, leaving little room for any new entrants given their constant innovation in the industry (Jurevicius, 2021). This does provide Microsoft for a case for change as it will allow the company to analyse, understand, and strategically plan for ways to improve their innovation techniques and find ways of disrupting currently dominated industries and markets.

Lastly, there is a need for change in Microsoft’s current workforce due to its imbalance in diversity from a women and minority perspective. This extends to HR policies that may need to be changed and updated to cater for a less criticised workforce (Parker, 2021).

3. Change Management Models

3.1. Prosci ADKAR Change Management Model

In an attempt to improve the way Microsoft tracked their sales and operations across various regions and roles, various teams within the company created, delivered, and drove the adoption of MSX Insights (MSXi). MSXi is a modernised business intelligence reporting solution that is used by various roles and teams within Microsoft such as salespeople, company leaders, managers, finance and operations teams (Delaini, 2021).

The Prosci ADKAR model was the perfect change management model for Microsoft to use in this implementation as it focuses on people of all levels in order for the change to be effective. Microsoft had engaged the project with identifying the different needs of leaders, managers, front-line sellers. Figure 2 presents the definition of the ADKAR model and how it was used on a high-level within Microsoft. The benefit of using this model was that it allowed the change management team to gain valuable insights on the resources and behaviours of the employees, and where to focus the resources to encourage the shift. This was further accompanied by structured feedback channels (Delaini, 2021).

Figure 2
Fig.2 - Prosci ADKAR Model used by Microsoft

The ADKAR model was followed each time the change was introduced to a new level or department. Having identified the need for the change and making senior management and all levels aware of the change, to identifying the benefits of the proposed change building the desire in each person. This further extended to creating a close partnership between Microsoft Digital, engineering teams, and adoption and landing teams to assist in making the effective change, implementing it seamlessly and now reinforcing the change throughout the company is all regions (Delaini, 2021).

3.2. Kaizen Change Management Model

As one of their biggest weaknesses, Microsoft must look to improving their cybersecurity with regards to the software and operating systems. As digital transformation is being experienced in most businesses, cybersecurity has become one of the key capabilities. Although cybersecurity can be implemented through various frameworks and technologies, human error can still cause a breach in the system, which is why clear communication and recurrent training on the most recent and prevalent practices is key to ensuring a strong cybersecurity capability (Panorama Consulting Group, 2020).

Emma Ryttare identifies two change management models that can be used and implemented with cybersecurity implementations, which are: Kotter’s theory of change management; and Lewin’s change management model. It is highlighted that within these models there are core aspects of effective change management which look at how to engage with employees of all levels, understanding the behaviour towards the change (Ryttare, 2019). Danial Beck further confirms these core aspects by stating that for effective cybersecurity change, understanding and engaging with various e-consumers on the initiatives is needed, as well as instilling a cybersecurity purpose and value system. Ultimately, ensuring that there is effective employee buy-in and constant feedback in the implementations (Beck, 2019).

Understanding the core aspects of effective change management, it can be argued that Kaizen’s cycle for continuous improvement would be an effective change management model for Microsoft. This model will allow the organisation to implement cybersecurity as a continuous process rather than a one-time transition. Furthermore, it gives employees more control over changes, building more trust. Figure 3 shows the steps of the Kaizen model for continuous improvement.

Figure 3
Fig.3 - Kaizen Change Management Model: Cycle for Continuous Improvement

The Kaizen model would be a great choice for Microsoft’s cybersecurity implementation as it’s 10 principles identify ways for turning this weakness into a potential strength for the organisation. By being proactive about problem solving, looking for adaptive change, identifying root causes, and gathering information from multiple sources, making low-cost, small improvements, and identifying solutions as mistakes are uncovered; the model is synonymous with the changing world of digital transformation and threats to cybersecurity.

4. Major Types of Change

4.1. Organisational Performance Management and Culture

As Satya Nadella took over Microsoft, he saw how and where the company could improve. The first email he had sent highlighted where the company should be focusing their energy and efforts. Furthermore, Nadella saw a way to drastically impact the employees and teams of Microsoft by changing the company’s current performance review methodology and culture. The performance management was restructured within the company from making internal teams compete with one another, also known as stack ranking, to performance reviews focused on constructive conversations. This drastically changed the mindset of employees to having one of a growth mindset (McLaren, 2019) (Chaudhary, 2021) (London, 2018).

The impact of changing the mindset of the organisation as well as the performance management of the teams resulted in Microsoft being able to align better with their customers, improving their products, and seeing the success that it brought (London, 2018). This impact of the culture change coupled with the new strategic plan, was further seen in Microsoft’s valuation reaching the $1 trillion mark after 5 years of Nadella’s appointment as CEO. Nadella understood that in order for Microsoft to further succeed in the ever-changing industry, a culture built around collaboration, learning, growth, and the customer, which was further instilled from the top level down (Chaudhary, 2021).

4.2. Intelligence Driven Organisation

As cloud computing and AI became the focus of the Fourth Industrial Revolution, Microsoft adapted their way of approaching the market and industry from a different perspective. Similar to the culture and performance management change, Nadella implemented a change in focus and strategy in Microsoft, stating the company should focus on mobile and cloud as it will allow the company to maximise the value of technology, enabling Microsoft to empower their customers, ultimately finding the balance between using the data to create personal, intelligent experiences while maintaining privacy and security of their customers (Fried, 2014).

The growth mindset was the foundation of transforming the company into an intelligence driven organisation. Through the Microsoft Consulting Services (MCS), the company was able to utilise the long list of global companies to unlock powerful insights, enhance security, and empower the teams with organisational agility ultimately leaving these clients with the competitive edge. This led Microsoft to developing the Intelligent Driven Organisation (IDO) Model, a framework that allows businesses to utilise digital feedback loops in developing executive strategies, building and ensuring the correct technical capabilities are in place, improving the day-to-day task execution, leading the organisation to achieving their desired outcomes (Chavatte, 2020).

Leveraging the data of the customers, Microsoft is able to turn their implementation of AI into value. The benefit of utilising the IDO framework, and the capabilities of the company, Microsoft was able to complete two years’ worth of digital transformation within two months. Furthermore, as Microsoft is able to offer this as a service to their clients through their own platforms of Azure, machine learning, AI, and other technical capabilities; Microsoft is able to be increasingly competitive in the market and a leader in the industry (Forbes Technology Council, 2018) (Walden, 2021).

4.3. Implementation of Microsoft Teams

COVID-19 impacted the global economy and every industry in some way or the other, with majority of the workforce beginning to work remotely. Products like Zoom, Google Meetings, Cisco Webex, and TeamViewer were beginning to see an increase in usage to aid in remote working. Although Microsoft Skype and Skype for Business was readily available and in use, Microsoft saw an opportunity to combine the capabilities of cloud and cloud collaboration, chat applications, and video conferencing with a user-friendly interface, which led to the creation of Microsoft Teams (Protalinski, 2020).

The usage of Teams has seen a drastic increase during the pandemic, becoming the preferred choice for communication in businesses across the world. In 2020, 95 million users were added to Teams, having grown exponentially since its creation. While Teams is not a standalone product but rather part of the Office 365 offerings, it can be said to contribute to the increase in revenue of the product for Microsoft, with $6.8 million being generated by Office 365 in 2020 (Curry, 2021).

5. Barriers to Change

Prior to the appointment of Satya Nadella, Microsoft was heading for turmoil as a company. In 2014, as the company had acquired Nokia, Microsoft had realised a major mistake in the acquisition, as due to the lack of innovation, the investment seemed to be one that conformed to previous unsuccessful investments. This resulted in 13000 employees being laid off in 2014 due to the current organisational change at the time. After Nadella’s appointment as CEO, the changes he had suggested were met with minimal resistance, however given the drastic change proposed, there would multiple barriers, mainly a cultural change barrier, as this impacts employees’ beliefs, thoughts, and assumptions (S, n.d.).

One of the strategies used by Microsoft was Lewin’s Change Management Model, of unfreezing, changing and refreezing. Coca-Cola has seen multiple changes to the company over its history and has utilised the Lewin model multiple times in order to better engage with their employees (UK Essays, 2021). Nadella engaged with the employees of all levels very closely in various ways such as focus groups, individually, or anonymously (Chaudhary, 2021).

With the focus of digital transformation being around security and privacy matters, there are multiple challenges that CSOs face when improving their cybersecurity. As technology improves and more innovation is introduced, so does the dangers of cybersecurity, leading to a major change barrier of information overload. Although companies such as Microsoft are able to store the data, utilising it to its full potential may be a challenge. Furthermore, while Microsoft may provide the tools to allow other companies to improve their cybersecurity, given the state and vulnerability of Windows, there may be a change barrier due to insufficient integration, human bottlenecks, credential trusts, and soft targets (Vanderburg, 2019).

Microsoft’s funding into approaching these barriers related to cybersecurity by increasing spending in the capability by $20 billion over the next 5 years. This tactic will allow Microsoft in identifying the relevant talent for the job; addressing major government flaws; and finding new ways of sourcing talent in the technological field (Rosenbaum, 2021). While no technology company has flawless cybersecurity, Microsoft’s investment into the field to improve it is an innovative way to overcome the change barriers.

Microsoft’s current challenges include mobile, cloud ecosystem, and newer business offerings. While mobile and cloud challenges can be managed and effectively executed through innovation and designated change management plan such as LaMarsh’s change model or Kazien’s cycle for improvement; it is Microsoft’s new offerings such as Power Platform that can present many change barriers. Given it is utilising AI and elements of a new digital transformation; procedural barriers such as the lack of expertise to implement the change, or lack of customer focus can cause problems for Microsoft.

Once again, through the cultural and organisational change undertaken by Microsoft over the last 5 years will allow the company to mitigate risks and overcome the various change barriers. By working in a more collaborative way and including the customer feedback at various stages, Microsoft will be able to overcome many barriers they are faced with when introducing new products or platforms into the market.

6. Recommendations and Conclusions

6.1. Recommendations

Microsoft is a leader in the technology industry, and a constant threat in any market that they enter. Although the company has many phenomenal strengths and an ever growing customer base and revenue, the threats and weaknesses that are present to the company must be addressed constantly and consistently to maintain the company’s reputation, valuation, and customer support.

Given that cybersecurity is one of Microsoft’s major weaknesses and threats, it can be recommended that going forward, focus on continuous improvements in the area. By implementing cybersecurity improvements as change management, Microsoft will be able to potentially turn this weakness into one of their strengths. Furthermore, by addressing the customer concern of cybersecurity, Microsoft may be able to improve and gain a larger customer base due to this.

It can also be recommended to address Microsoft’s ability to acquire various subsidiary companies. Given that unsuccessful acquisitions are one of Microsoft’s weaknesses, if not their greatest weakness, using various change management principles, Microsoft could invest the money within their own research and development teams, to build and improve their innovation. Microsoft has been known to have missed various opportunities in the mobile phone and cloud regardless of having the technology to be a major competitor and market leader. However, dedicating some investment and building a culture around innovation similar to that seen in Tesla, will allow Microsoft to identify new markets to enter and rapidly become a market and industry leader.

6.2. Conclusion

Microsoft is a leader in the technology industry, and has consistently been a leader since its conception. As the Fourth Industrial Revolution ushered in the internet and the digital transformation, Microsoft too adapted, albeit in a slow manner. The company seemed to lack innovation after Bill Gates had stepped away as CEO, however in 2014, when Satya Nadella was appointed, he brought with him a world of change.

Within 5 years, under Nadella’s leadership, Microsoft was able to become more innovative, respected, and reach a $1 trillion valuation. The need for change at Microsoft was identified through the use of the SWOT analysis with the focus being on Microsoft’s operating system and software being vulnerable and having weak cybersecurity management. Subsequently, Microsoft’s lack of innovation or ability to be slow to innovate presented another need for change in the company. Two change management models, Prosci ADKAR and the Kaizen continuous cycle, were presented to their applications in changing Microsoft into an intelligence-driven organisation and cybersecurity matters respectively. Furthermore, three major changes were explored in the company and their impacts defined as well as various barriers to change to the major changes. Laslty, recommendations are given on how to assist Microsoft in improving their cybersecurity and become more innovative.

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