Would Microsoft be better off with the new CEO?

Nadella is the now the new CEO of Microsoft. He replaces Ballmer who would be on the board of Microsoft with around 4% of its shares. Gates would now play a more active role in Microsoft by giving one third of his time. From 2008 Gates wasn’t involved in the day to day operation of the company. But now he would be involved. So Microsoft has one new CEO and two former CEOs on the board. This effectively means that the new CEO Nadella, would not only manage the company but also manage two of his former bosses.

The question is whether Microsoft would be better off with this structure?

What might be the Nemetic point of view?

To understand this let us assume for the moment that five top executives would now report to Nadella. Few weeks back the same executives were reporting to Ballmer.

Let us assume Ballmer and his subordinates were connected by strings/springs having equal stiffness of say, k (spring constant).

Now with the new CEO coming in, the same executives would be connected to both the new CEO and the previous CEO.

Let us further assume that the loyalty of the executives to both Nadella and Ballmer would be divided equally.

This means that the springs that connected Ballmer to the executives would have to be cut into two halves to form two springs. One half would be connected to Ballmer while the other half would be connected to Nadella.

So, the new spring constant for each half would now be equal to 2K.

This means the stiffness of the organization would quadruple .

This also means that the resonant frequency of the organization would increase by a factor of 2 times. So it would be now be more difficult for the organization to come into resonance or vibrate with the least effort.

With the new structural arrangements it also means that the force required to move the organization to resonance would simply increase by two times. It simply means that more effort would be needed to move things around the organization. Seen another way it informs us that the organization would lose its agility to stay relevant in a fast changing market place.

On the whole, Microsoft would tend to become more rigid. It would take more effort to make things happen within the organization. Effectively the organization would compromise on agility and resilience.

Therefore, from the Nemetic analysis, the new management structural design is not a good one and might not help Microsoft to be better off, both in the short and long term.

However, only time would tell whether the analysis is correct or not. Possibly in the next six months trends would be clear.

2 thoughts on “Would Microsoft be better off with the new CEO?

  1. DD- First thank you for one of the first applications of your work to a current situation. Let me add some things I think I see about MSFT that might help further the analysis.

    Gates from day 1 wanted to capture the desktop. When reacting to Apple innovations and the release of Windows they have achieved a defensible advantage in the enterprise. You might remember when Gates had his ah ha moment about the internet. Too late. With all of the incredible talent they simply did not see.

    Moving along mobile has destroyed the monopoly of the desktop. MSFT strong hold is now slipping away. They have been scrambling for the last ten years to figure out how to dominate the web interface. Meanwhile Windows continues to be a cash cow. Shipped with new computers – license fee to MSFT- and regular upgrades to essentially a captive audience for whom the cost of change costs are very high.

    Meanwhile today, MSFT has carved out a significant part of the “gaming” space. Xbox is I think no 1 or 2 in a market first dominated by SONY. They have been trying, unsuccessfully so far to capture the cell phone as they had previously done with the desktop.

    Apple and Google’s Android put an end to the dream. Android is open source. Cheapest OS for any cell phone company. Apple has created an eco system that justifies the price.

    Recently I have started seeing a much better consumer ad campaign from MSFT, but they have had good ad campaigns before.

    So . . .
    suppose in the face of the failures they have experienced, the disruptions needed for break through have been happening for at least 5 years or so. Suppose under our radar, the stiffness has been strained to the breaking point. So then the tighter structure you analyze might be a feature?


    1. MJ, Thank you for the in-depth comment which surely helps in further nemetical analysis of complex dynamic systems.

      It would be reasonable to assume that the inertia of the organization would remain the same. What changes significantly is stiffness. This would have three significant effects.

      First it would be less responsive to small changes/force in the environment since very stiff structures vibrate less with externally imposed forces. The ability to ‘see’ less would be inbuilt in the organization. Your comment about Microsoft’s history supports this point.

      Second, it would need more force to implement new things even if things are noticed. That translates to using up more management time, resources and effort, which is costly.

      Third, it implies that more acceleration would be needed to implement new ideas and go in new directions. Implementation would become an issue. It means more energy would be needed to freely move through the complex system. Now we would have two localized sources of energy – the board and the new CEO. Most of this energy would be spent in defending their existing markets, threatened by customer’s preference to switch to free OS like Ubunto. While China has already switched UK has recently announced its decision to move to free OS. Interesting thing is it is connected to ‘damping’. More Microsoft tries to defend its market and market share more the environment would offer resistance and push it back. That would involve Microsoft spending more energy to defend leaving less attention and energy to concentrate on new markets. It effectively loses its resilience. This also is highlighted in your comment. Microsoft not only spots new trends late in the game but also can’t bring it off like others did.

      So, I can’t figure out how increased stiffness can be a feature for the organization. On the contrary, it appears to me to be a ‘bug’ which can’t be easily fixed by Microsoft. On a lighter tone, ‘patches’ in this case would not work.


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