Microsoft: Real time data – Real time strategies

Volume 19 Letter 11

In the world today where business results are tabulated in real time, the only constant we can count on is change.  When Dorothy, in the Wizard of Oz, proclaimed, “Toto…I don’t think we’re in Kansas anymore,” she could have very well been talking about business today as the landscape continues to transform at an ever-accelerating pace.   And, let’s face it, when change is the only constant, the objective is not to avoid it but to intelligently manage it.   Managed well, change can bring exciting opportunities.  Watch how Microsoft pounced on a shift in their marketplace and turned it into a competitive advantage by pivoting from a command and control style of management to a coaching style of leadership.

Under former CEO Steve Balmer, Microsoft like many big corporations bounced along to the market rhythms largely dictated by Wall Street.  Annual earnings reports were followed by the requisite (and dreaded) yearly business review.  Valuable management time was sucked up by these reviews as strategies were planned and endlessly refined to defend year end results.  Strategic reviews often devolved into inquisitions creating an atmosphere of fear.  But things at Microsoft were about to change big time.

About the same time as Satya Nadella was taking over as the new CEO, Microsoft was transforming to selling cloud computing.  Unlike the old days, customers were no longer purchasing software; they were purchasing server bandwidth.  This new model of business meant that growth was dependent on utilization which could be easily measured in real-time.  With key performance measures provided instantly, business became more like a sports game where you always know the score.

One of the most frustrating things in business has always been the lag time between effort and outcome.  If a business unit slacked off, no one would know until the semi-annual results came out six months later!   Because of this delay, business managers often needed to employ a firm hand to ensure the work got done.  Command and control leadership developed proxy performance measures like number of sales calls completed or samples shipped but reality was there was no way to know the payoff until the quarter was reported.

With Microsoft’s shift to real time reporting, job performance and results were intrinsically linked.  Everyone could measure their performance against results.   The need for proxy performance measures became redundant as did the need for command and control management and the yearly planning review.  Strategies were now adjusted in real time rather than once a year and management efforts could be refocused on coaching employees rather than controlling them.

Despite these changes the concept of a mid-year business review meeting persisted.  The atmosphere of fear was so ingrained that even when the new Microsoft management team tried to re-purpose the meeting as a learning and coaching session, intransigent behaviours of self-preservation persisted.   Finally, to send a clear message that Microsoft was on a new path, the mid-year review meetings were eliminated.

What can we learn from Microsoft:

  1. Real time results changes everything:  Timely results removes the need for command and control management styles and creates a need for manager coaches focused on developing the teams’ skills.
  2. Strategy isn’t a sometimes thing:  You don’t develop a strategy once a year, present it in an annual review and forget it.  In a fast-changing business world, the strategy must be frequently reviewed, updated and honed as results roll in.
  3. Fear is not a motivator:  People leave companies where fear is used as a motivator.
  4. Old habits die hard:  Microsoft had to kill the mid-year review meetings in order to get the message out that managers are coaches not commanders!

The annual planning process is outdated and pre-supposes that strategic thinking and planning is a once a year deal.   In order to out manoeuvre your competition and create competitive advantage you can’t think strategically once in while… you must think strategically all the time.    Isn’t it time to replace your annual strategic planning review with more frequent, fast-paced, coaching sessions with an eye to honing skills and acting quickly on the latest information?  There is no yellow brick road to follow anymore!  Get out the GPS and navigate your future.

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