Chris Palmer

Strategy, Energy, Education, & Technology

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Imagine for a moment that you are reading the weekly classifieds, and you come across the following listing: Wanted! Experienced senior executive with proven management skills and a track record recognizing innovative ideas. Must also have a working knowledge of both the consumer and enterprise markets. Engineering & technical expertise an asset.

Welcome to Microsoft’s big 2014 challenge.

Steve Ballmer has lead the storied organization since 2000, seeing it through the formal departure of Microsoft chief founder Bill Gates. In 2014, the ship will have a new captain. That is, assuming they can find one. The CEO chair at Microsoft is quickly proving to be the hardest of senior executive positions to fill.

A Changing Microsoft

surface

The new CEO will be joining a firm in rapid transition. Microsoft has struggled to get a foothold in mobile, despite being in the smartphone space longer than both Apple and Google. Even after investing billions in the development, launch, and ongoing marketing of Windows Phone, Microsoft has struggled to surpass 5% of the market in the US (10% in Europe).

The new leader will also have to contend with the apparent failure of Windows 8 to gain enterprise appeal, and the general failure of Windows RT. Work is underway at Microsoft on Windows 9, but what direction that platform will take depends largely on the vision of leadership.

A bright side for would-be leadership, Microsoft Office still completely dominates the competition both at home and in the enterprise. Under Ballmer, the Office business model has begun to transition to a subscription based one via the office 365 offering. Office remains a source of significant revenue for the firm.

One Microsoft

Adding to the challenges of the new CEO is the fractured nature of the organization. Traditionally, Microsoft has been a very silo’d company. With divisions competing feverishly for things like R&D and Marketing funding. Last June, Ballmer recognized this problem and began the ‘One Microsoft‘ program.

‘One Microsoft’ is a deep reorganization of the company centered around rapid innovation, and achieving Ballmer’s goal of Microsoft becoming a ‘devices & services’ company. These changes have already began, with 12 new teams and leadership put in place in 2013. It will prove interesting if (and how) the new CEO continues in this direction.

Not The Same Old CEO Job

If the search committee does find a CEO that manages to bring the vision and decisiveness to make the right big decisions in all these spaces, they still need to contend with the changing nature of the CEO position. In the 1990s (and even into the aughts), it was still widely understood that the CEO role was largely a financial and strategic one. That is, the CEO set the overall direction and allocated overall resources. Helped by the advent of the streamed press conference, the CEO role has become increasingly public.

As demonstrated at CES2014 by new Yahoo CEO Marissa Mayer, today’s CEO is just as much a marketer and salesperson as they are strategist or financial analyst.

Gates, Ballmer, and the Board

ballmergates

Making matters even more challenging, Bill Gates will continue to chair the board at Microsoft, with Ballmer remaining on the board as well. This means that, no matter how great a CEO candidate they find, he/she will be under the watchful eye of not one, but two predecessors. Whether this is a problem or not depends largely on who you ask, but it will no doubt remain a point of concern for some potential candidates.

So the search continues. Almost overshadowing CES Tuesday, soon to be retiring CEO of FORD Motor Co. Alan Mulally ended speculation that he would be Ballmer’s replacement. Mulally told the AP that he wanted “to end the Microsoft speculation because I have no other plans to do anything other than serve Ford.” Mulally had been considered the front-runner.

As a result, Microsoft stock continues to slowly drop. Ballmer alone has seen over $1bn of the value of his own holdings wiped out since a December announcement that incoming Qualcomm CEO Steve Mollenkopf was himself out of the running. A result of him accepting a move from COO to CEO at that company.

Internal vs. External

In December, it was announced that the firm was looking at both internal and external candidates. Early on, there were as many as 200 names on that list. By mid-December? As few as 8 remained (including both Mulally and Mollenkopf). It is becoming apparent that Microsoft is now increasingly turning to within to find their next CEO. Names like Stephen Elop (who moved from Microsoft to head Nokia, and is being brought back through the acquisition), Satya Nadalla (who has been in charge of the successful cloud and enterprise offerings at Microsoft), and Tony Bates (who joined Microsoft via the 2010 acquisition of Skype) are now considered amongst the front-runners.

Interestingly, as I began writing this piece on Wednesday evening, news broke that Ericcson CEO Hans Vestberg is now being considered for the role. If this story develops any further, I’ll update this post.

There are also not a shortage of former Microsoft employees now external to the company that could prove an excellent fit. Don Mattrick for instance. In 2013, Mattrick left his position heading up Microsoft’s XBox division for a new role at Zynga. Mattrick understands the microsoft environment, has a technical background, and oversaw what has been microsoft’s biggest new consumer product success in the xbox. Like Mulally and Mollenkopf though, it may be difficult to get him to move from his current role.

Of course, even with these challenges, there is plenty of hope yet for Microsoft. The difficult criteria posted above? Ballmer and Gates both arguably met most of it (together they absolutely did). It’s entirely possible that John Thompson’s search committee will find another who does.

Of course, Microsoft could always look at having two people lead the company again, as they did for many years under Gates and Ballmer. But that doesn’t appear to be the likely direction at this point.

There is little doubt however, that whoever takes on this role is going to have mighty big shoes too fill.

Microsoft has recently stated that we should expect an announcement in early 2014. Watch this space.

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