Microsoft: What Changes Does Nadella’s Memo Hold?

Source: Thinkstock

Source: Thinkstock

Microsoft (NASDAQ:MSFT) has crossed over to what it once considered the dark side. It is becoming a mobile- and cloud-first company.

This transition is significant for Microsoft. The company has traditionally considered Windows the center of its product universe. Microsoft CEO Satya Nadella wrote in an open letter to Microsoft employees that it’s time to change. “The day I took on my new role I said that our industry does not respect tradition – it only respects innovation,” he wrote. “I also said that in order to accelerate our innovation, we must rediscover our soul – our unique core. We must all understand and embrace what only Microsoft can contribute to the world and how we can once again change the world. I consider the job before us to be bolder and more ambitious than anything we have ever done.”

Microsoft’s latest work has focused in this direction. Just this year (last fiscal year for Microsoft), the company released its first universal apps, improved several cloud-based products and grew its smartphone market share. All of these steps and more have taken the company further from the days when it was PC first to a mobile first approach.

The path to mobile first has not been easy for Microsoft. Nadella’s predecessor Steve Ballmer saw Windows as the sun of Microsoft’s universe of products. Even when he introduced the Windows phone as part of the 2012 Consumer Electronics Show (CES) keynote, he emphasized the importance of Windows to Microsoft. Even with this attitude more mobile and cloud products began to appear, showing that Microsoft was following the money into these areas.

When Nadella stepped into the CEO role last February, he inherited a company that was still PC first. Nadella has since then begun to make the changes vital to transitioning the company’s culture from a Windows centric one too a more mobile friendly one.

This is not to say that Microsoft should abandon Windows entirely. It’s the world’s most popular line of operating systems. One of its most anticipated upcoming products is Windows 9. However as smartphones and tablets continue to grow, Microsoft should continue developing products for these customers as an additional source of revenue. Some of these products are desired by even by non-Windows users. The success of Office for iPad is a good example of this phenomenon. Capitalizing on it further would be good for business.

Nadella talks of making even more cultural changes in the next fiscal year at Microsoft in his letter. He describes the changing culture of Microsoft, from its founding as a computer company bent on getting more customers to buy PCs to its current transitioning brand. “More recently, we have described ourselves as a ‘devices and services’ company,” he wrote. “While the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy.”

In other words, the Windows PC may be a part of Microsoft’s history, but its future will depend on the shifts happening now at the technology firm.

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