Microsoft Moves from Followership to Leadership
Microsoft Moves From Followership To Leadership
This week, my Kotter International colleague Randy Ottinger discusses how to transition from complacency to leadership.




Recently, when Microsoft announced plans to take a minority stake in the Nook, Barnes & Noble’s e-reader business, I worried that the partnership was a sign of an ongoing trend of Microsoft’s “followership.” However, with Microsoft’s unveiling of the new Surface tablet, and with its planned $1.2 billion acquisition of  Yammer, a social networking service, the company may be showing signs of a return to the thoughts and actions of a market leader.
What can we learn about leadership and followership from Microsoft? First, followership. Windows continues to guide Microsoft’s vision and generate the lion’s share of its revenue, while historically it has influenced almost every significant action that Microsoft has taken. As a result, with few exceptions, emerging market opportunities not connected with Windows or Office have not resulted in the types of projected success the company had hoped for. Microsoft was an early entrant in the search and mobile markets, for instance, but lacked the clarity, focus and business model innovation required to succeed.  The Nook partnership is another example of Microsoft playing catch up.

There is a way to grow additional revenue streams, enter new markets, and innovate at a faster pace –to resume leadership – but in order to do so, Microsoft would need to do things differently:

Clearly identify and prioritize big opportunities to play offense.  Microsoft did not get to where it is today by playing defense.  The company would benefit if it stopped considering new market opportunities as a way to protect its Windows business and hold onto its historic success. Rather, it must re-invent the game, pick its markets, and sustain its focus, urgency and investment – not allow others to define the markets for them. In short, the company needs to have a clearly defined big opportunity for each one of its major business areas – and it must play to win.
Microsoft has proven its ability to move from defense to offense. In the case of Xbox, the company identified the online game market as a growth target years ago.  Entrenched investors already existed when Microsoft entered the market, however, the company displayed the corporate will to win, investing heavily to build an industry-leading platform.  As a result Xbox was, and is, extremely successful.  And, with new innovations like Kinect, it is dictating play in the market – not just watching and waiting to respond.

That said, Microsoft needs to prioritize new opportunities in markets where it has the will to win, rather than defending on all fronts or forging into new markets that do not leverage its core competencies.  Unlike the Nook partnership, for instance, the recently announced acquisition of Yammer is a move that plays into Microsoft’s strengths in the business market where the company can leverage its strengths.
Create a greater sense of urgency around leading in new markets. We all know that Microsoft is not going away anytime soon. And, as Microsoft is a near monopoly in the PC market, it does not have to win in new markets to survive. But the reality today is that the traditional market for PCs is shifting dramatically to all kinds of new mobile devices, and if Microsoft does not increase its urgency to innovate at a faster pace it could be in trouble even in its traditional markets. (Kodak is one example of a company holding on to its historic market, not making the needed shifts and then ultimately losing their way even though they possessed the “next big technology” before its competition.) Further, this cannot just come from the top – Microsoft needs to create urgency throughout the entire company before it’s too late.
I suspect that the iPad was a wake-up call to the company in that it impinged aggressively on Microsoft’s traditional turf as business users began to adopt the device.  The iPad threat created a new sense of urgency in Microsoft leadership and employees that resulted in Microsoft marshaling its resources to come up with a very innovative new tablet/PC that, according to early reviews, is the best of both the PC and tablet worlds. Yet, in order to see continued success, Microsoft must sustain this urgency around innovating and dominating the tablet and other related business markets. If Microsoft’s life depended on winning in new markets, I’m confident they would be able to be successful.
Accelerate innovation and entrepreneurship outside of Microsoft’s hierarchical structure. Today, one of the greatest competitive advantages for a company in the technology market is speed, which comes from getting more people in the game to seize leadership roles at all levels. I’m sure that within Microsoft there are people with blockbuster ideas on how to win in new markets, but those voices are likely muted given the command and control nature of the company.  But, the same people who were responsible for coming up with historic innovations are typically not the people to come up with the ideas for tomorrow.  In order to unleash employee innovation, a new kind of organization is needed.  A structural change is required to knock down barriers that prevent new innovations from succeeding.  This structural change, which Dr. Kotter wrote about in a previous post, would allow the company to implement new ideas more quickly by unleashing action among those down in the hierarchy that see the next trend with a clear vision.
Microsoft has such a history of market domination, making it seem unthinkable that it could go the way of GM or Kodak. But when the change outside isn’t reflected inside an organization, that’s a warning sign.   As the start of the Olympic games near, an outstanding question is whether Microsoft will display the will to win again and take the steps required to put it on a renewed path to gold medal market leadership.
Randy Ottinger is an Executive Vice President at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations.