Boyden Executive Search

Microsoft has mounted a shift from its nearly 35-year-old Windows operating system to Azure cloud services on a foundation of strategic culture change.

The shift at Microsoft offers insights into organizational transformation on a large scale, which has been a success to date. The company has avoided falling prey to the disruption that has toppled other big tech pioneers, even sparking a revival. A new case study by Herminia Ibarra, Professor of Organizational Behaviour at London Business School (LBS), examines Microsoft’s transformation, with particular focus on the corporate culture change underpinning it.

A fundamental change to the business model, specifically in how revenues are generated, requires adaptation at multiple levels. Traditionally Microsoft sold software to clients under a fixed-term contract. Each sale guaranteed revenue. Cloud services are sold on a metered basis, thus revenue is generated only when customers actually use the service.

The implications are immense, especially for Microsoft’s sales team. Jean-Philippe Courtois, EVP and President, Microsoft Global Sales, Marketing & Operations, is leading what he describes as a shift from a “fixed mind-set” to a “growth mind-set”. Ibarra writes that when Courtois took the role in 2016, he saw the need to drive the organization towards a “culture of learning and coaching”, which Satya Nadella had set in motion soon after his appointment as CEO two years earlier. The change management effort includes “enabling coaching conversations that would help staff more effectively leverage their time to serve customers and attain key results”, Ibarra explains.

After all, some 40,000 people need to change the way they do their jobs. For example, in order to encourage customers to use the company’s cloud-based services more, staff had to understand exactly how customers use them and what motivates them. This crucial piece of talent development alone required hiring 5,000 specialists. Further, sales staff needed to be relieved of some duties in order to focus solely on selling. They also needed a more robust incentive structure.

Of course, technology and leadership talent development are also in the mix. Microsoft’s “Reimagine Managers” programme was created to train managers to coach and take a more supportive approach with their staff. Technology has made some routine management tasks easier, freeing up more of managers’ time for their people. It is also being used to gain insights into employee work patterns and fine-tune change management tactics.

Microsoft seems to be getting the human capital element right, and it is showing that even in a very large organization, culture change is possible. The Economist suggests that “the shift has only been successful (so far) because it has involved not just strategic insight, but a change in approach across the workforce.”

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