Perhaps in response to talk about Microsoft's fallibility in some market segments, CEO Satya Nadella issued a lengthy memo Thursday that encouraged Microsoft employees to "reinvent productivity" and make themselves obsessed with their customers. The memo seemed to put workers on notice that the culture in Redmond needs to change and that products like Windows, Office, and Xbox won't sustain the company in the long run.
Nadella, who took over the reins at Microsoft in February, told employees that Microsoft already has a "rich heritage" of producing productivity software, saying, "We help people get stuff done," but adding that "our industry does not respect tradition -- it only respects innovation."
Nadella promised more specific details on Microsoft's recent performance during its July 22 earnings call, though he did acknowledge that "engineering and organization changes" are in the works during coming weeks.
Until then, he wrote, Microsoft employees should be thinking about reinventing productivity "to empower every person and every organization on the planet to do more and achieve more."
State of the Microsoft Union
Patrick Moorhead, an industry analyst and founder of Moor Insights & Strategy, told us the memo represents a de facto "state of the union" address for Nadella.
"It seems to take bits and pieces of what he's been saying over the past few months," Moorhead said. "He seems to be setting the stage for organizational changes as well as extending the definition of productivity to encompass more creative areas."
The Microsoft workplace has had a reputation for infighting, staff fragmentation and nasty office politics. Steve Ballmer, Nadella's predecessor, devised One Microsoft as an effort to change the culture there shortly before announcing his retirement.
Seeking the Smart and Curious
While not mentioning One Microsoft, Nadella made it clear he wants the company to function in a more effective way and become a place where "smart, curious, ambitious people" can do "their best work."
"We think about productivity for people, teams, and the business processes of entire organizations as one interconnected digital substrate," Nadella said.
"None of this should come as a surprise to anyone at Microsoft," Moorhead said. "I think it will be received positively, and as a sign that Microsoft is finally going in a direction toward areas it could be winning."
Xbox Still Viable
Nadella told employees that the company will "continue to grow and innovate" with its Xbox entertainment console brand, which he said the company is fortunate to have. This counters speculation that Microsoft might jettison the Xbox division. Microsoft was considering whether to spin off that brand, which has surged in popularity since first launching in 2001. Although sales of Xbox One have topped the pace of predecessor Xbox 360, which went on to sell more than 80 million units, it remains behind Sony's PlayStation 4.
Possibly referring to the company's lagging success in the tablet and mobile markets, Nadella also promised to be "more effective in predicting and understanding what our customers need and more nimble in adjusting to information we get from the market."