microsoft | Paul Wallbank - Communications Professional

Building the post-agile workplace

Yammer founder Adam Pisoni believes the Microsoft owned business could be then next phase of the industrial revolution.

“I personally believe we haven’t seen a major change in how companies work since the industrial revolution,” says Yammer co-founder Adam Pisoni. “We’re, I think, on the brink of a change as large as that.

Pisoni was speaking at Microsoft’s Australian TechEd conference on the Gold Coast and gave an insight into how Yammer’s development philosophy is being implemented at Microsoft since the smaller company was acquired last year.

He believes all businesses can benefit from collaborative, cloud based tools like Yammer however software companies like Microsoft are the ones being affected the earliest from their adoption.

“We sometimes joke that Yammer’s development methodology is post-Agile, post-Scrum” says Pisoni. “Because they were not fast enough and don’t respond to data quickly.”

Understanding modern workplaces

This will strike fear into the minds of managers who are only just coming to understand Agile and Scrum methodologies over the traditional ‘waterfall’ method of software development.

“We focused primarily in the past on efficiency,” states Pisoni. “In many ways things like scrum attempt to make you more agile but still focus on efficiency. Everyone is tasked based and hours and burn down points and all that”

“The name of the game now is not efficiency, it’s how quickly you can learn and respond to information.”

“Yammer is less of a product than it is a set of experiments running at all times. We take bold guesses about the future but then we try to disprove our hypotheses to get there.”

“So we came up with this ‘post-agile’ model of a small, autonomous, cross-functional teams – two to ten people for two to ten weeks who could prove or disprove an hypotheses based on the data.”

“This lets us quickly move resources around to double down on that or do something else.”

Flipping hamburgers the smart way

Pisoni sees this model of management working in areas outside of software development such as retail and cites one of his clients, Red Robin burgers, where the hamburger chain put its frontline staff on Yammer and allowed them contribute to product development.

The result was getting products faster to market – one burger that would have taken eighteen months to release took four weeks. The feedback loops from the customer and the reduced cost of failure made it easier to for the chain to experiment with new ranges.

With companies as diverse as hamburger chains, telcos and software developers benefitting from faster development times, it’s a warning that all businesses need to be considering how their employees work together as the competition is getting faster and more flexible.

It remains to be seen if this change is as great as the industrial revolution, but it’s now that can’t be ignored by managers and entrepreneurs.

Paul attended Microsoft TechEd Australia as a guest of Microsoft who paid for flights, accommodation and food.

Today marks a moment of reinvention

Regardless of what it means for the wider industry, Microsoft’s deal with Nokia means both companies have entered fundamentally different phases of their businesses.

In announcing the company will acquire Nokia’s mobile and devices business, Microsoft said “Today marks a moment of reinvention”.

This is certainly true, with the retirement of Steve Ballmer, Microsoft officially enters the post Bill Gates era and today’s announcement is an admission from Nokia that their moment as the world’s dominant mobile phone manufacturer is over.

What’s notable about the deal is what Microsoft doesn’t get — particularly Nokia’s maps service. While Microsoft gets a license to use Nokia’s mapping services, it leaves the Finnish company with a valuable asset and possibly leaves it as the only company capable of competing with Google in that market.

For Microsoft, acquiring the expertise of Nokia’s engineers shouldn’t be understated, although integrating 32,000 Nokia employees will test Microsoft’s management as this increases their workforce by a third.

Possibly the most fascinating part of Microsoft’s announcement though is the comment in the second paragraph of their media release.

Microsoft will draw upon its overseas cash resources to fund the transaction.

US technology companies have been struggling to deal with the massive profits they have accumulated offshore as part of their tax minimalisation strategy. What we may now be seeing is a wave of foreign takeovers as American companies start to reduce their offshore cash stashes without incurring domestic tax bills.

If that’s true, Microsoft’s agreement with Nokia may well indicate we’re about to see many more takeovers around the world .

Regardless of what it means for the wider industry, both Microsoft and Nokia have entered fundamentally different phases of their businesses.

Google’s lost Docs mojo

Has Microsoft seen off Google’s threat to their office suite dominance?

Last week I spent the day at Xero’s Australian convention speaking to various cloud service companies, bookkeepers and accountants.

One of the notable organisations missing in the conversations was Google – two or three years ago, Google Apps would have been at the front and centre of conversations about cloud services and integration. Yesterday the company was barely mentioned.

Part of the reduced buzz around Google Apps at XeroCon is due to Xero’s closer relationship with Microsoft, but it also betrays how Google Docs is no longer the smartest, newest product on the block.

“We tried to eat their dog food, but our staff rebelled,” one manager of a marketing agency who worked with Google told me. “We thought we’d go Google Apps for all the work we were doing with them but we just found the products lacked the functions we needed.”

The main problem for business users are Google Docs’ slimmed down feature. While most people don’t use 95% of the tools included in Microsoft Word or Excel, each person uses a different 5% and find something critical missing from the cloud based challenger.

For writers, Google Docs’ lack of a word count function is a deal breaker. Speakers find the Presentation function far too basic concerned to the Microsoft Powerpoint or Apple Keynote packages.

In the cloud computing industry, Application Program Interfaces (APIs) are all important as these allow other services to plug into data and enhance value for users. Over the last two years, Microsoft have done a good job in cultivating their developer community while Google have taken theirs for granted.

Most importantly though is that Google seems to have lost focus on their productivity suite, it may be another example of the company’s corporate attention deficit disorder, or it may be be that Microsoft have seen off another challenge to their dominance in that sector.

If it is the latter, then Microsoft have done a good job with Office 365 in seeing off the threat that Google posed.

Despite the company’s challenges in the post-PC, post- Gates era it would be dangerous to write Microsoft off.

A question of incentives at Microsoft and Apple

Incentives create a company culture as we see within Microsoft, Apple and Amazon

Ben Thompson on his Stratechery blog speculates what Apple would be like were Steve Ballmer running the company.

Thompson makes an excellent point – that Ballmer has been very good in building a company driven by incentives like salaries, bonuses and titles. It describes Microsoft very well and highlights the companies strengths and weaknesses.

Were Ballmer to run Apple, Thompson concludes, it would be a far more profitable company than it is today but it would be fading into irrelevance just as Microsoft is.

That makes sense as Microsoft under Ballmer has been able to profit from the dominant market position it built up in the late 1990s, but the company has struggled against innovative competitors or the big market shifts following the arrival of smartphones and tablet computers.

Where Thompson is on more shaky territory is citing Amazon as another example of where profit is less important than innovation;

Amazon famously makes minimal profits; Microsoft made more money last year than Amazon has made ever, yet Amazon too is far more relevant in the consumer market today than is Microsoft.

Amazon may well be more relevant to the consumer market today than Microsoft, but that’s largely on the back of a business model built on shareholders subsiding customers – something that Apple has never done.

It may well be that when investors get sick of propping Amazon up, the company’s business model will have to change. Should Amazon have a Microsoft like dominance of the online retail or cloud computing markets then customers might be in for a nasty dose of sticker shock as profits are maximised.

Ultimately incentives are what shapes a company’s culture – whether the incentives are built around stack ranking, commissions or currying favour with the founder, they will determine how the business behaves.

Mr Ballmer regrets

The successor to Steve Ballmer as Microsoft CEO has some major decisions about the company’s future.

Following the announcement of his pending retirement, Microsoft CEO Ballmer held his first interview for twenty years with ZD Net’s Mary-Jo Foley.

During the ZD Net interview, Ballmer and Foley ranged over subjects ranging from his possible replacement, reasons for retirement and his greatest highlight during his thirteen year tenure as CEO.

Foley’s asked Ballmer what was his greatest disappointment as Microsoft CEO and, not surprisingly, he nominated the development of Microsoft Vista.

I would say probably the thing I regret most is the, what shall I call it, the loopedy-loo that we did that was sort of Longhorn to Vista. I would say that’s probably the thing I regret most. And, you know, there are side effects of that when you tie up a big team to do something that doesn’t prove out to be as valuable.

Those side effects of Vista’s botched development were felt across the PC industry as the operating system’s overlong development and disappointing performance broke the three year upgrade cycle that underpinned the sector’s business model.

Unlike the similar debacle eight years earlier with Windows ME where Microsoft’s market position was unchallenged, Vista came along at the time the computer industry itself was being disrupted by smartphones leaving the entire PC industry exposed to a major shift.

Now Ballmer’s successor will have to deal with the industry’s broken upgrade model along with the post-PC era where desktop and server operating systems are no longer the key to controlling the market. Every option is a challenge to Microsoft’s existing businesses.

As discussed in Ballmer’s interview with Mary-Jo Foley, Microsoft still sees its future in consumer IT, whether that includes continuing the company’s three screen strategy of supplying Windows on the desktop, tablet and smartphone will be one of the early and critical decisions the next CEO will have to make.

While Microsoft Vista might have been Steve Ballmer’s biggest mistake as Microsoft CEO, the challenges ahead for the company’s board and management are great, it’s going to take strong leadership for the once dominant software giant to maintain its place in a radically changed market.

Song of the day – Ms Otis regrets by Kirsty McColl and The Pogues.

Fighting in the sandbox

The walled gardens of the mobile phone industry aren’t good for users.

The current spat between Microsoft and Google over the Windows Phone YouTube app illustrates the value, and hindrance, of the internet’s walled gardens.

Google’s locking Microsoft Phone users out of YouTube shows the strength of these online empires and when coupled with control of the mobile phone platforms, as Google has with Android, it makes it hard for outsiders to compete.

In one respect, this is corporate karma coming back to bite Microsoft who ruthessly exploited their market position with Windows, MS-DOS and Office through the 1990s and early 2000s.

That doesn’t change the problems facing Microsoft Windows Phone users who want the same access to internet services enjoyed by Android and iPhone owners.

Being locked out of a service because of the product you choose to use is in many ways the antithesis of the internet and challenges the underpinnings of the online economy.

All internet and mobile phone users need to watch how this spat between Microsoft and Google develops, captive markets aren’t good for anyone.

Google and Microsoft show how online business is changing

Google and Microsoft’s quarterly reports show how all businesses are vulnerable in times of change.

Both Microsoft and Google yesterday reported their second quarter earnings for 2013 and both missed the targets expected analysts. Does this really mean anything?

Microsoft’s earnings were particularly notable as they included a $900 million dollar write off on Surface RT inventories, this almost certainly means a key part of the company’s tablet strategy has failed.

What’s striking in Microsoft’s earnings report is the terrible performance of the Windows Division which saw sales increase 10% year-on-year to 4.4 billion dollars, but earnings collapse by over 50%. Excluding the Surface RT write off, the division would still have seen a ten percent fall.

The company’s statement emphasised how the division is struggling with increasing costs.

Windows Division operating income decreased $1.3 billion, primarily due to higher cost of revenue and sales and marketing expenses, offset in part by revenue growth. Cost of revenue increased $1.2 billion primarily reflecting product costs associated with Surface and Windows 8, including the charge for Surface RT inventory adjustments of approximately $900 million. Sales and marketing expenses increased $344 million, reflecting advertising costs associated with Windows 8 and Surface.

At Google, the company’s 2nd Quarter report show trend is still upwards but the core business of online advertising is showing some cracks as the total number of paid clicks grows, but the value of each falls. At the same time traffic aquisition costs are rising at the same rate as revenues.

This could indicate that advertisers’ appetite for online links is fading. For smaller businesses, the cost of adwords campaigns has been escalating to the point where the old days of newspaper classifieds and Yellow Pages listings start to look cheap.

Couple the cost of advertising with the inevitable ‘ad blindness’ that web surfers have developed and a worrying trend for Google starts to appear. Overall Google’s net profit margin was 26%, down from 31% a year earlier.

While both companies remain insanely profitable – Google earned $14 billion this quarter and Microsoft $6 billion – both businesses are showing stresses as their markets evolve. It proves no business can afford to be complacent in these times.

Google and the workplace

Google’s evolution in hiring practices and HR policies describes the risks of relying on gut feelings and the importance of workplace accountability.

Over the years Google has attracted attention for its employment practices, particularly for its quirky interview questions which challenged many a genius.

It turns out those brainteasers have proved to be less than effective, as has the interminable interview process that saw job candidates endure dozens of meetings before being offered a role at the company.

A recent New York Times interview with Laszlo Bock, senior vice president of people operations at Google, discusses some of the company’s employment experiences along with some of the ways the organisation manages staff.

What’s notable is Bock’s findings on Google’s gruelling interview process with its brain teaser questions;

We looked at tens of thousands of interviews, and everyone who had done the interviews and what they scored the candidate, and how that person ultimately performed in their job. We found zero relationship.

The New York Times interview is particularly interesting as it reveals much of Google’s legendary employment criteria – particularly that of hiring only graduates with high university marks – turned out to be effectively useless.

Most telling though is what Bock found about managers and leadership;

We’ve actually made it harder to be a bad manager. If you go back to somebody and say, “Look, you’re an eighth-percentile people manager at Google. This is what people say.” They might say, “Well, you know, I’m actually better than that.” And then I’ll say, “That’s how you feel. But these are the facts that people are reporting about how they experience you.”

You don’t actually have to do that much more. Because for most people, just knowing that information causes them to change their conduct.

Who would have thought that accountability would make people behave better and more effectively?

Despite Google’s learning on hiring and management, things still go wrong. Business Insider’s Nicholas Carson has a wonderful story on the difficulties at restaurant review site Zagats which was taken over by the search engine giant and absorbed into their maps and geolocation divison.

The problems at Zagats though owe more to a cultural mismatch, as Carson writes;

It’s about the collision between the wealthy dream world of the technology industry and the scratch-and-claw meager existence of freelance writers.

One of the notable things about the current dot com boom is the contempt technologists and entrepreneurs have for content creators.

In the Silicon Valley view of the world founders and coders deserve to be generously paid but artists, musicians and writers should be thankful for the exposure they get and the odd dime thrown their way.

Google’s struggles with Zagats also exposes another problem with the tech industry’s hiring practices – that of ‘permatemps’ who never get on the payroll and have few benefits and no security. For years this was a problem at Microsoft and it remains a common practice today.

The story of Google’s evolution in hiring practices and HR policies is something all managers should read as it describes the risks of relying on gut feelings and the importance of workplace accountability.

IT industry feuds are buried as business models collapse

The collapsing personal computing and server markets are forcing once powerful competitors to bury animosities and feuds as industry giants face a troubled future.

Samsung’s exit from selling desktop computers illustrates how quickly the PC industry is collapsing which underscores Michael Dell’s urgency in his attempts to take Dell Computer private along with the spectacle of once hostile competitors like Oracle and Microsoft embracing each other.

Earlier this week Microsoft Australia hosted a briefing at their North Ryde office to show what the company is doing with their Azure cloud computing service, which is part of the company’s quest to find revenues in the post-PC world.

Microsoft are quickly adapting to the new marketplace. This week in Madrid, the company hosted their European TechEd conference where they showed off their Cloud First design principles of software built around online services rather than servers and desktop PCs.

One important part of Microsoft’s cloud strategy is establishing pairs of data centres to provide continuity to the various zones, including China, across the globe. Each individual centre is at least 400 miles apart from its twin to avoid interruptions from natural disasters.

Interestingly, this is the opposite of Google’s data centre strategy and quite different from how Amazon offers its data services where customers can choose the zones and level of redundancy they want.

There’s no real reason to think any of these three different philosophies are flawed, it’s a difference in implementation and each approach brings its own advantages and downsides which customers are going to have choose between.

While Microsoft is showing off its new direction, HP CEO Meg Whitman was in Beijing proclaiming that “HP is here to stay” and laying out the company’s path to survival in the post-PC world.

Like Microsoft, HP is putting bets on cloud computing and China, Whitman emphasized the work she’s been doing engaging with Chinese companies while promising “a new style of IT” and that “HP is in China for China.”

A key difference to Microsoft and Dell is that HP is doubling down on its desktop and server businesses with a focus on selling into the Chinese market. This is a high risk move given China’s investment into high speed networks and the global nature of the cloud computing movement.

One of the boasts of Whitman and her management team is that HP have added a thousand Chinese channel partners over the last twelve months, this is an effort to replicate Microsoft’s market strength in mature markets which has given the software giant breathing space against strong, cashed up competitors like Google and Apple.

Whether this works for HP in China remains to be seen, in the meantime Microsoft are trying to move their huge channel partner community onto the cloud with various offerings that give integrators who’ve traditionally made money selling servers and desktops some opportunity to sell online services.

A selling point for Microsoft is yesterday’s announcement they will offer Oracle databases on their Azure platform. The ending of animosities between Microsoft and Oracle is an illustration of just how the collapse in the PC and server markets is forcing market giants to forget old feuds and build new alliances.

With the server and personal computing markets being turned upside down, we’re going to see more unthinkable alliances and pivoting corporations as once untouchable industry giants realise the threats facing them.

The PC industry’s search for new directions

Microsoft and Dell struggle to reinvent themselves in the post PC era

All Things D reported over the weekend that Microsoft executives are fretting over a major restructure being planned by CEO Steve Ballmer. This is part of the fundamental changes challenging the entire PC industry.

Ballmer is dealing with massive changes in Microsoft’s core business as PC sales decline with customers moving to smartphones, tablet computers and cloud computing so finding new markets is a priority for the company’s board and senior management.

The same problems are facing all the major players in the PC industry and it’s the main reason why Dell is in the throes of a battle to take their business private, what’s fascinating is the different ways these companies are responding to these changes.

In Dell’s case the company’s looking at becoming “an Enterprise Solutions and Services (ESS) focused business” – essentially copying what IBM did a decade ago in moving from hardware and focusing on consulting and services to large corporations.

Microsoft on the other hand sees the future in devices and cloud computing with Ballmer telling shareholders last year that becoming a “devices and services company” is the future.

It’s important to recognize a fundamental shift underway in our business and the areas of technology that we believe will drive the greatest opportunity in the future.

In Ballmer’s view those opportunities lie in cloud computing services and devices like the Windows Surface tablet computer and the smartphones, products which Dell struggled with during the 2000s.

These are two very different directions and it illustrates just how the major players in the PC industry are searching for new business models as the old one collapses.

How many of them successfully make the transition will be for history to examine; it’s easy to see Microsoft surviving given its massive financial reserves and market power, although nothing can be taken for granted as we could have said the same about Kodak twenty years ago.

Dell on the other hand is far weaker being smaller with a narrower product base and currently has the management distraction of competing buyout offers. Dell’s survival is far from certain.

Others, like HP, seem to be slipping into obscurity as management flip-flops from one scheme to another. The takeover of EDS as part of HP’s move into enterprise consulting does not seem to have gone well and the company is wallowing.

What we’re seeing is the rapid disruption of an industry that itself was the disruptor not so long ago. It reminds us that even the corporated giants of today are as vulnerable as the stagecoach companies of yesteryear in the face of rapid change.

Microsoft’s business fightback

Microsoft stake their place in the CRM market. How will this affect companies like Salesforce?

Yesterday a series of vendor briefings showed how Microsoft is fighting back in the enterprise computing market and taking on upstarts like Salesforce in the CRM and business analytics markets.

Microsoft’s briefing presented a series of happy customers – including Colliers International, Servcorp and Metricon Homes – describing how they had deployed the Microsoft Dynamics product.

All the businesses at the Microsoft event said how it fitted into their existing business IT infrastructure. All were Windows shops running Exchange and Sharepoint.

This installed base illustrates Microsoft’s strength in the Enterprise marketplace along with its partner network of resellers and integrators.

Microsoft’s partner network was illustrated at HP’s Next Generation of Information Workers briefing where the company’s workplace of the future vision is very much a Windows service, even the layout is a replica of the Window 8 tiled layout.

The Next Generation of Information Workers product is largely built over Microsoft’s Sharepoint and HP’s own Trim product which again shows how legacy providers are leveraging their established technology.

Whether this is enough to hold off the likes of Salesforce and other cloud based services remains to be seen. Being Windows-centric is particularly tough at a time when many employees bringing their own Apple iPads and Android smartphones to work.

Microsoft’s awareness of its position was shown in the billing of the briefing where the invite billed the session as showing how Microsoft competes with Salesforce.

That competition is manifesting itself with both Salesforce and Microsoft aggressively acquiring social, analytics and marketing platforms to compliment their CRM products.

If the competition was just a matter of size there would be little contest as Microsoft’s $290 billion stock market capitalisation is more than ten times bigger that of Salesforce’s.

But it isn’t just a matter of size. Microsoft are have a legacy business to protect while disruptors like Salesforce aren’t encumbered by older desktop and server products.

What is clear though is that Microsoft is gearing to fight for these markets.

Steve Ballmer’s big platform change

Microsoft contemplates big changes as the computer market evolves around portable tablets and smartphones.

All Things D today reports that Microsoft is considering a major restructure to reflect changed computing markets.

One of the big messages from The State Of The Internet report is we are seeing three simultaneous changes to the computer industry – the shift from personal computers to smartphones, tablet computers and wearable systems – and Microsoft is at the centre of these transformations.

One graph, first released by Aysmco and expanded in the Meeker presentation, illustrates how fundamental these shifts are to Microsoft’s business.

Microsoft’s domination of the computer industry was almost total at the beginning of the century and remained so until the iPhone was released in 2007. Then suddenly things changed.

With the success of Android and the iPad, the market shifted dramatically against Microsoft and the WinTel market share is now back to 1985 levels when the Commodore 64 was a credible competitor.

The change that Microsoft faces shouldn’t be understated, although the company’s strengths with products like Office, Azure and Hotmail (or whatever this year’s name for their online mail product is) give the once untouchable incumbent some opportunities, particularly in the cloud.

At the end of Mary Meeker’s presentation at the D11 conference, Walt Mossberg asked her about Microsoft’s view that tablets and smartphones are just new computing platforms. Meeker dismisses that with the observation that the data is clear, the market has shifted to Apple and Google.

“Google and Apple are driving innovation,” says Meeker. “Microsoft is not.”

The numbers aren’t lying for Microsoft. That’s why Steve Ballmer has to move fast and think creatively about the company’s future.