Microsoft’s big reorganization has finally gotten official. AllThingsD has published a memo sent out by Microsoft CEO Steve Ballmer on Thursday providing details on the biggest restructuring the company has seen in years that’s intended to transform the firm into more of a “devices and services” company. The most prominent change is that the company will be broadly divided by function to make the company run more as one coherent unit — or as Ballmer puts it, “We are rallying behind a single strategy as one company — not a collection of divisional strategies.” Microsoft says that its official departments will consist of “Engineering (including supply chain and datacenters), Marketing, Business Development and Evangelism, Advanced Strategy and Research, Finance, HR, Legal, and COO (including field, support, commercial operations and IT).”
Microsoft will divide its engineering teams into four different departments: OS, Apps, Cloud, and Devices. Ballmer writes that the company will “consolidate our technologies coherently into these groups pulling together some things that have been spread out in our current BG structure like cloud infrastructure, operating systems, mail, and identity, to name a few.” Ballmer also says that this particular phase of the reorganization will last at least until the end of the calendar year.
From a personnel perspective, the biggest change is that current Windows hardware and software chief Julie Larson-Green will now head up Microsoft’s Devices and Studios Engineering group, which means that she will take over Don Mattrick’s old position as chief overseer of the Xbox business.
Ballmer’s full memo to Microsoft employees is posted below.
Subject: One Microsoft
Today, we are announcing a far-reaching realignment of the company that will enable us to innovate with greater speed, efficiency and capability in a fast changing world.
Please join me and my direct reports at today’s Town Hall at 10 a.m. PT to talk more.
Today’s announcement will enable us to execute even better on our strategy to deliver a family of devices and services that best empower people for the activities they value most and the enterprise extensions and services that are most valuable to business.
This company has always had a big vision — to help people realize their full potential. In the earliest days, it was by putting a PC on every desk and in every home. We’ve come farther than we could have imagined. The impact we have collectively made on the world is undeniable, and I am inspired when talented new hires say they chose Microsoft because they want to change the world — that’s what we do today, and that’s what we’ll do tomorrow.
Sharpening Our Strategy
About a year ago, we embarked on a new strategy to realize our vision, opening the devices and services chapter for Microsoft. We made important strides — launching Windows 8 and Surface, moving to continuous product cycles, bringing a consistent user interface to PCs, tablets, phones and Xbox — but we have much more to do.
Going forward, our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most.
We will do this by leveraging our strengths. We have powered devices for many years through Windows PCs and Xbox. We have delivered high-value experiences through Office and other apps. And, we have enabled enterprise value through products like Windows Server and Exchange. The form of delivery shifts to a broader set of devices and services versus packaged software. The frontier of high-value scenarios we enable will march outward, but we have strengths and proven capabilities on which we will draw.
This memo shows you how far we have developed our thinking on our strategy for high- value activities based on devices and services delivery.
Driving Our Success
It is also clear to me and our leadership that we must do an extraordinary job to succeed in this modern world. We have delivered many great products and had much success in market, but we all want more. That means better execution from product conceptualization and innovation right through to marketing and sales. It also means operational excellence in cloud services, datacenter operations and manufacturing and supply chain that are essential in a devices and services world. To advance our strategy and execute more quickly, more efficiently, and with greater excellence we need to transform how we organize, how we plan and how we work.
Improving our performance has three big dimensions: focusing the whole company on a single strategy, improving our capability in all disciplines and engineering/technology areas, and working together with more collaboration and agility around our common goals.
This is a big undertaking. It touches nearly every piece of what we do and how we work. It changes our org structure, the way we collaborate, how we allocate resources, how we best empower our engineers and how we market.
One Strategy, One Microsoft
We are rallying behind a single strategy as one company — not a collection of divisional strategies. Although we will deliver multiple devices and services to execute and monetize the strategy, the single core strategy will drive us to set shared goals for everything we do. We will see our product line holistically, not as a set of islands. We will allocate resources and build devices and services that provide compelling, integrated experiences across the many screens in our lives, with maximum return to shareholders. All parts of the company will share and contribute to the success of core offerings, like Windows, Windows Phone, Xbox, Surface, Office 365 and our EA offer, Bing, Skype, Dynamics, Azure and our servers. All parts of the company will contribute to activating high-value experiences for our customers.
We will reshape how we interact with our customers, developers and key innovation partners, delivering a more coherent message and family of product offerings. The evangelism and business development team will drive partners across our integrated strategy and its execution. Our marketing, advertising and all our customer interaction will be designed to reflect one company with integrated approaches to our consumer and business marketplaces.
How we organize our engineering efforts will also change to reflect this strategy. We will pull together disparate engineering efforts today into a coherent set of our high-value activities. This will enable us to deliver the most capability — and be most efficient in development and operations — with the greatest coherence to all our key customers. We will plan across the company, so we can better deliver compelling integrated devices and services for the high-value experiences and core technologies around which we organize. This new planning approach will look at both the short-term deliverables and long-term initiatives needed to meet the shipment cadences of both Microsoft and third-party devices and our services.
This means we will organize the company by function: Engineering (including supply chain and datacenters), Marketing, Business Development and Evangelism, Advanced Strategy and Research, Finance, HR, Legal, and COO (including field, support, commercial operations and IT). Each discipline will help drive our overall strategy. Each discipline will also be charged with improving our core capabilities in its area. We must improve in all aspects of the business.
There will be four engineering areas: OS, Apps, Cloud, and Devices. We will keep Dynamics separate as it continues to need special focus and represents significant opportunity. We will consolidate our technologies coherently into these groups pulling together some things that have been spread out in our current BG structure like cloud infrastructure, operating systems, mail, and identity, to name a few. Some of these changes will involve putting things together and others will involve repartitioning the work, but in all instances we will be more coherent for our users and developers. We have resolved many details of this org, but we still will have more work to do. Undoubtedly, as we involve more people there will be new issues and changes to our current thinking as well. Completing this process will take through the end of the calendar year as we figure things out and as we keep existing teams focused on current deliverables like Windows 8.1, Xbox One, Windows Phone, etc.
To improve engineering pace and quality, we will increase focus on our engineering systems, processes, and tools to improve the productivity of every engineer and to facilitate engineering collaboration and contribution across the company. Our engineering culture and new structure will enable more cross- group contribution, while maintaining confidentiality of some projects as needed. We will improve the approach we use to get MSR involved in product development, building on and enhancing our significant strengths there.
Organizing for Speed and Strategic Alignment
Specifically, our teams and their leaders will be these:
Operating Systems Engineering Group. Terry Myerson will lead this group, and it will span all our OS work for console, to mobile device, to PC, to back-end systems. The core cloud services for the operating system will be in this group.
Devices and Studios Engineering Group. Julie Larson-Green will lead this group and will have all hardware development and supply chain from the smallest to the largest devices we build. Julie will also take responsibility for our studios experiences including all games, music, video and other entertainment.
Applications and Services Engineering Group. Qi Lu will lead broad applications and services core technologies in productivity, communication, search and other information categories.
Cloud and Enterprise Engineering Group. Satya Nadella will lead development of our back-end technologies like datacenter, database and our specific technologies for enterprise IT scenarios and development tools. He will lead datacenter development, construction and operation.
Dynamics. Kirill Tatarinov will continue to run Dynamics as is, but his product leaders will dotted line report to Qi Lu, his marketing leader will dotted line report to Tami Reller and his sales leader will dotted line report to the COO group.
Advanced Strategy and Research Group. Eric Rudder will lead Research, Trustworthy Computing, teams focused on the intersection of technology and policy, and will drive our cross-company looks at key new technology trends.
Marketing Group. Tami Reller will lead all marketing with the field relationship as is today. Mark Penn will take a broad view of marketing strategy and will lead with Tami the newly centralized advertising and media functions.
COO. Kevin Turner will continue leading our worldwide sales, field marketing, services, support, and stores as well as IT, licensing and commercial operations.
Business Development and Evangelism Group. Tony Bates will focus on key partnerships especially our innovation partners (OEMs, silicon vendors, key developers, Yahoo, Nokia, etc.) and our broad work on evangelism and developer outreach. DPE, Corporate Strategy and the business development efforts formerly in the BGs will become part of this new group. OEM will remain in SMSG with Kevin Turner with a dotted line to Tony who will work closely with Nick Parker on key OEM relationships.
Finance Group. Amy Hood will centralize all product group finance organizations. SMSG finance, which is geographically diffuse, will report to Kevin Turner with a dotted line to Amy.
Legal Group. Brad Smith will continue as General Counsel with responsibility for law and corporate affairs and will map his team to the new organization.
HR Group. Lisa Brummel will lead Human Resources and map her team to the new organization.
As part of these changes, Kurt DelBene will be retiring from Microsoft. Kurt has been a huge part of our success in evolving Office to be a great cloud service, and is a key member of my leadership team. I can’t express enough gratitude for the work he’s done for the company, and I will truly miss him. Kurt is a truly amazing leader and a special person. His contributions to Microsoft over 20+ years can inspire us all.
Craig Mundie will be stepping off the SLT to devote 100% of his time to a special project for me through the end of this calendar year. Beginning in 2014, Craig will continue as a consultant through his previously agreed upon departure date at the end of calendar 2014.
Also at this time, Rick Rashid will step away from running Microsoft Research and move into a new role driving core OS innovation in our operating systems group. Rick created MSR, the most amazing computer science research institution in the world. We owe him so much for that. He has a great team to assume the mantle, and it is exciting to have Rick return to his roots in OS to help propel us forward.
How We Work
The final piece of the puzzle is how we work together and what characteristics this new Microsoft must embody. There is a process element and a culture element to discuss.
Process wise, each major initiative of the company (product or high-value scenario) will have a team that spans groups to ensure we succeed against our goals. Our strategy will drive what initiatives we agree and commit to at my staff meetings. Most disciplines and product groups will have a core that delivers key technology or services and then a piece that lines up with the initiatives. Each major initiative will have a champion who will be a direct report to me or one of my direct reports. The champion will organize to drive a cross-company team for success, but my whole staff will have commitment to the initiative’s success. We will also have outgrowths on those major initiatives that may involve only a single product group. Certainly, succeeding with mobile devices, Windows, Office 365 and Azure will be foundational. Xbox and Bing will also be key future contributors to financial success. Our focus on high-value activities — serious fun, meetings, tasks, research, information assurance and IT/Dev workloads — also will get top-level championship.
Culturally, our core values don’t change, but how we express them and act day to day must evolve so we work together to win. The keys are the following:
In a world of continuous services, the timeframe for product releases, customer interaction and competitive response is dramatically shorter. As a company, we need to make the right decisions, and make them more quickly, balancing all the customer and business imperatives. Each employee must be able to solve problems more quickly and with more real-time data than in the past.
In the new, rapid-turn world, we need to communicate in ways that don’t just exchange information but drive agility, action, ownership and accountability.
Collaborative doesn’t just mean “easy to get along with.” Collaboration means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value.
As a global company with literally billions of diverse customers in an accelerating business environment, we must have a clear strategic direction but also empower employees closest to the customer to make decisions in service of the larger mission. This is tricky in a big company, but it is the key to higher levels of productivity, growth and customer satisfaction.
In our industry, every day brings more challenges and more opportunities than the day before. But we have a unique chance to make the lives of billions of people better in fundamental ways. This should inspire all of us — those who love making products and services, those who love engaging with customers, and those who love planning and running our company in the most effective way possible. We want people who get up each morning excited to make Microsoft better — that’s how we come closer to fulfilling the potential of all people around the globe.
Our leadership team has discussed these cultural aspects a lot and is committed. In my own staff meetings, we are modeling these new characteristics yet also find ourselves occasionally slipping back. One strategy, united together, with great communication, decisiveness and positive energy is the only way to fly.
Seizing Our Unique Opportunity
Together, we have created great products and great success, but we all want more. That means a strategy to deliver a family of devices and services that best enable people for the activities they value most and the enterprise extensions and services that are most valuable to business. A new structure to bring these to market faster. Stronger centralized services so we can be more efficient and effective. Priority focus areas, short and long term. New characteristics of how we work together. In other words, better execution and innovation through strategy and goal and discipline and engineering coherence. One Microsoft all the time.
Across Microsoft, we are facing incredible new opportunities. As devices become further integrated into everyday life, we will have to create new and extraordinary experiences for our customers on these devices. We are going to focus on completely reinventing experiences like creating or viewing a creative document and what it means to communicate socially at home or in meetings at work. We are going to immerse people in deep entertainment experiences that let them have serious fun in ways so intense and delightful that they will blur the line between reality and fantasy. And as we develop these new experiences, we will also support our developers with the simplest ways to develop apps or cloud services and integrate with our products. We will help businesses that find themselves in a new world of ever-mounting information to manage that information through greater enterprise information assurance. We will make these high-value activities priorities in our strategy.
Lots of change. But in all of this, many key things remains the same. Our incredible people, our spirit, our commitment, our belief in the transformative power of technology — our Microsoft technology — to make the world a better place for billions of people and millions of businesses around the world. It’s why I come to work inspired every day. It’s why we’ve evolved before, and why we’re evolving now. Because we’re not done.