Archive: July, 2019

6. Window on managing suppliers

The cultural change at Microsoft has been well documented, partly because everyone knows
the brand and partly because the change has been so dramatic.
What can procurement learn from this most famous of case studies? In the sixth in the series
of blogs about change management in procurement, I consider the cultural change at
Microsoft and what it can teach us about managing suppliers.
There are many anecdotes about Microsoft, the personal computer software company under
the leadership of Steve Ballmer, CEO from 2000 to 2014. The culture was highly competitive
and at time ruthless. In an interview with the Chicago Sun-Times early in his tenure in 2001,
Ballmer called Linux, an open-source operating system and popular Windows alternative, “a
cancer that attaches itself in an intellectual property sense to everything it touches.” This was
at odds with many Microsoft staff who viewed the open-source concept, or the idea that
software should be shared publicly for others to use, as vital to collaboration and the key to
technological progress.
Microsoft became the butt of jokes, laughed at for missing out on mobile entirely, as well as
its clunky hardware, talking paperclips, and susceptibility to viruses and spyware. The share
price also suffered.
Fluctuation in the technology sector are more extreme than many other sectors and
Microsoft’s dominance, like any other organisation, was only temporary. Procurement
professionals often feel that they are the preferred buyer of a supplier’s goods and services,
but this is rarely the case and circumstances can change quickly.
The surprise appointment of Satya Nadella 5 years ago marked a dramatic change in
Microsoft’s approach to business and culture. It shifted away from software licensing to
cloud based solutions.
Central to the new CEO’s world view was the growth mindset, the
belief that skills are improvable and they aren’t set in stone. Nadella wanted his company to
become one of “learn-it-alls,” not know-it-alls. People needed to see themselves, and the
organisation, as more fluid entities. The focus was on improving, not proving, themselves.
Although the leadership team established a long list of principles, they recognized the
neuroscience research which shows that humans have an extremely hard time remembering
exhaustive list. They shrank it to shrink to just three, two-word phrases: “Create clarity,
generate energy, deliver success”.
One of Nadella’s first announcements was that Microsoft was going to release a version of its
signature software suite—Microsoft Office—on the iPad, bucking Microsoft’s reputation for
not collaborating with rivals. As the keynote speaker at Salesforce’s Dreamforce conference
two years later, Nadella used an iPhone during a product demo, a sight that would’ve been
unimaginable in the Ballmer era.
Since taking over as CEO five years ago, Microsoft’s share price has tripled. Last November,
its market capitalisation briefly passed Apple’s, temporarily making Microsoft the most
valuable company in the world.
Many procurement professionals are protective over their organisation’s intellectual rights
and are wary of collaborating, especially with competitors. The Microsoft case study does not
suggest that buyers should ignore the value of their organisation’s intellectual property, but it
does show that having an open mind, exploring opportunities and taking some chances can
have a positive benefit on the bottom line.
These days all the cool kids may still have Macs, but Microsoft, under CEO Satya Nadella,
has turned a corner. Procurement can do the same.