After weeks of speculation, Microsoft finally made it official that Satya Nadella (News - Alert) will become the third CEO in its storied history.  While to be honest I had been rooting for IBM Watson to take the helm given the complexities of managing the Redmond, WA-based colossus, for a host of reasons that industry observers have voiced since Nadella became the clear front-runner for the job, the selection makes sense. 

As a 22 year vet of Microsoft, as my colleague Tony Rizzo observed recently, Nadella is a “safe” choice. In fact, the comfort of his ascension can be seen in the official announcement on the Microsoft website which is full of personal background info, quotes from Nadella and even video testimonials.  He knows the company—its human and technical resources, culture, and its challenges.  He also brings with him the management expertise required to run a company this large. 

However, Rizzo posed the right question and provided an instructive answer when he noted, “Will the stock move finally to, say, $45 per share? Probably. Will it move to $200 a share with Nadella at the helm? Very likely not.”  This is very germane for all Microsoft stakeholders.

Change agent?

As I have noted in several postings in the past, we live in what I have called “The Age of Acceleration” where the only constants are change and the increasing velocity at which it is occurring.  Whether Nadella is the right choice in this era, where across the entire global information and communication technology (ICT) industries major disruption is afoot and where innovation and agility are going to be paramount for success, is certainly an open question. Nadella is going to have to demonstrate, and with a bit of urgency, that he is capable of stepping out of the company’s comfort zones on a variety of fronts including changing its culture. 

This risk here, is that while it will continue to be a major player, if it remains seen as a sometimes fast follower rather than a true leader, its dominance even in historically well insulated markets can be undermined. And, because of the acceleration of “E”verything it can happen fast.  Indeed, it can happen a lot faster than the slippage Microsoft has experienced as Google (News - Alert) Chrome usurped the long standing domination of Internet Explorer in the browser market.  There is also the jeopardy in a world of disloyal customers with access to great information and alternatives that major market shifts by being slow can result in being in a position to being left out and not just left behind.  Microsoft’s struggles to be relevant in the mobility space are a case in point.

The Road Ahead is all about Ecosystems      

Back in 1995 when a then young Bill Gates (News - Alert) penned the bestselling book, “The Road Ahead,” with Microsoft executive Nathan Myhrvold and journalist Peter Rinearson, the road to market domination was much easier.  A company could dictate, as Microsoft so often did, the way in which markets would evolve based on proprietary solutions and aggressive marketing.  Today, the game has changed as the Internet has empowered users with knowledge and choices, and domination is about having strong ecosystems. The Internet did in fact change everything, including Gates revising his vision of the future just before publication of the book as he himself realized that mass adoption of the Web by the masses was dictating that Microsoft quickly move to be an Internet company.

In the evolving ecosystem arena the 800 pound gorillas are Google and Apple who have rightly ascertained how to put together the puzzle pieces that allow users of their products and services in the online-centric world to check out any time they want but really never leave.  Microsoft if you are handicapping such things is a 600 pound gorilla. Other interesting or emerging ecosystems are Amazon, Salesforce, and of course Facebook (News - Alert). There are also some interesting interlopers in the OTT and financial services spaces and big players in places like China waiting to exert themselves.   

All of the current dominant ecosystem anchor companies like Microsoft not only have broad portfolios of capabilities with anchor core competencies they leverage—search, app stores, browsers, devices, cloud services, etc. —which provide them with competitive advantage for their respective ecosystems. They also all have the financial wherewithal to grow organically and pick of potential threats to their positions. They also can be adroit in fine-tuning their focus, as Google demonstrated with its decision to jettison Motorola to Lenovo, things that could detract from strengthening their ecosystems. Where Nadella faces his biggest challenge is going to be in coming up with the right puzzle pieces for the Microsoft ecosystem to compete in the ecosystem wars, and yes shed capabilities that are drags on ecosystem enrichment.

Nadella takes over with a lot of great tools in the kit bag.  However, the perception is, and perception is very much reality in tech, that Microsoft is not “cool.” This is despite recent ad campaigns from the company that attempt to paint a different picture.

Image via Microsoft.

The realities are that advertisers want eyeballs to make transactions follow, and they will gravitate to the ecosystems that consume our time based on the belief mindshare translates into wallet share.  Hence, while Microsoft is likely to continue its domination of (pardon the pun) the office, whether Nadella can re-energize growth through maximization of Bing, xBox, IE, Skype, all things related to the cloud and give Android (News - Alert) and iOS a run for the money in mobility are all open questions. This is particularly true as my office increasingly becomes wherever I am.  Plus, in a app-based world, keeping developers engaged will be crucial, even in the enterprise space where security challenges are likely to see more and more enterprises setting up their own app stores to assure safety, as well as deal with compliance and licensing issues.

In short, it is not overly dramatic to say that as a result of turmoil across ICT and around the world which has created tipping points in virtually every market, caution may not be an alternative for any CEO in the tech industry.  Maybe Nadella needs to author a book with a title like, “The Virtual Road Ahead.” At this critical juncture in time, where it is probable that the moves made in the next 18-24 months will dictate the structure of the ICT industries for possibly decades, boldness and agility are going to be table stakes for success.

In this regard, to say that the first months of a Nadella regime are going to be heavily scrutinized, in ways that his predecessors did not have to endure, goes almost without saying. His first moves are going to be critical.  Where he decides to place early bets—with employees, developers, customers, partners, and in developing new business models and relationships—will be telling.

It is never an easy task to takeover an iconic and massive brand that people think has become a bit stale. This is always a challenge, the fact that it is Microsoft only makes it that much harder.  Nadella has the intellect and credentials to be a good steward. It may not take long to find out if he has what it takes to be a great one. The road ahead could be the one less traveled. We are at a fork in the road, it will be fascinating to see the path chosen.