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Microsoft is smart to prepare for its new role as underdog

July 17, 2014
Obsession
The Cloud
July 17, 2014
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Worldwide device shipments, Microsoft vs everyone else

Microsoft’s massive job cuts, announced today, shouldn’t surprise anyone. If anything, they’re just the beginning. While Microsoft is still growing and still profitable, it is far from the position of comfort that former CEO Steve Ballmer’s grand demeanor suggested.

In reality, Microsoft is now an underdog, and new CEO Satya Nadella seems to get that. Sure, Windows still runs more than 90% of desktop and laptop PCs sold worldwide. But the near-term future of the computer industry isn’t just PCs—it’s also mobile devices, including phones and tablets. With that broader definition of a computer, Microsoft Windows powered just 14% of computers shipped last year, according to Gartner. In a software era defined by cross-device continuity and network effects, Microsoft doesn’t have nearly enough.

Perhaps the most hopeful sign for Microsoft is that its leadership isn’t hiding from this reality. In fact, COO Kevin Turner even included this slide in his presentation this week at the company’s Worldwide Partner Conference. (See GeekWire’s coverage.)

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Microsoft 14% device share requires a challenger mindset

Nadella’s vision for the company, including cloud services that work with all of the world’s devices, seems one worth pursuing. But it’s the blueprint for a smaller, leaner Microsoft than the one we’ve known—especially in the Nokia division, which will be heavily affected by the layoffs.

Microsoft still has thousands of smart, capable employees, even after today’s cuts. But Nadella’s remarks last week that Microsoft’s culture needs a reset were spot-on. For Microsoft to compete in this new era of computing—or come to dominate the next one—it will need to think and act like a hungry underdog, not a snug incumbent.

Read this next: Microsoft’s massive mobile problem—and opportunity—in two charts

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