Running head: MICROSOFT CORPORATION SYSTEM 1

Microsoft Corporation System Design and Management Analysis

Dick Bridy

University of Phoenix

Abstract

Bill Gates sought innovation and demanded dialogue and coordination from internal and

external stakeholders to achieve the goal “to help people and businesses throughout the world

realize their full potential”. The analytic paper was an assessment of Microsoft (MSFT) based

on the influences of contextual and cultural factors and stakeholders on systems design and

management practices from an executive’s perspective. The analysis is based on stakeholder

relationships that influenced MSFT’s systems design and lead to improvements to maximize

stakeholder value. There are six contextual factors of focus: key characteristics of internal and

external relationships, the competitive landscape, strategic opportunities, challenges,

performance improvement, major stakeholder groups (customers, employees, investors,

suppliers, partners, community, and senior leadership team. The result was an insider’s view of

the systematic way MSFT operates with the customer in mind.

Microsoft Corporation System Design and Management Analysis

The paper contains an assessment from an executive’s perspective, based on the

influences of contextual and cultural factors and stakeholders on Microsoft Corporation’s

(MSFT) systems design and management practices. The goal is to analyze how the influences

shape MSFT’s systems design and lead to improvements to maximize stakeholder value. Six

contextual factors will be analyzed, they are: 1) key characteristics, 2) internal and external

relationships, 3) competitive landscape, 4) strategic opportunities, challenges, and performance

improvement 5) major stakeholder groups (customers, employees, investors, suppliers, partners,

the community), and 6) senior leadership team (Gordon, 2012).

Key characteristics

Wood (2000) contends that the equilibrium between structure and chaos is the key to

sustained creativity. Extreme insecurity discourages employees from mustering the best effort.

Freedom is fostered by direction, purpose, and selective structure. MSFT balances bureaucratic

processes and structure at one end with the creative chaos of transactions, interests, and

relationships, which enable it to be innovative at the other (Wood, 2000).

"Without order nothing can exist – without chaos nothing can evolve."

"New ideas are not born in a conforming environment."  

– Roger von Oech

Internal and external relationships

The external sharing and connecting can be leveraged within the organization (Morgan,

2009). Collaborating externally fosters relationships with customers, shareholders, and

stakeholders. External stakeholder collaboration increases revenue and customer service. The

process decreases product development, research, and marketing costs. MSFT has adopted the

philosophy that internal collaboration enhances the organization’s core. Dialogue unites

employees and promotes a shared culture. The results are increased team productivity, leveraging

core knowledge that reduces decision-cycle times (Morgan, 2009). Success is a function of a

well designed structure. For example, at MSFT strategy is primary, and the tools are secondary.

The division heads concentrate on three elements: business value, opportunity costs, and risks.

The use of benchmarking is a valuable tool to establish a solid measurement framework that

aligns with the business objectives. Additional objectives focus on the cultivation and nurturing

of a collaborative culture and to establish a solid adoption plan. A final and important series of

goals is to establish training programs and governance guidelines focused on external and

internal collaboration that establishes policy of cooperation, respect, and engagement (Morgan,

2009). .

Competitive landscape

"If you possess the market, you eventually possess the profits."

- Bill Gates

The MSFT competitive strategy is based on a series of goals designed by Gates (2010).

The first requirement is to concentrate on a market with enormous potential and few competitors.

Become the first entry, get big, and become the dominant industry leader (Gates, 2010). Industry

leadership requires an obligation of MSFT to set the industry standard, produce the best product

or service, make it useful, and the least expensive. The key to MSFT’s success has been the

ability to establish a proprietary position. MSFT owns what they sell and protects that position

vigorously. To that end, MSFT employs a system of intellectual property management (IPM).

The goals focus on the customer and strategic alliances. One goal is to make the customers and

strategic alliances an offer one cannot refuse by providing products or maintaining MSFT

relationships that provide continual improvement and value-added results. The final mandate is

to innovate and improve the MSFT products and services (Farahani, & Chitsaz, 2010).

For example, MSFT implements internal research and external acquisitions to develop

new product lines and achieve a sustained competitive advantage and respond to the customers’

needs (Porter, 1990). In 2004, MSFT decided to enter the security business to gain market share

from Norton Antivirus (Symantec) and McAfee (Kotadia, 2005). The result was the acquisition

of two antivirus companies and an anti-spyware company. The spyware acquisition produced an

anti-spyware application for Windows that launched the Trustworthy Computing Initiative (TCI)

(Kotadia, 2005). The venture changed MSFT’s coding practices to render security developers'

first priority.

Strategic opportunities and challenges, and performance improvement

MSFT is facing the challenge of adapting the business to the rapidly changing market,

environment, and customer demand. The organization is confronted with the mandate to sustain

and improve the performance of core business. The call to action is to leverage core

competencies, to drive key performance indicators (KPIs), and create value to outperform the

competition (Doz, & Kosonen, 2008; Gordon, 2012; Jacobs, 2008). MSFT must combine

analytical skills, industry experience, and proven tools to accelerate the performance

improvement process. MSFT views the process as acquiring and retaining customers, the critical

stakeholder. The process mandates programs that maintain market leadership versus one of

survival (Doz, & Kosonen, 2008).

For example, MSFT views customer value as more than offering a low cost-benefit ratio;

they seek to provide a value-added product or service. The company seeks to attain customer

intimacy versus customer satisfaction. Product innovations are more than new attributes and line

extensions; they are new product categories, brands, and speed. MSFT is constantly seeking

sustained competitive advantage (Porter, 1990). The growth force is based on distinctive product

capabilities versus merely building resources. Business and process innovation at MSFT is

systematic opposed to a linear process. Technology innovation is paradigmatic versus

incremental based on an enterprise-wide scope of creating new business models (MSFT Mission,

2012).

Major stakeholder groups

Thompson (n.d.) defines stakeholder analysis as a process of “systematically gathering

and analyzing qualitative information to determine whose interests should be taken into account

when developing and implementing a policy or program” (p. 1). The key steps in the process are:

1) identifying the stakeholders, 2) prioritize them, and 3) understand the key stakeholders

(Thompson, n.d.). Clarkson (1995) classifies primary stakeholders as individuals whose

continuing participation, the corporation are required to exist as a going concern. The

relationships are characterized by mutual interdependence. Clarkson (1995) includes

shareholders, partners, suppliers, employees, customers, communities as well as the government.

The MSFT stakeholders are internal and external. The list of stakeholders, subject to this study is

the: customers, employees, investors, suppliers, partners, the community, the Board, and senior

leadership team (Gordon, 2012). The following sections will address Microsoft stakeholder

interest and the effect on the system as depicted in Figure 1 (MSFT Structure, 2010).

Figure 1

Microsoft Stakeholders

(MSFT Structure, 2010).

The customer relationship

Gates (2010) views the most important stakeholder relationship is with the customer. The

Microsoft mission is to “help people and businesses throughout the world realize full potential”

(MSFT Mission, 2012, p. 1). The Week Three submission presented an overview of the

organizational management systems (process). The message was that the effectiveness of an

organization’s management system determines how well an organization manages risks; meets

operational, financial, and quality goals; supports innovation, and achieves high customer and

stakeholder satisfaction (Majstorovic & Marinkovic, 2011). The focus of that essay was on

internal and alliance systematic relationships. One cannot lose sight of the most important

stakeholder in the business relationship – the customer. The MSFT focuses on customer goals,

using “data, the opinions of internal experts, benchmarking, gathering information, engaging in

dialogue, and seeking feedback” (Phipps, 2004, p. 77).

The listening system

Microsoft employs a listening system that provides the feedback from studies such as the

Microsoft Customer and Partner Satisfaction Survey (MCPSS), the Enterprise Customer

Satisfaction Survey (ECSS), as well as product satisfaction surveys, usability studies, online

feedback forms, and research forums. MSFT customers can choose to give feedback through the

Customer Experience Improvement Program (CEIP), a product-based technology that provides

real-time feedback about Microsoft product experiences. The listening system facilitates the

removal of bugs, prioritizes content for service packs, and identifies desired features for future

products (MSFT Customer experience, 2012).

Employees

MSFT employee expectations are simply stated: 1) fair compensation, 2) respect for their

person and their views, 3) opportunities for growth and advancement, and 4) membership in a

winning team (Wood, 2001). MSFT provides multiple resources to assist in the balance work

and home life such as referral services, generous maternity, parental leave allowances, and

flexible work arrangements, such as part-time, flex-time, and telecommuting (MSFT Corporate

citizenship, 2011). The goal is to have happy, successful, and productive employees.

Investors

Investor relations are a high priority at MSFT. Communication and transparency are the

cornerstones of investor relations. The financial reporting system is refined to deliver the latest

financial and operational information to the stakeholders on a timely basis. To the MSFT Board,

investor relations (IR) are systematic functions that support the communication process. IR is the

strategic corporate activity that promotes the investment case of Microsoft Corporation "on the

radar screen" of corporate analysts and the mutual fund managers (MSFT MBD, 2012, p. 1).

Suppliers and partners

Suppliers or vendors and Microsoft’s partners are engaged in either the Microsoft Vendor

Program (MVP) or the Microsoft Master Vendor Agreement (MMVA). The objective is to make

working with Microsoft beneficial to B2B customers and partners. Ensuring satisfaction among

vendors and partners is a core component of Microsoft through the Customer - Partner

Experience (MSFT Customer, 2011). For example, MSFT partners with the government to

nurture an environment in which opportunity and growth can flourish through several mediums.

Partnership arrangements have been established in innovation and research, technology for

development, IP incentives, technology infrastructure, Global IT marketing, and a human

resources (HR) based program to attract Global talent (MSFT Customer, 2011).

Nongovernmental organizations (NGOs) are beneficiaries of the MSFT commitment to

the civil society. The MSFT commitment is to assist NGOs by advancing social and economic

development through the use of technology. The strategy is focused on ensuring NGO

technological access to secure sources, optimizing IT solutions, and transforming NGO

operations through the implementation of technology (MSFT Corporate citizenship, 2011).

Community

MSFT has established a citizenship initiative titled, Microsoft’s Citizenship Initiative

(MCI). Microsoft’s Governance Committee (MGC) has responsibility for MCI (MSFT Corporate

citizenship, 2011). Microsoft's citizenship mission is to serve the needs of communities and

fulfill responsibilities to the public. Through partnerships, MSFT technology innovations, the

employees, and resources; MSFT seeks to solve societal challenges and create economic

opportunities on both a global and a local level (MSFT Corporate Citizenship, 2011). Citizenship

work helps empower individuals, strengthen communities, and drive economic growth. The

Partners in Learning (PIL) initiative reached nearly 16 million students and teachers, and the

BizSpark program helped 75,000 individuals grow their small businesses in 2011 (MSFT

Corporate Citizenship, 2011). Environmental conservation has a top priority at MSFT; for 2011,

the company reduced computer energy use by 27%. Governance is another high priority;

Governance Metrics International awarded a 9.5 out of 10.0 market rating (MSFT Corporate

citizenship, 2011).

Five product groups

The five product groups vend technology software and services to the customer. The

product groups are referred to as a matrix system. A matrix system superimposes, “a group or

interdisciplinary team of project specialists, such as scientific and engineering personnel, on a

functional organizational design. In a matrix organization, members have dual allegiance to a

particular assignment or project and the organizational department” (Matrix management, 2012,

p. 1). The five MSFT product groups are: 1) Windows and Live Windows Group (PC operating

software and Windows products); 2) Server Software (Internet server software); 3) Online

Services (advertising and Bing), 4) Microsoft Business (business-related software and servers),

and 5) Entertainment and Devices (Xbox, Zune, and automotive industry software) (Form 10-K,

2010); MSFT Structure, 2011).

The permanent divisional MSFT groups have internal mission and goal frameworks.

Cross-functional project teams have, “a definitive, purpose, the problem/opportunity, parameters,

products/outcomes, resources, suggested approaches, reporting relationships, roles, and

timeframes, milestones, and deadlines” (Phipps, 2004, p. 81). The MSFT personnel are trained to

focus on customer goals, using “data, the opinions of internal experts, benchmarking, gathering

information, engaging in dialogue, and seeking feedback” (p. 77). The organizational goal of

developing system relationships is founded in facilitative leadership. The facilitative leader

transcends buy-in, the process “uses external rewards or the honor of positive associative

relationships with individual leaders to gain compliance” (Senge, 1990, p. 218-219).

Board and senior leadership team

The MSFT board of directors (Board) contains nine members. Members include Bill

Gates, the founder and chairman, the chief executive officer (CEO), and Steve Ballmer with

seven independent and non - management directors. The Board supervises organizational

activities with the use of five integral committees: 1) antitrust compliance, 2) audit, 3)

compensation, 4) governance and nominating, and 5) finance (Hamilton, 2011; MSFT Board,

2010). Senior management is composed of, “seven group presidents, five senior vice presidents,

such as human resources and marketing, the chief research and strategy officer, the chief

software architect, the general counsel, and the chief operating officer that report to the CEO,

Steve Ballmer” (Hamilton, 2011, p. 1). The Board and senior managers have the responsibility to

influence contextual and cultural factors that affect Microsoft Corporation’s systems design and

management practices (MSFT Board, 2010).

Conclusion

The preceding paper was an assessment based on the influences of contextual and

cultural factors and stakeholders on Microsoft Corporation’s (MSFT) systems design and

management practices from an executive’s perspective. The analysis of stakeholder relationships

influenced MSFT’s systems design and lead to improvements to maximize stakeholder value.

The analysis was based on contextual factors. Key characteristics of internal and external

relationships are the competitive landscape, strategic opportunities, challenges, performance

improvement, and major stakeholder groups (customers, employees, investors, suppliers,

partners, community, and senior leadership team). The result was an appreciation of the

systematic way to operate with the customer in mind. Bill Gates sought innovation and

demanded dialogue and coordination from internal and external stakeholders to achieve the goal

“to help people and businesses throughout the world realize their full potential” (MSFT Mission,

2010, p. 1).

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