Case study application MANAGING STRATEGIC CHANGE AT MICROSOFT CANADA Microsoft C
ID: 345270 • Letter: C
Question
Case study application
MANAGING STRATEGIC CHANGE AT MICROSOFT CANADA
Microsoft Canada is a subsidiary of the Microsoft Corporation responsible for the marketing, sales, and service of the full range of software products, including the Windows operating systems and Microsoft Office, enterprise solutions, and the Xbox video game console. The organization marketed to a variety of segments, such as software applica- tion developers, small and medium business, and large enterprises, through a broad range of partners that worked directly with the client organizations to install and optimize the soft- ware’s use. A small service organization, along with the partners, provided consulting support to clients.
Prior to 2001, Microsoft Canada had been part of the North American subsidiary. Under this structure, the large U.S. market was clearly the focus of attention for Microsoft’s server, desktop, and other software products. However, the President of Microsoft Canada argued that the Canadian market was differ- ent and underdeveloped. It had a different mix of customers than did the United States, dif- ferent competitors, and different growth opportunities. Moreover, software sales and personal computer shipments as a percent- age of the market’s size and growth were below worldwide averages. These differ- ences, he argued, warranted a specialized strategy.
As the fiscal year ended, the president and his newly appointed Director of Strategic Planning wanted to seize the opportunity to define a uniquely Canadian strategy. The strategic planning director’s prior position had been as Director of Marketing and Corpo- rate Communications in Microsoft Canada. Together with her senior marketing manager, they had crafted and implemented a participa- tive process of strategic planning. The strate- gic planning director contacted the OD practitioner who had worked with them and contracted to design and implement a strate- gic planning process for the Canadian organi- zation. Over a two-month period, the strategic planning director conceived of a series of
workshops involving the Canadian Leadership Team (CLT). This team represented a broad cross section of the organization, including representatives from the legal staff, human resources, Microsoft’s consulting and service business, marketing managers, customer support, and managers responsible for differ- ent segments of Microsoft’s business, includ- ing enterprise customers, small and medium business, Xbox, and the Microsoft Network (MSN).
The strategic analysis phase consisted of preliminary work by several members of the CLT as well as initial exercises during the first workshop. Members of the CLT each prepared an analysis of their respective area of res- ponsibility. For example, the enterprise sales manager provided historical growth rates in revenues, developed forecasts for market growth and Microsoft’s share, described cur- rent levels of customer satisfaction, and a tech- nology road map of products being developed by the Redmond headquarters organization. In addition to these specific analyses, the strate- gic planning director contracted with a market- research firm to provide overall descriptions of the Canadian information technology market. Finally, a competitor analysis was performed to develop an understanding of likely strate- gies, goals, and initiatives from key competi- tors such as IBM, Oracle, and (at the time) Sun Microsystems, as well as the competitive threat posed by alternative operating systems software.
During the first workshop, the CLT used the prework data to perform an environmental scan. They discussed, debated, and ultimately came to some agreements about the trends affecting the organization. Based on that scan, the group engaged in a vision and value for- mulation exercise and set out an initial list of short- and long-term goals. These activities led to several important decisions for the new marketing organization. For example, the vision and values exercise produced important insights about what the Canadian organization stood for, its uniqueness compared to other marketing subsidiaries within the Microsoft orga- nization, and its strengths in competing as a Canadian organization. The values also informed discussions about future goals and the strategy for achieving them. Importantly, the Canadian leadership realized that customer loyalty would and should become a driving force for the organi- zation. This realization led to passionate discus- sions about the relative emphasis in the organization on revenues versus customer satis- faction and loyalty. It also led to the development of a Big Hairy Audacious Goal (BHAG) that the members of the CLT believed would be challeng- ing but achievable.
The first workshop ended with a number of assignments, unresolved issues, and excitement about the future. In between the first and sec- ond workshops, members of the CLT worked with their own organizations. Issues, decisions, and questions that were addressed within the CLT were discussed throughout the organiza- tion. The most important discussion concerned the BHAG and the relative emphasis of revenues and customer loyalty over the short and the long term. A consensus began to emerge that the right and proper strategy for Microsoft Canada was to argue for a slower growth rate in revenues in the short term, invest in customer satisfaction and loyalty, and then leverage that loyalty for a more secure stream of revenues in the future.
The president took this idea to the execu- tives in Redmond and discussed the implications of this strategy, including revenue projections, budget implications, the risks involved, and how the strategy aligned with corporate and other marketing organizations’ initiatives. The results of these conversations became the sub- ject of opening discussions at the second workshop.
The cautious but positive support from the corporate organization allowed the CLT to move forward on its strategic intent. In the second workshop, the organization’s mission and values were finalized, year-by-year revenue goals were
agreed upon to achieve the BHAG, and these goals were broken down and assigned to specific groups and managers. Finally, key customer and partner-loyalty programs were established and outlined. Ownership for the different initiatives was assigned and a strategic change plan emerged. The president pressed the group on its decision to emphasize customer loyalty and challenged the group with several scenarios that tempted them to trade off satisfaction for reve- nue. These scenarios helped cement the CLT’s commitment to their strategy.
An important part of the strategic change plan that emerged was a discussion and decision to tie the individual performance appraisals of CLT mem- bers to the achievement of both revenue and cus- tomer satisfaction goals. The CLT as a whole also staked their end-of-fiscal-year bonuses to the achievement of customer satisfaction, rather than revenue goals.
The strategic change efforts at Microsoft Canada are important for several reasons. First, the Canadian organization’s realization of the importance of customer satisfaction and loyalty was influential in moving the larger Microsoft Corporation to examine its values in this area. A BusinessWeek article reported on the changes Steve Ballmer was making in the organization; they reflected the increased importance of cus- tomer loyalty in Microsoft’s strategy and struc- ture changes. Second, the organization learned how to organize a strategic planning effort. In the two years since this effort began, the strate- gic planning director has built a stronger strategic planning organization and has taken more and more responsibility for driving the strategic plan- ning process. Even as the corporate Microsoft organization was making important changes in its reporting structure, financial systems, and business processes, the Canadian organization was able to adapt using its own resources and knowledge. Finally, the BHAG has become an institutionalized part of the organization that drives thinking and decision making in the organization.
Study the case deeply and write about it.It should be in following stepa
Introduction
Background
Proposed solution
Alternatives
Recommendations
Explanation / Answer
Introduction:
This case study pertains to a typical case of how a country subsidiary felt the need for country-specific business strategies and how they were finally able to devise the same. The case deals with how important it is to have a strategic planning approach and have a clear goal definition. It also lays emphasis on the need for priority setting and stakeholder alignment.
Background:
Microsoft Canada, a subsidiary of Microsoft Corporation, is responsible for marketing, sales and service activities in the country market. It functions in a market characterised by the need of good customer relations. Prior to 2001, Microsoft Canada was part of a North American subsidiary, and the US market was the main focus area. However, the President of Microsoft Canada held the view that the Canadian market was highly underdeveloped, and had huge potential. The same strategies would not work in the US and Canada since the consumers were different, and so were the competitors. Thus, he wanted Canada-specific strategies to be devised and implemented to fully realize the market’s potential.
Proposed Solution:
The President teamed up with the Director of Strategic Planning, who in turn recruited an OD practitioner to help devise a strategic plan. They organized a series of workshops with the Canadian Leadership Team (CLT) which comprised of a broad cross section of the organization, including representatives from the legal staff, human resources, Microsoft’s consulting and service business, marketing managers, customer support, and managers responsible for different segments of Microsoft’s business, including enterprise customers, small and medium business, Xbox, and the Microsoft Network (MSN).
Workshop 1 – Every function in the CLT prepared a detailed report of their respective area of responsibility. Competitor analysis was performed.
This data was used to prepare an environmental scan, which helped form the short term and long term goals. BHAG was formulated.
Workshop 2 – BHAG was broken down into individual functional goals. Ownership of initiatives was assigned. It was decided to focus on customer satisfaction and loyalty in the short term and on revenues in the long term.
Alternatives:
The alternatives Microsoft Canada had was to work with external experts as well in the planning process. As far as can be seen in the case, there were no external experts in the strategy framing process. Since this was a first for Microsoft Canada, it would have been beneficial to have an external point of view on the situation as sometimes due to having worked in the same organization and the same role for years, employees become myopic, and a fresh point-of-view is appreciated.
Recommendations:
The recommendation for Microsoft Canada is to focus on their strategic plan and continuously refine the strategies since this is the first time such a plan is being implemented. It is of utmost importance to focus on execution efforts.