Corporate Strategy
Microsoft’s corporate strategy should be two-fold. It should focus on increasing cash flows by evaluating the performance of current product-mix and parallelly position itself for long-term sustainable growth. The increase in cash-flows from the current product mix would first require maximizing operating income generated from the licensing, hardware, and other revenue streams across its range of product offerings. Microsoft should also investigate to define tangible metrics and indicators to determine the satisfaction of its customer base across its three major customer segments. Additionally, the analysis of Exhibit 4 from the HBS Study reveals that the corporate segment is generating negative revenues and negative operating income. Microsoft should analyze the reason for this segment having continued YoY loss and evaluate if the firm should discontinue addressing the corporate customer segment altogether.
Second, Microsoft should determine the strategic initiatives it can take today to position itself for long-term sustainable growth. My analysis of this segment falls into three major buckets. First, I would evaluate what Microsoft can do to leverage the power of the commercial cloud. I would analyze what are the strategic initiatives the firm can plan to increase adoption, drive engagement, and optimize consumption to achieve scale and enhance utilization. Second, I would analyze the changes to the existing business model to promote the migration of existing customer base to the subscription model. I would focus on the maximum revenue-generating markets and the execution strategy in those markets. Third, I would look into increasing gross margins ‘per socket’ for the three major products as a service offering.
IT Strategy
To ensure alignment with corporate strategy, I would recommend strategizing IT initiatives under two major categories. The first would be to leverage analytics and cloud capabilities to enhance customer satisfaction and increase performance to target short-term increases in cash-flows. Second, for Microsoft to position itself for long-term sustainable advantage, we would recommend unleashing the power of the commercial cloud and take proactive measures to increase adoption, drive engagement, and optimize consumption. To leverage analytics and cloud capabilities, I would first define metrics and indicators to determine the satisfaction of customers across MS Office Apps, Windows 10, Office 365, and Azure for the Devices and Consumer, Commercial and Consumer segment. I would then measure and analyze the adoption and use of the functionalities, and redefine business continuity metrics based on the data.
