Mulally and Microsoft

All opinions are my own and do not necessarily reflect those of Novo Nordisk.

When news broke on Tuesday that some groups were lobbying for Alan Mulally to get a look as the next CEO of Microsoft, I was pretty positive.  Since then Jon Talton has written a more nuanced and cautionary view of this, suggesting, among other things, that celebrity CEOs are not always able to perform the miracles people are hoping for, and also that the history of CEOs switching fields and succeeding is sketchy.  These are good points, but I still find myself in the Mulally camp for two reasons.

One, in turning around Ford, Mulally demonstrated the ability to do what I think is one of the most important things a CEO can do.  He changed the culture.  To illustrate this let me relate a story that Mulally told at a lunch benefit for Leadership Tomorrow last year (disclosure: I’m on the board of Leadership Tomorrow, and Alan Mulally is one of the more well-known graduates of the program).  He related how when he came to Ford he was introduced to their weekly  status meeting, in which management representatives across the globe phoned in to a telecon for a status report.  And, in familiar corporate fashion, each representative was to indicate, via a green-yellow-red chart, how things were going with his or her domain.  At the first meeting, everything was green.  This from a company that was losing billions.  At that meeting Mulally stressed that what he wanted was the real story, and that no heads would roll because of it.

At the next meeting, Mark Fields, the then-president of the Americas division, knew there was a problem with the launch of the Edge model.  He held up  his card and it was red.  Mulally began clapping, and soon several other executives were offering ideas and support to get the Edge launch back on track.  By the following week, almost every card now showed a mix of colors.

This is of course an anecdote, and I’m the first to be skeptical of stories because I know how they can mislead and be cherry-picked examples. But the evidence suggests a fundamental change in Ford culture did start there, though it’s a correlation, culture change also tracked with Ford’s ascendency among US auto companies.  Microsoft from the outside seems like a place that could use a change in culture.  Being able to point out where things are going poorly and where you need help seems like it could be a nice change from worrying about falling to the bottom of the stack. And change of other sorts is going on at Microsoft, especially given their recent purchase of Nokia’s handheld business.  Which brings me to:

Two, the business model Microsoft has been moving to does involve manufacturing.  Jon Talton’s point about CEOs changing fields and technologies is valid, but Microsoft has been moving towards creating devices like the Surface and now phones.  This isn’t as much of a leap from making cars (or planes) as just software might be.  Not that Microsoft has relied solely on software for a long time, but in many ways that’s still how people think of the company.  Still, Mulally would not be on such foreign ground in taking over a company like Microsoft.

It’s also possible that the problems of CEOs switching industries might be overblown.  A nice analysis of the pharmaceuticals industry by Stewart Lyman in a guest post at Xconomy suggested that at least in the highly technical Biopharma industry, scientists (ie technical experts) were neither better nor worse than individuals with other backgrounds when it came to running companies.

Ultimately, the reasons for the Board of Microsoft to pick the next CEO will likely revolve around the most appealing vision for Microsoft’s future and how stongly the Board feels their top candidate can pull it off.  Jon Talton’s point about the complexity of Microsoft’s business suggests maybe another reason why Mulally might be a good candidate.  While at Ford, as described in this story, Mulally oversaw the reduction of product line and focus on key sectors of the market that allowed Ford to grow and compete.  Might be the kind of Ford focus Microsoft needs.

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