Big Company. Little Company

I was out at the Microsoft Mountain View campus a few weeks ago for an event hosted by their venture relations group.  I had the chance to meet Chris Liddell, MSFT’s CFO, along with 3 of their divisional CFO’s.  It was a pretty wide ranging discussion from how they are thinking about M&A to several strategic area of focus to how the divisions are working together on projects that cross divisional boundaries.

The thing that struck me the most was not the WHAT of their thinking, but the HOW.  I participated in a break-out session with Tami Reller, CFO of Platforms and Services division (which includes their search and online advertising properties).  There were about 15 of us in the group (including 4 or 5 from MSFT) and we quickly went deep on a few areas of particular interest to this division.  This is a $17.5 Bn (with a b) operating unit for MSFT. While I know that MSFT is as beurocratic as the next large software company, what really stood out to me in this conversation (and, in fact, the entire day I spent with MSFT management) was how fluid and innovative their thinking was (at least on these subjects).  They think about and talk about their business like many of our portfolio companies do – looking for market trends, leveraging existing assets and competencies and with a view to a return on their investment.  Sure – you have to tack on a handful of zeros to the numbers in their business plans, but at heart they are engaged in the kind of thinking (at least as it relates to their online properties) that is going on in conference rooms in venture firms and start-up companies all over the world.  It was a good reminder to me that even within large organizations you can think and act much more nimbly – at least if you want to.

  • Aziz Grieser

    I think your shock from observing MSFT is due to popular preference to bash them for non-inclusiveness, which is thought to be contrary to Google and other web 2.0 company's 'new way' of doing business, which is simply not the case, IMO.

    MSFT is better managed than Google IMO. Their valuations have always been tangible, sustainable, and extremely defensible. I think that is due to their M&A arm, as you refer to. I've met several founders of companies bought by MSFT, and I can't stress enough how intelligent they have been, and how insightful the acquisition showed Microsoft to be.

    The Zune and Windows Vista launches were bad performances, but MSFT was able to brush them off their shoulders, because they have so many other great acquisitions to lean on. In the past, Google has made MANY more weak R&D and M&A investments in their effort to gain more customer info.

    Times of economic hardship crush the Yahoo's of the world, and force Google to scale back their pace of innovation, a must-needed attribute of their business model. On the contrary, MSFT can now use its big 'ol cash reserves to muscle the Yahoos, and steal market share from the Google. The extent to which this recession will hurt/profit one or the other of these companies will only be able to be seen in 2 years, when the survivors turn the corner ahead of the economy.

    — My two cents

    • sethlevine

      great observation. and you're right – msft if well run and has tons of extremely smart people who are passionate about what they are doing.

  • Adil

    Please excuse my ignorance … What is fluid thinking ?

  • Gerald Joseph

    Hey Seth, It's great that you recognized the interesting strategic mindset over at MSFT. I recently accompanied a friend to a dinner party with some folks from MSFT and was also pleasantly surprised at the alignment of their thinking – they're open to everything, even technologies that may be disruptive in some respects to their OS. The key thing to remember is that the evolution of MSFT's internal culture may be in response to criticism they faced during the dot-com era from arbitrageurs and speculators who demaneded that MSFT break-up into 4 or more companies in order to realize a higher valuation. At least as an outsider, it appears that the various divisions run far more independently then they used to in respect to strategic vision, r&d, and m&a.

    • sethlevine

      i think that's completely right, gerald. i also think that at the same time they've figured out how to work cross divisionally more effectively than in the past.

  • I have not been fortunate enough to cross paths with any of these mega business execs but I do agree with what is said about the way MSFT manages their business (although this is all hearsay to me) This is a little off topic but I am curious to see with the manner in which google is being run, their extreme growth especially, if/when they will ever be stopped. You cannot question the authoritative pull google demands but when does it end or does it. What would happen if you take MSFT management with google authority?