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Originally published March 3, 2014 at 10:20 PM | Page modified March 5, 2014 at 6:19 AM

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Microsoft shake-up may hold clues about new CEO’s strategy

With new CEO Satya Nadella making moves in Microsoft’s top executive ranks, analysts look for clues to what they mean in company strategy and his leadership style.


Seattle Times technology reporter

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In his first big reshuffling of Microsoft executive ranks since becoming CEO last month, Satya Nadella announced the departures of two top-ranking executives and new roles for political operative-turned-Microsoft executive Mark Penn and longtime company marketing executive Chris Capossela.

The moves touched off speculation over what they indicate about Nadella’s leadership, as well as what the role means for Penn, a former adviser to President Clinton and to Hillary Rodham Clinton’s 2008 presidential campaign.

Leaving Microsoft is Tony Bates, the former CEO of Skype who joined Microsoft after the software giant bought Skype. He more recently served as Microsoft’s executive vice president of business development and evangelism.

Bates had reportedly been on the shortlist of candidates considered to replace former Microsoft CEO Steve Ballmer and has expressed the desire to be a CEO again.

His role will temporarily be filled by Eric Rudder, who will also continue to be responsible for technology initiatives for all Microsoft devices and services.

Also leaving will be Tami Reller, executive vice president for marketing. Reller was named to that role in July as part of a companywide reorganization.

While the position meant that Reller headed the company’s newly centralized marketing functions, she had to share the responsibilities with Penn, who was placed in charge of marketing strategy. The two initially shared advertising and media responsibilities as well.

That arrangement became “uncomfortable and, increasingly, untenable,” according to online publication Re/code.

Reller, who briefly was a co-leader of the Windows division, had also served as chief financial officer in several Microsoft divisions.

Taking over as chief marketing officer will be Capossela, a 20-year Microsoft veteran who has worked on marketing Office products and with retail and manufacturing partners to market consumer products.

Penn, meanwhile, has been named chief strategy officer, responsible for working on strategic issues across Microsoft’s products and investments, and leading the company’s competitive research and analysis.

“Mark brings a blend of data analysis and creativity that has led to new ways of working,” Nadella wrote in an email to employees. “His focus on using data to quickly evaluate and evolve our campaigns has driven new insights and understanding.”

Nadella said he expects to apply Penn’s “unique set of skills” across challenges ranging from new product ideas to overall strategic investments.

It is Penn’s new role that generated the most buzz Monday, with speculation over whether his move could be considered lateral or whether it was a promotion or demotion, and what it means for the company.

Since being named a Microsoft vice president in 2012, the combative Penn is arguably best known for coming up with Microsoft’s “Scroogled” campaign.

That campaign, which attacked Google’s privacy practices, has been criticized by some for being unnecessarily contentious and negative — and questionably effective in getting users to switch to Microsoft’s Bing search engine.

But Penn, a former CEO of public-relations firm Burson-Marsteller, has also been credited with coming up with the more heartwarming “Empowering” ad campaign, in which Microsoft technologies are seen enhancing people’s lives. An “Empowering” ad, shown during the Super Bowl, generated much positive response.

Penn’s appointment was “a bit of an unexpected appointment, from my perspective,” said David Cearley, an analyst with research firm Gartner. “He brings a skill set you wouldn’t typically expect to see for someone in charge of product and tech investments at Microsoft.”

Typically, such roles are filled by people with deep technological or advanced research knowledge.

But Microsoft’s senior leadership team is already filled with people with such background, including Nadella himself.

Microsoft co-founder Bill Gates is also expected to step up his time there, serving as technical adviser to Nadella.

“One way to look at it is that Satya likely sees himself as the real product visionary and strategist and the one tracking the deep tech trends and dynamics,” Cearley said. “In that case, Mark’s role would be to add a perspective as a non-technologist, tapping a skill set that isn’t Satya’s skill set.”

Nadella’s mantra since taking the top post has been that Microsoft needs to be “mobile first, cloud first.”

“There’s going to be an emphasis on: ‘What does it mean for Microsoft products to be in this mobile first, cloud first world,’ ” Cearley said.

Penn, with his polling, data collection and creative data-analysis skills, could be able to interpret “what the data is telling us about the market and where it needs to go,” Cearley said. “I think that’s additional information that Satya is looking for.”

Michael Cusumano, a professor at MIT Sloan School of Management who specializes in strategy, product development and entrepreneurship in the computer-software industry, said he found Penn’s move puzzling.

“I would find it hard to imagine that Satya Nadella would delegate really critical decisions about which markets to go in, which technologies to invest in — really corporate strategic decisions — to someone who is really a political strategist,” he said.

Cusumano also hazarded a guess: Penn won’t last in the role.

“I would guess he won’t have any real way to communicate his strategic ideas,” Cusumano said. “If he’s not in charge of advertising and corporate marketing, what is he going to do? Just give speeches? My guess is that he will be frustrated in this role.”

Plus, Cusumano said: “He’s Ballmer’s guy. He’s not Nadella’s guy.”

Taken in total, Nadella’s moves Monday are not seen as a repudiation of the “One Microsoft” vision Ballmer put forth last July in which he reorganized the company with the goal of making it more agile and collaborative.

Indeed, in his memo, Nadella said he had asked his senior executives for their “all in” commitment.

He also ended his memo with a quote from “The Boys in the Boat” by former Microsoft employee Daniel James Brown. The book, about the University of Washington 1936 rowing team’s Olympic quest, talked about the concept of “swing — something that happens when “all eight oarsmen [on a rowing team] are rowing in such perfect unison that no single action by any one is out of synch with those of all the others.”

“As a company, as a leadership team, as individuals, that is our goal — to find our swing,” Nadella said.

Janet I. Tu: 206-464-2272 or jtu@seattletimes.com. On Twitter @janettu.



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