To: Satya Nadella, CEO, Microsoft Corp.

From: David Coursey, Editor-at-Large, SiliconAngle

Re: Fixing Microsoft from the inside out

First, congratulations on becoming Microsoft’s third CEO. Your background is much closer to Bill’s than Steve’s, which is a good thing. There are some who say pushing innovation is not your job. I say that if the board did not want someone technical and innovative, they should have picked a “business guy” instead.

Steve Ballmer was a good steward of Microsoft, but not a successful builder. Steve did his best and would have stayed forever, I think, if not given a push. I like Steve tremendously and always have. He has left a money machine that gives a new CEO tremendous flexibility. And if you ever feel a lack of passion, invite Steve around for a wild stage presentation or a Crazy Eddie impersonation.

With John Thompson’s IBM and Symantec background leading the board and Bill and Steve available to support you, plus some incredibly talented staff at all levels, you have the tools necessary to make Microsoft a much more important player than it is today.

The challenge will be getting Microsoft out of Microsoft’s way, something Steve could never do but seems a goal of his parting “One Microsoft” initiative.

As an insider, I wonder if you can see what outsiders have seen for decades: Microsoft is its own greatest competitor and worst enemy. The undoing of Microsoft isn’t Google or IBM or Amazon or the cloud or Apple or anything: It’s Microsoft undoing itself by concentrating on initiatives that make sense to insiders and leave outsiders perplexed.

Getting Microsoft out of Microsoft’s way must be the first order of business. You have the benefit of being an old Microsoft hand, but never tainted by the stain of the Windows or Office groups. Granted, your online services work didn’t turn to gold, but that is a tiny piece of Greater Microsoft.

You must address the toxic legacy of Microsoft’s “stack” performance ranking system, common to other tech companies including Google and Yahoo. The problem with the system, which predestined that some employees be ranked at the bottom regardless of actual performance, is that it perverts teamwork and encourages all the wrong sorts of employee behaviors.

In a stack system, one path to success is being the smartest person on an otherwise not very smart team, thus avoiding real competition from coworkers. Thus, really smart people are left in intellectual wastelands where their contributions aren’t as significant as they would be in a smarter team. Sadly, for many workers, the daily battle at Microsoft isn’t about outside competition but winning office politics and a good evaluation.

Is it any wonder that a company’s whose biggest competitive battles are among its own employees seems so detached from market reality? Thankfully, stack ranking is officially gone but the mindset can easily continue. Don’t let it.

A key concern is creating a compensation system and work environment that attracts and keeps better talent. This is difficult, in part, because of the number of geniuses who make huge salaries at Google and other companies for seemingly not doing very much (besides not leaving for another company and accomplishing something).

The Windows franchise ran off the rails with the overambitious Vista OS, got briefly back on track with Windows 7 and headed into a brick wall with Windows 8. Now, people are hearing that Windows 9 is headed our way.  That creates the perfect reason for all us Windows XP lovers not to buy anything until Windows 9 appears and solves all our problems. At least we can hope.

Is that really the best Microsoft can do? Didn’t anyone see this scenario coming, since many outsiders did? Why was it allowed to play out? Because Microsoft did what seemed best for Microsoft, regardless of its customers.

Want to win customer support as new CEO? Announce that Windows XP fixes will continue for several more years and make Windows 7 available as a free, easy-to-install downgrade for Windows 8 customers. These two acts will show that Microsoft’s new CEO feels his customers’ pain and is willing to rattle the Windows group for being so disconnected from market reality.

You will likely be pressed to extend the Office franchise to other operating systems. Try not to do it in code and let the cloud version make Office universal. Look for what people will use on mobile platforms, remembering that a desktop or laptop and real Office is what many of us expect to use for many, many years to come. It is not necessary for all platforms to share a user interface. Not even a good idea.

I am not clear on whether the game console and online services businesses should be sold. It seems like Bing and Azure are together part of Microsoft’s total cloud strategy, so I am thinking that making Bing successful is still a worthwhile goal. Hint: Bing needs to be more like Siri and less like Google. Make search smarter.

I am not a gamer, so I don’t feel qualified to comment on Xbox. Seems like a keeper, but only if it isn’t/doesn’t become a distraction.

Anyway, welcome to the helm. You are the right person for the job, and I hope everyone — even competitors — are hoping for your success. A reinvigorated Microsoft will do great things. The industry still needs Microsoft leadership.

To paraphrase a favorite President: Microsoft has nothing to fear but Microsoft itself. Fix that and you will have positioned the company for even greater success.

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