The New York Time has an article on the changes that Microsoft is going through these days. The entire article seems like Microsoft response to commentary in the press that their best days of growth are over.

With a provocative title that invokes the "midlife crisis" metaphor, Microsoft is definitely trying to respond to recent stories around Microsoft's change in compensation from stock options to restricted stock grants as an indicator that Microsoft and IT in general is reaching maturity. It's clear from the article that the reporters had access to Microsoft executives who now get to tell their side of the story. They make some good points about all the growth areas such as "Integration Innovation" and the 20-30% growth in the mid-market space. However, it's going to take some time before these businesses can make significant contributions to the $32 Billion in revenue, which is mostly comprised of Microsoft franchise products such as Windows and Office. Unless there is real innovation that creates a new highly profitable franchise, I really don't see much growth for Microsoft.

Another interesting point in the article is the change in which Microsoft compensates senior managers. Their previous plan was based on sales and profits but now it's going to be based on customer satisfaction. The other company that has a similar model is Siebel with their 100% customer referenceability and satisfaction, but we all know what's happening to Siebel right now. Also, a lot of their customer satisfaction survey results seem to have been hyped up on their website (see article on Nucleus Research in Business2.0).

Despite the negative aspects of a fuzzy measure and potential abuse of customer satisfaction surveys, I think it's the right direction for Microsoft. If you're maturing as a company and market, and if you're the dominant player, making sure that you maintain and continue to cross sell/upsell into your existing customer base becomes critical for continued success. IBM was able to use this strategy successfully to recover from their missteps to evolve and grow their business. The difference is that IBM always had good relationships with their customers and a culture that reinforced long term relationships. Microsoft never had this culture so it will be interesting to see how quickly they can adapt to the new order. Changing compensation is the first step to driving changes in behavior so I think they're on the right path. Like so many things in business, it's now all up to their execution.