Defending a Global Business Model in Turbulent Times
“Our mission is to empower every person and every organization on the planet to achieve more” ¿How isolationist political momentum across the world is threating Microsoft of accomplishing its mission? ¿Will the company be able to defend its global business model in a world in a world that seems suspicious of the benefits of the globalization?
The technological revolution of the last 30 years has been one of the drivers – if not the most important one – of the globalization process across the world. In this context the tech industry is global by essence, as the flow of information and data that are in the roots of this industry do not respond to any physical boundaries or national borders, but to the desire of people and companies to develop efficient solutions to specific and relevant problems; “Global flows of all types support growth by raising productivity, and data flows are amplifying this effect by broadening participation and creating more efficient markets[1]”. In this context, Microsoft, as one of the major players of the tech industry, has faced a major challenge in its business model during the last few years as isolationist policies have been rising across the world questioning not only the global trade of goods and services, but also the free flow of information and human capital transfer across countries. The political momentum of this trends has raised a major thread for Microsoft and present a major crossroad for the whole industry. Understanding the reason why the company management is concerned about this issue and how they are addressing it is the key objective of this essay, as this understanding will help us to determine how well prepared is the company to succeed in the long-term.
Microsoft Corporation – a US based multinational technology services, devices and software company with revenues of 89.95 USD billion in 2016[2] and a market capitalization of over 600 USD billion – define its mission as global: “Our mission is to empower every person and every organization on the planet to achieve more[3]” and the way how they seek to achieve this mission is through the flow of diverse knowledge across its people, as we can see in its strategy statement: “Maximize the business impact of global diversity and inclusion to empower our people, transform our culture and delight our customers[4]”. These elements are the core of Microsoft business model, a model that is being tested by the isolationism trends that have raised in different countries, affecting not only the direct supply chain of Microsoft devices, but also and more important the free flow of knowledge and human capital across the company. As we can see, defending its own business model and vision is the reason behind why the management team of the company should and has been so active leading the defense against these political trends across the world.
One of the key principles that Microsoft has been following to address the latest isolationism trends in the mid-term has been to prioritize the long-term perspectives of the business over the short-term circumstances of a certain country. Specifically, this mean that, if the fundamentals drivers of the business haven’t changed, the company has avoided to alter long-term investment projects due to political turbulences. As an example of this we can see what happened in the UK in 2016, when just after the Brexit outcome, and while large multinationals announced exits from the country, Microsoft confirmed the construction of two new data centers in the country to expand its cloud business across the region. “Microsoft’s commitment to the UK is unchanged. In particular, those customers in our UK data centers should continue to rely on Microsoft’s significant investment plans[5]” the company said.
But at the same time the company has been addressing this concern in the short term actively fighting back different policies from governments that are preventing the company to recruit the best possible talent. A concrete example of this was the lawsuit that Microsoft filed against the US Government few weeks ago in order to revoke the order that will end the DACA program (Deferred Action for Childhood Arrivals) in March 2018. “As an employer, we appreciate that Dreamers add to the competitiveness and economic success of our company and the entire nation’s business community[6]” declared the company Chief legal officer. From my perspective is not clear how effective this action will be in defending Microsoft strategy, and in my opinion, the company should be working with more emphasis in developing more effective ways to allow employees work from distance ensuring that future policies would not affect their people.
Even only time will effectively tell us the impact of the isolationism trends in Microsoft business model, we can determine that the company has been defending from them with both short and mid-term actions. But, what does remain unclear is how a global mission oriented company like Microsoft that is aiming to serve every customer in the world will succeed in times where some segments of our society are demanding more local and tailored solutions, being suspicious of answers that are global by nature.
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[1] James Manyika, “Digital Globalization: The new era of global flows”, McKinsey Global Institute, February 25, 2016, https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows, accessed on November 2017.
[2] Microsoft Corporation, 2016 Annual Report.
[3] Microsoft Corporation, “Company Overview,” https://www.microsoft.com/en-us/about/default.aspx, accessed November 2017.
[4] Microsoft Corporation, “Global Diversity”,” https://www.microsoft.com/en-us/diversity/business-of-inclusion/default.aspx, accessed November 2017.
[5]“ Microsoft: Brexit won’t make us pull business in UK”, 25 January 2017, The Telegraph, http://www.telegraph.co.uk/technology/2017/01/25/microsoft-brexit-wont-make-us-pull-business-uk/, accessed on November 2017.
[6] “Microsoft president urges Congress: put Dreamers before tax reform”, 5 September 2017, Reuters, https://www.reuters.com/article/us-usa-immigration-microsoft/microsoft-president-urges-congress-put-dreamers-before-tax-reform-idUSKCN1BG2CB, accessed on November 2017.
Interesting read!
Your points on talent acquisition and retention really resonated in light of isolationism policies in the United States. Even beyond the DACA program, the availability and ease of acquiring work permits has declined and is likely to continue. For a global company like Microsoft, I believe acquiring top talent from all corners of the world helps them to remain in-tune with their global customers. Putting heavy restrictions on this is a risk to them. I like that Microsoft is taking a public stance against the policies it disagrees with while not letting it hinder their overall objectives and expansion goals.
This is interesting. I think, like you stated, the tech industry by nature is global. A global company like Microsoft benefits from information and talent sharing around the world. Your question about addressing tailored and localized solutions to me comes down to security and privacy. I think those are increasingly difficult to fully achieve in this world, and also could require Microsoft to be exposed to more risk than they’d like. While I support Microsoft, as one of the largest tech companies in the world, making a statement against public policies they are fundamentally against, I agree with your assessment of Microsoft finding more innovative solutions to connect their people from around the world. I think this type of investment, in their people, will continuously be one that will yield positive outcomes no matter what the circumstance.
I agree with your statement that Microsoft’s short-term solution (making statements against public policies) may not be the most efficient solution to the issue you describe. However, I do think that even if you don’t think Microsoft’s statements on these topics will help their bottom-line, it is still important for such large, powerful companies to speak up about these issues. I also agree with your point that Microsoft should look for more innovative ways to allow employees to work from a distance, at least in the interim while the isolationist policies remain in effect.
I am curious to know how Microsoft’s decision to remain focused on the long-term, and specifically their decision to build data centers in the UK despite the current political environment, is affecting their bottom-line. I would imagine that Microsoft felt the need to build a data center in the UK because of expected local data traffic on Azure. If the UK economy is significantly impacted by Brexit (e.g., if a portion of the finance industry that is currently in London migrates out of the country) the economic viability of these data centers could be significantly impacted.
Great article, Nicolas! It’s interesting to think about supply chain problems related to the spread of data. I think an interesting trend prompting some of the isolationist policies around data is privacy. Many technology companies have been pushing the envelope on collecting consumer data, and there are significant variations in policies across different countries. Facebook specifically has been called out for transferring data from the EU to the US (source: https://www.reuters.com/article/us-eu-privacy-facebook/ireland-asks-europes-top-court-to-rule-on-eu-u-s-data-transfers-idUSKCN1C80XQ). European regulators are concerned about their citizens data being subject to surveillance in the US. Although this was not the immediate focus for Microsoft, it will be very interesting to see how technology companies are able to adapt to better satisfy global consumer privacy requirements.
Great article, Nicolas. I see talent acquisition as an important priority for Microsoft in terms of maintaining a global perspective and continuing to deliver on its customer promise, which as you highlight, is global in nature. Similar to the comments made above, I also believe that utilizing a public platform and voice as large as that of Microsoft’s to take a stance on issues that will have major business and social implications is a responsibility of large corporations. Additionally, I think that considering alternative solutions to a typical work-force and workday could be an advantageous strategy not simply as a means of providing a solution to isolationist policies, but also as a competitive advantage against other technology companies, particularly as the trend of working remotely and in a flexible environment becomes increasingly important to employees (https://www.nytimes.com/2017/02/15/us/remote-workers-work-from-home.html). With regard to Microsoft’s businesses abroad, I agree with TOM’s comment that from a technology standpoint, I am concerned with how isolationism will affect Microsoft’s business with regards to privacy. As the world becomes increasingly focused on protecting data, and potentially, as you note, more suspicious of global players, I could imagine it becoming difficult for foreign companies to remain in certain markets. Additionally, without aligned perspectives on privacy or the support of a local government, Microsoft may be unable to deliver on its customer promise or maintain the level of security necessary for its data-related services. While the Trump administration is working to add language to NAFTA around the trade of data, until this is formalized, Microsoft should think critically before expanding into certain markets in the short or medium-term beyond its current operations abroad (https://www.washingtonpost.com/business/economy/trumps-trade-deficit-obsession-could-hurt-leading-american-industries/2017/11/27/b2b8122c-cbb5-11e7-8321-481fd63f174d_story.html?utm_term=.ca8ae2c0e0b3).