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Can Microsoft change? Or should it split up?

(MoneyWatch) After its big miss in earnings, largely due to its massive miscall on the popularity of the Surface RT tablet, the Microsoft (MSFT) reorganization plan looks more important than ever before.

The whole idea is to support innovation, get company activities aligned with customer interests and really make synchronicity between devices and services work. That's where the market has headed.

But the reorganization has yet to show, even with the readily apparent change in the nature of computing and such competitors as Apple (AAPL), Google (GOOG) and Samsung's moving beyond the old model, whether Microsoft is capable of not just mandating change, but making it work. If it can't, the only logical choice may be to divide the company into multiple independent entities so at least some parts could survive.

The underlying problem for Microsoft is that the computing market has rapidly left behind the company's basic strategy of controlling the machines that people use with operating-system software. For decades, the company had a virtual monopoly on desktops and expanded its reach into servers and corporate data centers. Once Microsoft controlled the underlying operating systems, it then expanded into a secondary layer of software, whether office productivity for business users or databases and tools for IT departments.

The combination of mobile devices that broke Microsoft's grip on the client end, and cloud computing that didn't necessarily need the company in data centers, shattered this form of control. And, yet, as Harvard Business School Professor Clay Christensen described in "The Innovator's Dilemma," dependence on the very technologies that initially let a company grow became a hindrance. Former Microsoft Vice President Dick Brass and others have pointed out that the company's Windows and Office product groups "prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence." Cleaving to old ways of doing things has even been evident in Microsoft's collection of visual branding, as designer Andrew Kim has pointed out.

Will things really be any better with the reorganization? Here is a telling section from the memo from management:

Building upon Windows, Xbox and our growing suite of consumer and enterprise services, we will design, create and deliver through us and through third parties a complete family of Windows-powered devices -- devices that can help people just as much in their work life as they do after hours. Devices that help people do more and play harder.

We will strive for a single experience for everything in a person's life that matters. One experience, one company, one set of learnings, one set of apps, and one personal library of entertainment, photos and information everywhere. One store for everything. Microsoft has the clear opportunity to offer consumers a unified experience across all aspects of their life, whether the screen is a small, wearable, a phone, a tablet, an 85-inch display or other screens and devices we have not yet even imagined.

In other words, Windows will be primary and delivered across multiple devices, which is basically what the company has tried to do for decades, with variations of the operating system for PCs and notebooks, servers and mobile devices. Microsoft will offer applications that everyone will use, much as Office ruled the office productivity market. Again, that is no different from the company's efforts to also dominate in entertainment, with games and other offerings through the Xbox, and in all forms of software (frequently failing to gain consumer approval, as with its Money and Accounting packages).

Microsoft still thinks like a software company that wants its own hardware because that seems to be the way to ensure software sales. Get the devices into the enterprise and you get more coherent support for those platforms, much as users' experience with Microsoft at work spilled over to the home in the past.

Management consultant Ram Charan wrote about the difficulties Microsoft would face in trying to integrate its operations:

Integration has two parts to it. The first is to get various functional silos and P&L centers sharply aligned with the specifics of customer requirements. The second applies to the multiple channels a consumer might use as part of that experience -- for example, for a bank these would include a website, an ATM, and the lobby of the local branch. The person in charge of online banking might want a different offering than the person leading the branch offices, just as an engineering head might want a different set of product features than a manufacturing VP. Integration means taking into account all of those points of view and making the right trade-offs to give consumers a total end-to-end experience better than the competition.

However, is Microsoft really trying to organize itself around what customers want or find a new way to organize customers around what it wants? The shakeup in 2010 did little to no good. Why would the current one be any different?

It may be that the only hope for Microsoft is as a collection of smaller companies, where one focuses on consumer devices and another on the needs of the enterprise. That wouldn't enable the grand vision of One Microsoft -- and one world that all depends on the company. However, this might be one of those times where having something that works and retains value is better than a grand vision rapidly falling out of relevance.

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