Nadella asked Gates to "devote additional time to the company, focused on technology and products" and Gates has said he'll make over a third of his time available to meet with product groups. (While chairman is more than an honorary role, owning 357 million shares in Microsoft conveys its own authority, and Ballmer gets a role on the board too.)
The Microsoft opportunity
What Gates said about the opportunities for Microsoft in his comments on Nadella's announcement is reminiscent of what Steve Ballmer talked about when he announced the One Microsoft reorg; "taking Office and bringing it to interactive documents, letting you find your information in rich ways, secure your information in rich ways or even building a cloud platform that connects to all sorts of different devices."
The first steps of those are Office services like the natural language queries in the new Power BI service and Smart Search in Windows 8.1 and the newly renamed OneDrive.
But developing those into the future of Microsoft (a future in which Office is everywhere and Windows is just another platform) needs all the different resources Microsoft has, including the ones some shareholders and analysts have suggested selling off.
As Ballmer put it, a company that can create the next big thing will "have to understand natural user interface and hardware. Hardware and software will need to kind of evolve together.
Whether it's wearables or what's going on with screen or input technology, without the right hardware and software skills, without the right machine learning and cloud infrastructure, without the right focus on applications and platforms, without the right appreciation of consumer and enterprise, I think it's hard to do."
Nadella is talking in very similar terms when he says that "over the next decade, computing will become even more ubiquitous and intelligence will become ambient", referring to "the coevolution of software and new hardware form factors" (which sounds like wearables and natural interfaces and wall computing and all the things Microsoft Research has been working on) and "an ever-growing network of connected devices, incredible computing capacity from the cloud, insights from big data and intelligence from machine learning."
In other words, Nadella's strategy as CEO isn't to rip out the One Microsoft reorg the way an outside candidate might have done; it's to make it work in all the ways that bullish, bombastic Ballmer found it hard to do.
From Dynamics, to Bing to Azure, Nadella has made a habit of taking on products where Microsoft has major competition and taking a different direction that plays to Microsoft's strengths – and also not giving up even when it's taken those products time to become successful.
He's been clear about not letting the successes of the past turn into anchors that hold the company back. "I feel what is important for us is to see these new things and not just be beholden to what we had in the past but to really do the innovation."
He also pointed out "the tech business is all about being able to get the concept right before its conventional wisdom and then having the perseverance to see it through."
That sounds like what Microsoft needs, more than a new direction or a fire sale. Picking an insider as CEO means the board gets someone who doesn't have to take time to get up to speed, but it's also a compliment to Ballmer and Gates that the board has chosen someone who's going to execute their vision, but in his own way.
