How Microsoft’s Board nullified Gates, boosted Nadella, and set a positive tone for the next 10 years

After reading Barb Darrow’s post earlier today asking the question “What about Bill?” in the Microsoft transition, I immediately recognized what happened and quickly commented on Google+. But I wanted to take those notes and expand a little further here, because I have always had a keen interest in organizational strategy and culture, and especially how corporate cultures are set through executive action.

First off, I don’t know if Satya Nadella is the best possible pick as Microsoft’s new CEO, so I’ll leave that to the “analysts” out there (although he looks like a pretty darn good choice to me). But one thing struck me about announcement: it’s brilliant in its almost Machiavellian construction.

Here’s how this delicate-yet-strong power transition works:

• As everyone expected, Ballmer is now 100% out of the picture, which is good because he was rocking the boat too much with his overly-emotional and disruptive monkey-dance style. There was never going to be a role for him going forward because he has only one volume setting (11) and he can be a loose cannon in interviews.
• Meanwhile Gates is removed from the Board Chairman seat and he’ll now “help” Nadella with the transition and participate in product innovations. This is undoubtedly the joint work of the Board and Nadella, who expertly crafted a way to both keep Gates around long enough but also politely escort him out of the executive suite. Gates’ power is now deeply neutered so the Board can discuss matters without him second-guessing them. Whether the Board can really guide the company effectively from here is debatable, but at least they don’t have to play second fiddle to a legendary founder with whom they just can’t compete.
• Nadella has neatly cloaked himself in the Gates shadow by pulling Gates into his own orbit and putting Gates into an active — but not too active — and temporary role as “advisor” to Nadella and selected product teams. This is a way to dazzle the long-time Microsofties with the sparkly goodness of Gates and show that Nadella is the true chosen successor — all while Nadella consolidates power and starts to turn the ship.
• The icing on the cake for Nadella, the Board, and hopefully customers? Gates’ temporary participation is focused on fostering a new culture the Board knows they desperately need: a culture of innovation. Microsoft has blown it on multiple tech revolutions for years, and they need to find the next wave or just drown. Bringing in a legend to work for the new CEO sends a clear message to everyone in the company: help us innovate or hit the bricks, no matter how much money you’ve got.

Going forward, it doesn’t much matter whether Gates actually does anything of technical or product value for Microsoft. His primary value now is being the poster boy for innovation. If he doesn’t deliver much, no big deal — he can fade nicely into Microsoft history and guide the amazing work the Bill & Melinda Gates Foundation is doing. He just can’t sit on the Microsoft Board anymore, telling everyone how he did it in 1995.

This CEO transition strategy really is remarkable. It’s done two seemingly impossible things at the same time: It’s gotten Gates out of the way without setting up a series of narratives that compare Gates and Nadella ad infinitum. And I’ll bet you a tiny fraction of Gates’ fortune that he’s actually cool with it. It relieves him of a lot of pressure to deliver results in a company that he’s not really been running for a very long time. He can spend a year or so hanging out at Microsoft part-time, and slip away.

The Microsoft Board has really set the tone for the next 10 years with three simple messages:

1. We love the company Gates built and the legacy he’s leaving us.
2. But Nadella is our guy now, so listen to him.
3. And you all better get to innovating right away. There’s no time to lose.