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Innovation Strategy at Microsoft: Clouds on the Horizon SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of Innovation Strategy at Microsoft: Clouds on the Horizon


Microsoft employs 90,000 people and its products affect millions of users around the world every day. Developing the next version of Windows or Office is easy for Microsoft, but the company has struggled when it comes to more radical innovation. Intense competition from Google, Apple, and others threatens a business model that has delivered tremendous success over 25 years. This case highlights the strategic challenges facing Microsoft and provides insights into the organizational, leadership, and operational issues that must be addressed in order to define a successful innovation strategy at one of the world's most well-known companies.

Authors :: Raul Chao, Stylianos Kavadias

Topics :: Innovation & Entrepreneurship

Tags :: Operations management, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "Innovation Strategy at Microsoft: Clouds on the Horizon" written by Raul Chao, Stylianos Kavadias includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Microsoft Innovation facing as an external strategic factors. Some of the topics covered in Innovation Strategy at Microsoft: Clouds on the Horizon case study are - Strategic Management Strategies, Operations management and Innovation & Entrepreneurship.


Some of the macro environment factors that can be used to understand the Innovation Strategy at Microsoft: Clouds on the Horizon casestudy better are - – cloud computing is disrupting traditional business models, increasing transportation and logistics costs, increasing household debt because of falling income levels, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, etc



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Introduction to SWOT Analysis of Innovation Strategy at Microsoft: Clouds on the Horizon


SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Innovation Strategy at Microsoft: Clouds on the Horizon case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Microsoft Innovation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Microsoft Innovation operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.




SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix


SWOT analysis of Innovation Strategy at Microsoft: Clouds on the Horizon can be done for the following purposes –
1. Strategic planning using facts provided in Innovation Strategy at Microsoft: Clouds on the Horizon case study
2. Improving business portfolio management of Microsoft Innovation
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Microsoft Innovation




Strengths Innovation Strategy at Microsoft: Clouds on the Horizon | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Microsoft Innovation in Innovation Strategy at Microsoft: Clouds on the Horizon Harvard Business Review case study are -

Ability to recruit top talent

– Microsoft Innovation is one of the leading recruiters in the industry. Managers in the Innovation Strategy at Microsoft: Clouds on the Horizon are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.

Diverse revenue streams

– Microsoft Innovation is present in almost all the verticals within the industry. This has provided firm in Innovation Strategy at Microsoft: Clouds on the Horizon case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Superior customer experience

– The customer experience strategy of Microsoft Innovation in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Learning organization

- Microsoft Innovation is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Microsoft Innovation is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Innovation Strategy at Microsoft: Clouds on the Horizon Harvard Business Review case study emphasize – knowledge, initiative, and innovation.

Sustainable margins compare to other players in Innovation & Entrepreneurship industry

– Innovation Strategy at Microsoft: Clouds on the Horizon firm has clearly differentiated products in the market place. This has enabled Microsoft Innovation to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Microsoft Innovation to invest into research and development (R&D) and innovation.

Digital Transformation in Innovation & Entrepreneurship segment

- digital transformation varies from industry to industry. For Microsoft Innovation digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Microsoft Innovation has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Innovation driven organization

– Microsoft Innovation is one of the most innovative firm in sector. Manager in Innovation Strategy at Microsoft: Clouds on the Horizon Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.

Effective Research and Development (R&D)

– Microsoft Innovation has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Innovation Strategy at Microsoft: Clouds on the Horizon - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Training and development

– Microsoft Innovation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Innovation Strategy at Microsoft: Clouds on the Horizon Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Operational resilience

– The operational resilience strategy in the Innovation Strategy at Microsoft: Clouds on the Horizon Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Organizational Resilience of Microsoft Innovation

– The covid-19 pandemic has put organizational resilience at the centre of everthing that Microsoft Innovation does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Cross disciplinary teams

– Horizontal connected teams at the Microsoft Innovation are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.






Weaknesses Innovation Strategy at Microsoft: Clouds on the Horizon | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Innovation Strategy at Microsoft: Clouds on the Horizon are -

Employees’ incomplete understanding of strategy

– From the instances in the HBR case study Innovation Strategy at Microsoft: Clouds on the Horizon, it seems that the employees of Microsoft Innovation don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Low market penetration in new markets

– Outside its home market of Microsoft Innovation, firm in the HBR case study Innovation Strategy at Microsoft: Clouds on the Horizon needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Microsoft Innovation is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Innovation Strategy at Microsoft: Clouds on the Horizon can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.

Compensation and incentives

– The revenue per employee as mentioned in the HBR case study Innovation Strategy at Microsoft: Clouds on the Horizon, is just above the industry average. Microsoft Innovation needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Slow to strategic competitive environment developments

– As Innovation Strategy at Microsoft: Clouds on the Horizon HBR case study mentions - Microsoft Innovation takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.

Capital Spending Reduction

– Even during the low interest decade, Microsoft Innovation has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.

Interest costs

– Compare to the competition, Microsoft Innovation has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Increasing silos among functional specialists

– The organizational structure of Microsoft Innovation is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Microsoft Innovation needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Microsoft Innovation to focus more on services rather than just following the product oriented approach.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Microsoft Innovation supply chain. Even after few cautionary changes mentioned in the HBR case study - Innovation Strategy at Microsoft: Clouds on the Horizon, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Microsoft Innovation vulnerable to further global disruptions in South East Asia.

Lack of clear differentiation of Microsoft Innovation products

– To increase the profitability and margins on the products, Microsoft Innovation needs to provide more differentiated products than what it is currently offering in the marketplace.

Workers concerns about automation

– As automation is fast increasing in the segment, Microsoft Innovation needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.




Opportunities Innovation Strategy at Microsoft: Clouds on the Horizon | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis


The opportunities highlighted in the Harvard Business Review case study Innovation Strategy at Microsoft: Clouds on the Horizon are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Microsoft Innovation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Changes in consumer behavior post Covid-19

– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Microsoft Innovation can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Microsoft Innovation can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Microsoft Innovation is facing challenges because of the dominance of functional experts in the organization. Innovation Strategy at Microsoft: Clouds on the Horizon case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Microsoft Innovation to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Microsoft Innovation to hire the very best people irrespective of their geographical location.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Microsoft Innovation can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Learning at scale

– Online learning technologies has now opened space for Microsoft Innovation to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Microsoft Innovation can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Better consumer reach

– The expansion of the 5G network will help Microsoft Innovation to increase its market reach. Microsoft Innovation will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Microsoft Innovation to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Low interest rates

– Even though inflation is raising its head in most developed economies, Microsoft Innovation can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Buying journey improvements

– Microsoft Innovation can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Innovation Strategy at Microsoft: Clouds on the Horizon suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Manufacturing automation

– Microsoft Innovation can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Microsoft Innovation can use these opportunities to build new business models that can help the communities that Microsoft Innovation operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.




Threats Innovation Strategy at Microsoft: Clouds on the Horizon External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis


The threats mentioned in the HBR case study Innovation Strategy at Microsoft: Clouds on the Horizon are -

Barriers of entry lowering

– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Microsoft Innovation with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Microsoft Innovation.

Stagnating economy with rate increase

– Microsoft Innovation can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Microsoft Innovation business can come under increasing regulations regarding data privacy, data security, etc.

Technology acceleration in Forth Industrial Revolution

– Microsoft Innovation has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Microsoft Innovation needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Microsoft Innovation in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Environmental challenges

– Microsoft Innovation needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Microsoft Innovation can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.

Increasing wage structure of Microsoft Innovation

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Microsoft Innovation.

Consumer confidence and its impact on Microsoft Innovation demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.

Regulatory challenges

– Microsoft Innovation needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Microsoft Innovation needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.




Weighted SWOT Analysis of Innovation Strategy at Microsoft: Clouds on the Horizon Template, Example


Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Innovation Strategy at Microsoft: Clouds on the Horizon needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of the case study Innovation Strategy at Microsoft: Clouds on the Horizon is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of the Harvard case study Innovation Strategy at Microsoft: Clouds on the Horizon is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Innovation Strategy at Microsoft: Clouds on the Horizon is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Microsoft Innovation needs to make to build a sustainable competitive advantage.



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