Liddell, who was CFO at International Paper and CEO at Carter Holt Harvey before taking on the top finance job in Redmond, says the economy is going through a “reset period” and companies should be thinking about adopting strategies to cope with the “realities of the new normal”.
The concept, which Liddell attributes to Mohamed El-Erian, CEO of investment firm PIMCO, supports the need for a different growth strategy in the next decade as economic activity is expected to be relatively subdued.
But one thing that will remain is the role of software in driving productivity and innovation, as it has been doing so for the past 10 years. “Our industry will be more significant than in the past,” Liddell says.
He discusses the five fundamental plans Microsoft is using, and which other companies can also adopt, to succeed in the new environment.
• First, focus on cash. Microsoft has little debt and its cash reserves allow it to seize acquisition opportunities.
• Second, streamline the cost structure.
• Third, drive operational excellence. For Microsoft this is getting software out in full and on time, and coming out with a strong product portfolio. It is about being “ambidextrous”, through being able to cut costs and be productive at the same time.
• Fourth, compete and grow market share. The companies that survived the crash in 1929 had greater revenue at the end of the recession. “Leaders take market share,” he says. Even if the pie is smaller, they are able to secure a greater share of the market and better growth.
• Fifth, invest in innovation. This is fundamental for Microsoft, he says.The company has a more than US$9 billion R and D budget this year, and the budgeted figure is higher for 2010.