Making the Business Look Like the Brand

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When Microsoft announced its recent organizational restructure, the company laid out the specific reasons for the move. It said that the move was designed to get away from different product divisions having different strategies, which ended up being counterproductive. Now, the company is going to be divided by function, which should help align the smaller groups.

Analysts read between the lines, though, and many came to the conclusion that Microsoft's motives were twofold -- to stop infighting, and to try out something that Apple  has had success with. In truth, the motive no longer matters to Microsoft, and now the question is simply, how will the company benefit from the new structure?

A far-flung parallel
Looking to other big companies that have had big reorganizations -- Microsoft now employs about 100,000 people -- the first one that jumps to my mind isn't Apple, it's Gap . Last year, Gap announced that it was moving away from a regional structure, and reforming itself around its brands. There is no longer a head of U.S., or Asia, or Europe, there are simply brand leaders. The point of the move wasn't to make the company look like some other company, it was to give Gap a structure that aligned with the way its customers thought about it.

As an example, Microsoft is now going to have all its operating system flavors -- except blue raspberry -- run by one function. The operating systems engineering group can now think about the experience in the same way that consumers do. During the Xbox launch, some commenters thought that a solution to the "always connected" requirement could be that the Xbox, Windows Phone, and laptop or tablet operating systems could all talk to each other, giving customers an easier way to check in. With the functions all working together, that kind of thinking is now a real possibility.

The parallel with Gap is that Microsoft is trying to make its self-image align to the image that customers have of it. That's going to be a very good thing, in the long run.

The closer parallel
Back to Apple. While Microsoft may not be trying to mimic Apple's organization, it must have learned something from that company's success. Apple has used its alignment to help developers and consumers understand its products in a way that Microsoft has failed to do. One of the successes that Apple has had is that its structure makes it easier for the company to develop products that play together nicely. If you think your iPhone should be able to communicate with your iPad in some specific way, it probably can.

Microsoft's previous divisions made it harder for the company to think about products in that manner. That's made it harder for consumers to understand the products and, in turn, has meant that sales were pulled down. The reason the Apple model works, and the reason that Microsoft is moving to a similar model, is that companies that succeed do so because they understand their customers. An organizational structure that aligns with customers will result in better, more intuitive, and more consistently branded products. That's a recipe for success.

What this means for Microsoft in the long run won't be clear until a new round of products can be developed under the new structure. In the future, I'll be looking for a lot more compatibility between products, and a more cohesive brand feel.

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Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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