C-151Microsoft froM Gates to satya Nadella20I.docx

C-151
Microsoft: froM
Gates to satya
Nadella
20
IntroductIon
On February 4, 2014, Satya Nadella became CEO
of Microsoft. Nadella, a native of Hyderabad, In-
dia, was only the third CEO in Microsoft’s 39-year
history. Cofounder Bill Gates was CEO from Mi-
crosoft’s establishment in April 1975 through Janu-
ary 2000 when he passed the reins to Steve Ballmer.
Gates remained chairman though until February
2014. The Gates years were characterized by dra-
matic growth as Microsoft expanded from a small
start-up to become the largest and most dominant
software company on the planet, in the process
making Gates the world’s richest man. The founda-
tions of Microsoft’s success during this period were
its two monopolies: the Windows operating system,
which at its peak was used on 95% of the world’s
personal computers (PCs), and Office, which had a
90% market share in 2012.1
Microsoft continued to expand both revenues
and profits under the leadership of Steve Ballmer.
During his tenure, revenues expanded from $25 bil-
lion to $70 billion while net income grew 215% to

$23 billion. One area that did particularly during the
Ballmer years was the Windows server business, a
division that Nadella ran prior to becoming CEO.
Servers sit at the center of networks of PCs, and are
used to perform a variety of functions including da-
tabase hosting, file services, Web services, print ser-
vices, and applications services. Microsoft makes a
version of Windows, Windows Server, which runs
servers. The Windows server business was a $20-bil-
lion division by 2014. Microsoft gained share from
competitors such as IBM, which promoted the rival
Linux operating system. By 2014, 75% of servers
built around Intel microprocessors used Windows
Server as their operating system, as did around 50%
of all servers.2 The Linux and Unix operating sys-
tems took the number 2 and 3 spots.
Despite impressive growth, Microsoft’s stock
price stagnated during the Ballmer era. This reflected
a growing concern that Microsoft had lost its leader-
ship in the computer industry to three firms, Google,
Apple, and Amazon. Google had grown dramati-
cally during the 2000s on the back of its dominant
Internet search business. Along the way, Google
had developed an operating system for smartphones
(Android) and laptops (Chrome) that were now chal-
lenging Windows on computing devices, a category
that had expanded beyond traditional PCs to includ-
ed smartphones and tablets. Google was also offering
a “cloud-based” suite of productivity tools, Google
Docs, which competed directly with Office.
02277_Case20_rev02.indd 151 01/10/15 6:03 PM

C-152 Case 20 Microsoft: From Gates to Satya Nadella
Apple, a firm that was nearly bankrupt in 1997,
had done more than any other company to expand
the definition of computing devices to include
smartphones and tablets. Apple had introduced the
first version of its smartphone, the iPhone, in 2007.
Differentiated by elegant design and ease of use, two
Apple hallmarks, the iPhone was a sensation that re-
defined what a smartphone should look like and do.
Apple followed the iPhone with the 2010 introduc-
tion of the iPad, a tablet device that created an en-
tirely new computing category, and one that canni-
balized sales of laptop PCs. Both devices ran Apple’s
iOS operating system, further reducing the relevance
of Windows.
As smartphones and tablets gained popular-
ity, more and more computing was being done us-
ing these mobile devices—accessing applications and
data stored on servers “in the cloud” rather than on
a traditional PC. According to Microsoft’s own esti-
mate, by mid- 2014, while 90% of traditional desktop
and laptop PCs still used Windows, only 14% of all
computing devices (a definition which included PCs,
smartphones, and tablets), used Windows.3 Although
under Ballmer’s leadership Microsoft had tried to
grow its share by introducing a Windows smartphone
and the Surface tablet, these offerings failed to gain
traction. By 2014, Windows Phone had less than 3%
of the global smartphone operating system market,
while Apple’s iOS held 15.2%, and Android 81.1%.4 In
the tablet market, Android had a 65.8% share, Apple’s
iOS had 28.4%, and Windows tablets had 5.8%.5 Mi-
crosoft was assumed to be losing significant amounts

of money on its phone and tablet businesses. To
compound matters, after three decades of sustained
growth, PC sales were declining: PC sales fell by 4% in
2012 and by 9.8% in 2013, although demand stabilized
in 2014.6
Amazon, the world’s largest Internet retailer, was
challenging Microsoft from another direction. By the
mid-2000s, tens of thousands of servers were being
grouped together into “server farms” located in the
cloud to host high-traffic Internet websites. Google
had built server farms to host its Internet search busi-
ness, Microsoft likewise had server farms for its Bing
search business and MSNBC Web offerings, and Am-
azon had built server farms to host its large online
retail business. In 2005, Amazon leveraged the knowl-
edge and capacity it had accumulated building server
farms to start a new business, Amazon Web Services
(AWS). AWS hosted data, Web services, and applica-
tions for paying customer. These data, services, and
applications could be accessed from anywhere by
a user with a computing device and an appropriate
wireless or hardwire connection. By 2014, AWS was
viewed as the market-share leader in the emerging
cloud-computing business.
Microsoft entered the cloud-computing business
in 2010 with Azure (later renamed Microsoft Cloud).
Azure was founded within the Windows Server di-
vision that Nadella ran prior to becoming CEO. In
addition to hosting data and websites, Azure allows
clients to build and run applications that reside on
Microsoft’s cloud. By 2014, Azure was thought to
be number two in the emerging cloud business, with
Google and IBM rounding out the top four. Indus-

try wide, the cloud-computing business generated $16
billion in sales in 2014, but it was growing very rapidly
and was thought by many to represent the future of
computing. 7
Commenting on Microsoft’s overall competitive
position in 2014, the general manger of one busi-
ness unit noted that: “I think we have about 18 to 24
months to get it right. If we don’t, Microsoft is fin-
ished.”8 This statement reflected a widespread belief
within the company that the computer industry was
undergoing a massive paradigm shift, away from the
client-server world based on PC architecture in which
Microsoft had been so dominant, and toward a world
of mobile devices and cloud computing in which
Microsoft faced significant competitive challenges.
Nadella was as cognizant of this as anyone. By March
2014, he had already honed his vision for the com-
pany. Microsoft, he said, was competing in a “mobile-
first, cloud-first” world.9 The task facing Nadella was
deciding what actions to take to ensure that Microsoft
survived and prospered in this brave new mobile-first,
cloud-first world. He knew he had to act fast.
BIll Gates and the
early hIstory of
MIcrosoft
Bill Gates and Paul Allen established Microsoft in
1975. Gates was a 19-year-old Harvard dropout.10
Allen, who was 22, had dropped out of Washington
02277_Case20_rev02.indd 152 01/10/15 6:03 PM

C-153Case 20 Microsoft: From Gates to Satya Nadella
State University to work as a programmer at Honey-
well in Boston. Gates and Allen had both attended
Seattle’s elite Lakeside high school, where they had
bonded over their common interest in computers.
By all accounts, the young Bill Gates was extremely
intelligent, hypercompetitive, ambitious, hardworking,
and a gifted programmer. One of his former teachers
at Lakeside described him as the most intelligent stu-
dent she had ever had. He could also be dismissive of
people who lacked his technical acumen, abrasive, and
hypercritical. One story widely circulated in Microsoft
is that if he disagreed with the technical or product
presentations of Microsoft employees, he would inter-
ject with sharp comments along the lines of “that’s the
stupidest thing I have ever heard” or that the idea was
“brain damaged.” Legend has it that on more than
one occasion Gates reduced a presenter to tears, al-
though Gates would argue that it was never the person
he criticized, just the idea. Gates respected people who
were smart and hardworking like him, who marshaled
their facts, and who stuck to their guns when chal-
lenged by him if they knew they had the facts on their
side. Gates ultimately relied upon such people to lead
projects and businesses within Microsoft.
In 1975, Allen persuaded Gates to drop out of
Harvard and start Microsoft to write a version of the
computer programming language, BASIC, to run on
the world’s first commercially available PC, the MITS
Altair 8800, which used an Intel 8080 microprocessor.
Gates and Allen met with the founder of MITS and
demonstrated their version of BASIC for the Altair
8800. This resulted in a deal under which MITS dis-

tributed Microsoft BASIC for the Altair 8800, mak-
ing Microsoft the first company to sell software to
run on a personal computer. Microsoft subsequently
wrote versions of Microsoft BASIC that ran on other
PCs of the time, including Apple’s first successful of-
fering, the legendary Apple II, introduced in 1979.
In June 1980, Steve Ballmer joined Microsoft.
Ballmer had been a friend of Gates at Harvard, and
was the only person who had outscored Gates on
mathematics and microeconomics classes at Harvard.
Ballmer had worked at Procter & Gamble after Har-
vard, and then moved on to Stanford Business School.
Gates persuaded Ballmer to drop out of Stanford and
manage business operations at Microsoft. He was em-
ployee number 30.
In July 1980, IBM approached Microsoft about
using a version of Microsoft BASIC for the IBM
PC, which was then in development. Gates persuad-
ed IBM to adopt a 16-bit Intel processor (originally,
IBM had been considering a less-powerful, 8-bit pro-
cessor). Gates was also instrumental is pushing IBM
to adopt an open architecture, arguing that IBM
would benefit from the software and peripherals that
other companies could make.
Initially, IBM was intent on licensing the CP/M op-
erating system, produced by Digital Research, for the
IBM PC. However, the current version of CP/M was
designed to work on an 8-bit processor, and Gates had
persuaded IBM that it needed a 16-bit processor. In a
series of quick moves, Gates purchased a 16-bit op-
erating system from a nearby company, Seattle Com-
puter, for $50,000. Gates then hired the designer of the

operating system, Tim Paterson, renamed the system
MS-DOS, and offered to license it to IBM. In what
turned out to be a masterstroke, Gates persuaded IBM
to accept a nonexclusive license for MS-DOS (which
IBM called PC-DOS). MS-DOS had a command-line,
text-based interface and could only run one program
at a time, but, for 1981, it was state of the art.
To drive sales, IBM commissioned developers to
build a number of applications for the IBM PC. In
addition to Microsoft Basic, these included a version
of VisiCalc, an early spreadsheet that was a popular
application for the Apple II, a word processor, Easy-
Writer, and a well-known series of business programs
from Peachtree Software. Introduced in August 1981,
the IBM PC was an instant success. Over the next
2 years, IBM would sell more than 500,000 PCs, seiz-
ing leadership from Apple, which had dominated the
PC market with the Apple II. IBM had what Apple
lacked—an ability to sell into corporate America. As
sales of the IBM PC mounted, more independent
software developers started to write programs to run
on the IBM PC. These included two applications
that drove adoptions of the IBM PC: word process-
ing (WordStar and WordPerfect) and a spreadsheet
(Lotus 1-2-3).
The success of IBM gave birth to clone manufac-
turers who made “IBM-compatible” PCs that also uti-
lized an Intel microprocessor and Microsoft’s MS-DOS
operating system. The “clone” industry was born when
engineers at Compaq Computer reverse engineered
the BIOS chip in the original IBM PC. The BIOS chip
converted the operating system into machine language,
and was integral to the operation of the PC. It was the
only key component of the IBM PC that IBM had not

02277_Case20_rev02.indd 153 01/10/15 6:03 PM
bought off the shelf from other manufacturers. Com-
paq’s BIOS chip was functionally equivalent to the chip
in the IBM PC, but used different code and thus did not
violate IBM’s copyright. Other PC companies soon fol-
lowed Compaq’s lead, including Tandy, Zenith, Lead-
ing Edge, and Dell. The birth of the clone industry was
a huge boon to Microsoft. By virtue of its nonexclusive
license with IBM, Microsoft had the ability to sell MS-
DOS to a growing number of clone makers.
In 1983, Microsoft expanded its product offering
with the introduction of Word for MS-DOS, the com-
pany’s first word processor. Word was differentiated
from other word processors at the time by being the
first to use a mouse. In 1985, Microsoft introduced
a version of Word to run on Apple’s latest machine,
the Macintosh. In 1985, Microsoft released the first
version of Excel, the company’s spreadsheet offering,
which competed with the bestselling Lotus 1-2-3. In
1987, Microsoft purchased a start-up company that
had developed presentation software for the Macin-
tosh. This product ultimately became PowerPoint, the
first version of which was introduced in 1990.
The lead developer for Word and Excel was
Charles Simonyi, a key hire at Microsoft who had for-
merly worked at PARC, Xerox’s legendary research
center, which had pioneered the development of the
computer mouse, on-screen icons, a graphical user

interface (GUI), object-oriented programming, and
the laser printer. In a quirk of business history, senior
management at Xerox had passed on the opportunity
to commercialize these innovations, which opened the
doors to Apple and Microsoft to pick up the ideas
and run with them.
In 1982, with business booming, Paul Allen was
diagnosed with Hodgkin’s lymphoma. His cancer was
successfully treated with radiation therapy, but he
took an extended leave and never again held an oper-
ating position at Microsoft. In 2000, he resigned from
the company’s board of directors.
BuIldInG the douBle
Monopoly
By the mid-1980s, Microsoft was doing very well.
It became apparent that the MS-DOS business had
some compelling economics. While Microsoft bore
the costs of developing successive versions of MS-
DOS, the incremental or marginal costs of producing
individual copies of MS-DOS were very low. In the
case of new PCs, Microsoft simply gave the master
code to the manufacturer, who installed MS-DOS
on every machine built, and paid Microsoft a licens-
ing fee per machine. This resulted in gross margins
as high as 90%. In contrast, the gross margins of PC
makers at the time were closer to 40%.
the development of Windows
and office
In 1986, Microsoft went public. The IPO raised $61
million and valued Microsoft at $650 million. Micro-
soft now had over 700 employees. The company’s po-

sition, however, was not secure. Although MS-DOS
was the most widely used operating system for PCs,
Apple had shown what the future looked like in 1984
when it introduced the Macintosh. Borrowing many
ideas from Xerox PARC, the Mac had a graphical
user interface (GUI) which displayed programs as on
screen icons. It also used a computer mouse with its
point-and-click methodology for selecting tasks. This
intuitive interface was a big improvement in usabil-
ity over the clunky command-line interface of MS-
DOS, which could be intimidating for people without
a computing background.
Gates realized that a GUI interface was the future.
Microsoft worked closely with Apple to develop the
first version of Word for the Mac, which took full
advantage of the Mac’s GUI interface and mouse
capabilities. Word for the Mac soon became one of
the bestselling Mac applications. At the same time,
Microsoft took what it learnt from Apple and used it
to start developing its own GUI interface, which was
christened Windows.
Apple inadvertently helped Microsoft in two ways.
First, it licensed its “visual displays” to Microsoft in
1985, enabling Microsoft to legally develop a GUI
that had a similar look and feel to the Mac. Second,
it was difficult to develop applications for the Mac.
Apple did a poor job of providing tools to help third-
party software developers write programs for it. In
contrast, Gates often said that the most important
strategic business unit at Microsoft was its tools busi-
ness. Microsoft invested heavily in the development
of tools to boost developer productivity. This made
02277_Case20_rev02.indd 154 01/10/15 6:03 PM

it easy for third-party developers to write applications
for MD-DOS, and later Windows, and drove adop-
tion of Microsoft’s operating system offerings.
The first version of Windows was introduced in
November 1985. It was a GUI shell that displayed
programs as on-screen icons allowed for multitasking
(using more than one program at a time). Windows
sat on top of MS-DOS. It was commercial failure.
Many users lacked sufficiently powerful hardware
to run Windows, and there were few programs avail-
able that took advantage of its features. Nevertheless,
Microsoft continued development work on Windows.
IBM, too, saw the importance of a GUI interface.
IBM was losing market share to the clone makers, so
it decided to replace MS-DOS with its own GUI op-
erating system, OS/2. IBM contracted with Microsoft
to develop OS/2. However, the arrangement was a dif-
ficult one. IBM resented the fact that Microsoft had
facilitated the emergence of the clone businesses by
licensing MS-DOS to IBM’s competitors. IBM was
also concerned that Microsoft continued to work on
Windows even while it developed OS/2. For its part,
Microsoft knew that IBM was also investing in the
UNIX operating systems, and had licensed a UNIX
based PC operating system, NeXTSTEP, from NeXT,
a PC company that Apple founder Steve Jobs estab-
lished after he left Apple in 1985. Microsoft knew it
would be in trouble if IBM scrapped OS/2 in favor
of a UNIX alternative. The pivotal event was IBM’s

announcement that it would release two versions of
OS/2, a powerful version that would be exclusive to
IBM machines, and a basic version for other PC mak-
ers. That wasn’t news that Microsoft wanted to hear.
Gates decided to sever links with IBM and go for
broke on Windows.
The fruit of this effort, Windows 3.0, was intro-
duced in 1990. Windows 3.0 was a big improvement
over earlier versions. It was well reviewed and became
a major commercial success. IBM’s OS/2, meanwhile,
garnered mixed reviews and limited market traction.
PC manufacturers, seeing a chance to deliver a body
blow to IBM, which after all was a direct competitor,
adopted Windows 3.0, bundling it with most new PCs.
Market momentum toward Windows was also helped
by the introduction versions of Microsoft’s increas-
ingly popular applications products, Word, Excel,
and PowerPoint, for Windows 3.0. At the time, each
of these products was number 2 in its market space
(Word was behind WordPerfect, Excel behind Lotus
1-2-3, and PowerPoint trailed Harvard Graphics).
Microsoft’s rivals, however, were slow to introduce
versions of their products for Windows, resulting in
big market-share gains for Microsoft’s offerings. To
further drive adoption of Windows, Microsoft re-
doubled its efforts to provide developers with the best
tools, and to persuade them that Windows was best
platform for which to develop applications.
In 1992, Microsoft combined its three leading ap-
plication programs—Word, Excel, and PowerPoint—
into a single offering for Windows, which it called
Office. Office was priced slightly below the com-
bined price of each individual offering. Microsoft

also promised interoperability between the three pro-
grams, although this took several versions to perfect.
Microsoft’s rivals, including most notably WordPer-
fect and Lotus, lacked a comparable suite of offerings
and were unable to match Office. From this point on,
Office became the dominant suite of productivity pro-
grams for information workers.
During the late 1980s, Microsoft started an
operating system development project targeted primar-
ily at servers. Servers were specialized PCs that sat at
the heart of corporate networks of “client” PCs and
“served” those “clients,” holding shared files and appli-
cations programs used by many machines, such as email
systems. Dubbed Windows NT, this was a powerful,
32-bit operating system that could run on servers. Un-
like Windows 3.0, it was not DOS based (“NT” stood for
new technology). To develop Windows NT, Microsoft
hired a team of software developers led by Dave Cutler
from Digital Equipment Corporation (DEC). Cutler’s
team drew on their prior experience developing 32-bit
systems for DEC to develop Windows NT.
The move into the server OS business represented
recognition by Microsoft of the growing importance
of client-server systems within large enterprises. The
development of Windows NT constituted a strate-
gic shift by Microsoft toward the enterprise market,
where the primary demand for client-server systems
resided. Windows NT was an attempt to make secure,
stable software that could run “mission-critical” ap-
plications within enterprises. Client-server networks
were taking business away from the mainframes and
minicomputers sold by the likes of IBM, DEC, and
Hewlett Packard. Microsoft wanted a piece of this
business, and with Windows NT it intended to get

it. Introduced in 1993, Windows NT was a solid, sta-
ble, secure system that gained increasing acceptance
02277_Case20_rev02.indd 155 01/10/15 6:03 PM
within enterprises. Windows NT marked the begin-
ning of Microsoft’s server business.
To gain further enterprise business, Microsoft
added an email client to its Office suite, Outlook,
which could connect with corporate email hosted
on severs. By the time Windows NT was introduced,
Microsoft was also selling a relational database offer-
ing, Microsoft SQL Server. A relational database is
a product whose primary function is to store and re-
trieve data as requested by other software applications,
be they on the same computer or running on another
computer across a network. Microsoft SQL Server was
the company’s entry into the enterprise-level database
market, and it pitted Microsoft against Oracle and
IBM, both of which had relational database offerings.
The 32-bit technology underlying Windows NT
was subsequently incorporated into the next two re-
leases of Windows for PCs, Windows 95, and then
Windows XP (introduced in 1995 and 1998, respec-
tively). Increasingly, this made Windows more than
just a GUI that sat on top of MS-DOS. Windows
was becoming a fully-fledged operating system in its
own right. By the time Windows 2000 was introduced,
Windows had effectively shed it DOS heritage.

Windows 95 was a landmark release. Its enhanced
graphics effectively closed the gap between Windows
and Apple’s Macintosh. Since the introduction of the
IBM PC, Apple had been a niche player in the PC
business, focused primarily on the education, graph-
ic artist, and desktop publishing markets, where its
graphic displays and ease of use gave it maximum ad-
vantage. With Windows 95, however, the differential
appeal of the Mac all but vanished. By 1997, Apple
was facing bankruptcy.
the internet tidal Wave
One other event occurred during the 1990s that helped
to cement the dominance of Microsoft: the explosive
growth of the World Wide Web (WWW). Tim Bern-
ers Lee, a British researcher at CERN in Europe, in-
vented the Web during the early 1990s. The WWW sits
on top of the Internet, which itself had been developed
by American researchers during the 1960s and 1970s.
As Berners Lee conceived it, the Web used hypertext
markup language (HTML) and hypertext transfer pro-
tocol (HTTP) to enable links to be made to information
anywhere the Internet, thereby creating an enormous
“web” of information. In 1993, a team at the University
of Illinois led by a 22-year-old student, Marc Andrees-
sen, developed the Mosaic Web browser. Mosaic could
display information on the Web graphically. This was
the beginning of the enormous growth of the WWW.
After graduation, Andreessen joined up with Jim Clark,
the former CEO of Silicon Graphics, to form Netscape.
Netscape further developed the Mosaic Browser,
releasing its version, Netscape Navigator, in November
1994. Netscape Navigator quickly became the domi-
nant Web browser. In August 1995, Netscape held an
IPO. The stock was offered at $28 a share, but closed its

first day at $75, valuing Netscape at $2.9 billion.
Prior to the explosive growth of the Web,
Microsoft’s Internet strategy involved the creation of
a dial-up online service, MSN, which was developed
to be included with Windows 95. MSN was similar in
conception to early versions of AOL, with email capa-
bilities, message boards, chat rooms, and some news
and weather offerings. The first version of MSN did
not have a Web browser and users could not connect
to the Internet. With MSN and Windows 95 in late
development, Gates became aware of the rapid growth
of the Web. Microsoft legend has it that the WWW
was brought to the attention of Gates by memos from
two junior engineers, Steve Sinofsky and Jay Allard.
Gates immediately saw its strategic significance. In
May 1995, Gates wrote a memo to his executive staff
and direct reports, calling the growth of the Internet a
“tidal wave.” Gates wrote that the Internet “is crucial
to every part of our business” and “the most impor-
tant single development to come along since the IBM
PC was introduced in 1981”. In his memo, Gates went
on to say that Netscape was a “new competitor”, and
that Microsoft’s strategy should be to make it clear
that “Windows machines are the best choice for the
Internet.”11
To fulfill Gates’s vision, Microsoft acted rapidly. It
licensed a version of the Mosaic Web browser from a
company called Spyglass, improved on it and released
it as Internet Explorer (IE) version 1.0 in August 1995.
IE 1.0 was bundled with Windows 95 and appeared as
an icon on the start screen. Although it was too late to
change MSN in time for the release on Windows 95,
MSN was reworked to utilize HTML and HTTP and
give users access to the Web. In late 1996, the new ver-

sion of MSN, MSN 2.0, was released. Microsoft also
quickly added the ability to insert hypertext links into
Office documents, allowing readers of those docu-
ments to navigate away to websites.
02277_Case20_rev02.indd 156 01/10/15 6:03 PM
antitrust issues
All of these moves were successful for Microsoft.
However, the bundling of IE with Windows bought
Microsoft to the attention of the U.S. Department
of Justice (DOJ). The DOJ argued that the bundling
strategy put Netscape at a competitive disadvantage
and was a deliberate attempt on Microsoft’s part to
“squash” their rival. Whereas Netscape charged con-
sumers for their browser, IE was perceived as being
a “free” product. Moreover, the DOJ contented that
Microsoft configured the Windows code such that it
was slow and difficult for users to download Netscape
Navigator and install it on the Windows desktop. For
its part, Microsoft claimed that IE was part of the op-
erating system and that users expected it to be there.
In the end, the DOJ prevailed. The judge in the
case ruled that Microsoft was a monopoly, and that
the bundling strategy represented an abuse of Micro-
soft’s monopoly power. In 2002, Microsoft and the
DOJ reached a settlement that required Microsoft to
share its application programming interfaces (APIs)
with third-party companies, so that they could write
programs that worked well with Windows. Micro-
soft, however, was allowed to continue bundling IE

and other products with Windows. For Netscape, this
was a Pyrrhic victory. The company continued to lose
market share against IE, and was not helped by re-
ports that its products were inferior in quality to IE.
In 1999, Netscape was sold to AOL for $10 billion, a
price tag that left many scratching their heads. AOL
discontinued the Netscape browser in 2008. At the
time it had less than a 1% share of the browser mar-
ket, down from over 90% in 1995.
ManaGInG
the coMpany
From the outset, Gates made a point of hiring people
who were like him—young, bright, driven, competi-
tive, technically sharp, and able to argue effectively for
what they believed in. A small but influential num-
ber of these hires came from Xerox PARC, including
Charles Simonyi, who led the development of the first
versions of Word and Excel. Ballmer hired some of
sales personnel. One of these was an aggressive sales-
man named Vern Raeburn. Gates had insisted that
Microsoft should not sell directly to end-users, but
Raeburn marshaled his arguments and persuaded
Gates to change course. Raeburn quickly pulled to-
gether a team to market and sell Microsoft’s products
to consumers.
This was the genesis of a split within Microsoft
into two distinct functions that persist to this day:
an engineering function that develops products, and
a sales and marketing function that sells them. For
years, Gates was the de facto head of engineering
with responsibility for product development, where-
as Ballmer was responsible for sales and marketing.

Although Microsoft went on to create different busi-
ness units—Windows, Windows Server & Tools, and
Office all had their own business units, for example—
the engineering and sales and marketing functions
would cut across these units, creating a loose, matrix
organization. Finance, legal, and human relations
functions also cut across business units.
To motivate key employees and encourage them
to work long hours and commit to the company, Mi-
crosoft gave them stock options. When the company
did well, and the stock price rose, these employees
made substantial sums of money. As the stock price
surged after the IPO in 1986, Microsoft stock options
became a major draw, enabling Microsoft to hire the
best and the brightest. By 2000, it is estimated that the
surging stock price had created over 10,000 million-
aires among Microsoft employees.12 Paradoxically,
by the mid-1990s, some early employees were so se-
cure financially that their competitive edge had been
blunted. Some were said to have retired on the job.
Many other key employees simply left the company to
pursue other interests.
Another notable feature of Microsoft that
emerged over time was the tendency for people to
circulate within the company. It was not unusual for
people to change jobs every 18 months, and move
from business to business.
formalizing Management Processes
As the company’s growth began to accelerate in the
early 1980s, Gates brought in people with business
experience to help take the load of his shoulders and
manage the day-to-day operations and finance side of
the business, leaving him to focus on product develop-

ment, technology, and strategy, and Ballmer to focus
on sales. A key early hire was John Shirley. Shirley
02277_Case20_rev02.indd 157 01/10/15 6:03 PM
worked for Tandy Corporation, the parent company
of Radio Shack. Shirley joined Microsoft as president
in 1983 and stayed through 1990. He remained on the
board until 2008. People within the company would
joke that Shirley was there to provide some adult su-
pervision.
In 1994, Gates hired Bob Herbold as chief operat-
ing officer (COO). Herbold had a PhD in computer
science and had worked at Procter & Gamble for 25
years, where he was responsible for P&Gs worldwide
marketing and brand management. Herbold stayed at
Microsoft until 2001. Another “adult” in charge of
day-to-day operational issues, Herbold saw it as his
job to bring discipline to the company without under-
mining the characteristics that had made it competi-
tive. Herbold describes arriving at a company that was
chaotic: “Incompatible systems and divergent practic-
es companywide were causing all kinds of problems.
Bills from suppliers weren’t being paid on time. We
never knew precisely how many people worked for the
company. Business units set projections using incom-
patible frameworks and measures that prevented a
comparison of their performance.”13
Much of this chaos was the result of rapid rev-
enue growth often exceeding 30% a year. Herbold

notes “a balkanized system had grown up because,
for years, Bill had focused on product development
and Steve had focused on sales. Meanwhile, business
and geographical units had relatively free rein to cre-
ate local functional staffs, set business practices, and
build stand-alone information systems. They weren’t
particularly interested in giving up their autonomy.”14
Herbold moved fast to standardized, basic business-
es processes at Microsoft, including financial reporting,
vendor payments, and human resources policies. He
also found a company with no formal strategic plan-
ning process in place. Herbold developed a rolling,
3-year planning process based on a standardized format
that included historic and future projections of market
share, revenues, costs, and profits. The process distin-
guished between established products, such as Windows
and Office, and new products where there was a much
greater degree of uncertainty. The plans were modified
and streamlined every year based on new data.
Herbold also formalized a human resources per-
formance-appraisal process that had originally been
developed by Gates. The appraisal process required
managers to evaluate their direct reports, and it uti-
lized a forced curve, such that some members of a
team would always end up being classified as star
performers, and others as poor performers. The star
performers would get big pay increases, whereas the
underperformers would be “encouraged to find a job
outside of the company” if they couldn’t bring up
their rating over time. Critics of this system, known
as stack ranking, noted that it pitted employees on
a team against each other, encouraged backstab-
bing, and created a real problem for managers who

had built strong teams, because they were forced to
classify some of their team as underperformers, even
though in an absolute sense they might be good.15
the Product development Process
Given the nature of Microsoft’s business, a key as-
pect of the company’s organization and management
structure relates to the way it formalizes development
of its software products. In the early years “superpro-
grammers” such as Simonyi and Gates drove the vi-
sion for products. Gates came to the realization that
this model would not scale well. Superprogrammers
were in short supply, had little interest in updating a
product once it had been created, might not under-
stand the market well, and were prone to clash with
other superprogrammers. In response a formal sys-
tem for developing, testing, and releasing products
emerged in the mid-980s.16
The process starts with a program manager, who
is responsible for specifying the vision of the product,
its key features, development schedule, development
process, and implementation tradeoffs. The program
manager works closely with senior software devel-
opers and with product managers in marketing to
achieve all of this. His or her role, in other words, is
to coordinate engineering and marketing and distill
out of this what the product should do, what its key
features should be, and a schedule to achieve these.
The program manger is then responsible for manag-
ing the overall development effort, and must make the
call on features to add or cut in order to hit goals such
as schedule. On complex products such as Windows
and Office there is a hierarchy of program managers.
For example, while there may be an overall program
manager for a new version of Office, there will also

be program managers for each constituent program—
Word, Excel, PowerPoint, and so on.
It is important to understand that many of the
ideas for a product’s features come from developers
02277_Case20_rev02.indd 158 01/10/15 6:03 PM
and marketers. Program managers are leaders and fa-
cilitators of the process, rather than bosses, and they
must work through persuasion and negotiation. In
part, this may be due to the high status that developers
in particular have within Microsoft’s culture, some-
thing that can be traced back to Gates and Simonyi.
Indeed, most program managers were themselves star
developers who rose through the engineering ranks.
Once the product vision, key features, schedules,
and the like have been mapped out, it is up to soft-
ware developers to implement the vision and features.
Developers write the code. Typically, a small team of
senior developers and program managers will take
charge of the product architecture, and developer
leads (first-line managers) will provide detailed guid-
ance to their teams of programmers. While developers
may be the source of ideas for new features, they are
required to clarify what each feature accomplishes,
and to help program managers decide what to in-
clude in a product, and what to cut in order to stay
on schedule.
Testing the code is the responsibility of developers

and testers. Developers are meant to test their own
code frequently (typically every day). They also work
in pairs with testers and are required to hand their
code over to a tester for testing before adding their
work to the “official build.” The goal in this process
is to reduce the bug count to zero. Microsoft also
has a specially trained group of people who perform
final tests on a completed product to see if it is ready
for shipment. As part of this process, beta versions
of the product will be released to key customers for
feedback, and the product will be tested in a usabil-
ity lab. Microsoft has approximately one tester for
every developer, an unusually high ratio but one that
is consistent with the goal of producing stable, secure
software that can run mission-critical applications for
enterprises.
Over time, Microsoft routinized this process, with
offering such as Windows, Office, and SQL Server go-
ing through 3- to 5-year definition, development, test,
and release schedules. As these products have grown
in complexity and features, there was a tendency for
the process to become more bureaucratic and harder
to manage. This was made more challenging by the
fact that many program managers, senior develop-
ers, and development leads were people who had ex-
celled in a technical sense but had little management
training or experience. In the mid-2000s, this led to
serious issues when Microsoft ran over budget and
over schedule while trying to develop Windows Vista
(discussed later in the case).
the BallMer years
When Bill Gates handed the CEO role over to Steve

Ballmer in February 2000, the company was at the
top of its game. Windows and Office dominated their
respective markets, generating prodigious amounts
of free cash flow. The stock price had hit an all-time
high of $58.72 on December 23, 1999. Microsoft was
the most valuable company on the planet, and Gates
the world’s richest man. Gates continued to work full
time at Microsoft until 2008, assuming the role of
chief software architect, with primary oversight for
product development. He also remained chairman of
the company.
During the Ballmer era, revenues increased 280%,
to $70 billion, while net profit expanded by 215%, to
$23 billion. The stock price, however, dropped below
$40 a share in mid-2000, and did not break through
that level again until 2014, after Ballmer had resigned.
The failure of the stock price to advance despite grow-
ing top and bottom lines reflected a widely held belief
among investors that Microsoft had lost its leadership
position in the industry. Moreover, critics believed
that the company was destroying economic value by
investing in businesses that did not generate a positive
ROI. These included the Xbox videogame business,
Internet search, and the device businesses that encom-
passed the Zune music player, smartphones, and tab-
let computers. By the end of the Ballmer era, it was
widely believed that the shift to a world characterized
by mobile devices and cloud computing presented an
existential threat to Microsoft’s core operating system
business.
One of the first problems that Ballmer had to con-
front was the risk of a slowdown in the rate of growth
of both Windows and Office. The markets for both
products were now mature in most developed nations,

implying that revenues would increasingly come from
replacement rather than first-time demand. Although
there was still plenty of room for growth in develop-
ing nations, those markets were also characterized
by extremely high levels of piracy—as much as 90%
in markets like China and Vietnam. Indeed, even in
02277_Case20_rev02.indd 159 01/10/15 6:03 PM
developed markets such as the United States, piracy
rates for software products are as high as 20 to 25%.17
Two trends helped Microsoft weather the matu-
ration of its two primary product offerings. First, a
significant number of consumers in developed mar-
kets purchased multiple devices: a laptop and a desk-
top for example. Second, Microsoft continued to
grow its share of the enterprise markets for Windows
Server and SQL Server, taking business from UNIX,
LINUX, Oracle, and IBM. Microsoft’s success in the
enterprise space reflected the fact that to a consider-
able extent, the company had succeeded in building
stable, secure software that could run mission-critical
applications in enterprises. Given that Windows for
the client and Office were also widely used within en-
terprises, Microsoft was increasingly focused on its
enterprise business. Indeed, by the early 2000s, Mi-
crosoft was more of an enterprise company than a
consumer company.
Product diversification: Xbox
Under Ballmer, Microsoft continued to diversify its

product offerings, entering into new markets. The first
was the videogame market. By the late 1990s, Sony
dominated this market with its PlayStation console
and related game offerings. The market was worth
$20 billion globally and was growing. Microsoft saw
the PlayStation as a threat. The PlayStation was a
specialized computer that ran a non-Microsoft oper-
ating system, and could theoretically be connected to
the Internet via a TV cable. Moreover, the PlayStation
was often located in the living room. Bill Gates had
long dreamed of having Internet-enabled computing
devices in the living room that operated interactive
TV, and could also be used for Web browsing, playing
games, and online shopping; but Gates wanted those
devices to run Windows.
Microsoft had capabilities that persuaded man-
agement that the gaming market was a viable target.
Microsoft had produced one of the bestselling PC
games of all time—Microsoft Flight Simulator—and
had published another, Age of Empires. Through
MSN it also had the world’s largest online gaming
site, MSN Gaming Zone, which had 12 million sub-
scribers in the early 2000s. Moreover, Microsoft in-
tended to use a customized version of the Windows
operating system to power Xbox. This would save de-
velopment costs and make it easier for developers to
write games for the Xbox, because many were already
familiar with Windows programming APIs and tools.
Microsoft lacked the ability to produce hardware,
so it decided to outsource this to a contract manu-
facturer, Flextronics. Microsoft’s strategy was to price
the Xbox at or below cost to drive adoption, and then
make money on the sales of games, either directly in

the case of games developed in house, or from royalty
fees in the case of games developed by third parties. For
this strategy to work, it had to guarantee Flextronics a
profit margin, which meant paying Flextronics a sub-
sidy on every machine manufactured.
Xbox was introduced in late 2001, after $1.5 bil-
lion in development costs. The company faced tough
competition from Sony’s new offering, PlayStation 2
(PS2). To drive adoption, it cut prices for hardware ag-
gressively. By 2003, Microsoft was thought to be losing
$100 on every Xbox it sold. To make that back and
turn a profit, Microsoft reportedly had to sell six to
nine games per Xbox.18 By late 2004, Xbox was still a
distant second to PS2 in the videogame market, hav-
ing sold 14 million consoles against Sony’s 70 million.
While Sony was making good money from the business,
Microsoft was registering losses. Microsoft’s home and
entertainment division, of which Xbox was a part, lost
$4 billion between the launch of Xbox and mid-2006.
In November 2005, Microsoft introduced its next-
generation console, Xbox 360. Again, contract manu-
facturers made the machine, and again Microsoft paid
them a subsidy to ensure their profit margins. Sony fol-
lowed a year later with its PS3 console, as did Ninten-
do with the Wii console. The Wii was a less powerful
machine than either Xbox 360 or PS3, but it came with
a motion sensor controller than changed the way play-
ers interacted with games. The Wii bought a new gen-
eration of casual gamers into the market and turned
into a surprise hit for Nintendo. Meanwhile, Micro-
soft and Sony slugged it out in the hard core gaming
market. Demand for Xbox was helped by Microsoft’s
enormously popular Halo franchise. As the market ex-
panded, all three companies were able to make profit

on an operating basis in the business. However, both
Microsoft and Sony hurt themselves with quality
problems and component shortages early in the prod-
uct cycle (Microsoft had to take a $1.05 billion write
off in 2007 for replacing poor-quality consoles).
Although Microsoft did achieve profitability on
an operating basis for Xbox business by late in the
Xbox 360 cycle, on a cumulative basis the return on
02277_Case20_rev02.indd 160 01/10/15 6:03 PM
investment was still believed to be negative. One bright
spot for Microsoft was the growth of its online game
subscription service, Xbox Live. Introduced in 2002, by
mid-2013, Xbox Live had around 45 million paying sub-
scribers who used it for everything from playing multi-
player games online to streaming movies from Netflix
and browsing Facebook. At the time, Microsoft was
thought to be generating annual revenues in excess of $3
billion from Xbox Live.19 Microsoft also garnered strong
reviews and sales for its Kinect motion sensor controller.
Introduced in late 2010 for the Xbox 360, Kinect was
developed as a response to Nintendo’s Wii controller.
In late 2013, Microsoft launched its third-gener-
ation game console, Xbox One. Sony matched with
the launch of its PS4 system. At launch, Microsoft
positioned Xbox One as an all-purpose entertainment
system for the living room, controlling TV, music,
and film streaming services through the Kinect mo-
tion and voice sensor, in addition to being a game

console. Sony focused its marketing for the PS4 on
the core gaming market. By mid-2014, Sony was
believed to have sold 7 million PS4 consoles, versus
5 million Xbox One consoles. With Satya Nadella now
in charge, Microsoft changed the marketing strategy
for Xbox One, emphasizing its capabilities as a gam-
ing machine and co- promoting it with new iterations
of its popular Halo and Call of Duty franchises.
Product diversification: internet search
Another hallmark of the Ballmer era was Microsoft’s
expansion into Internet search. Microsoft had long
had primitive Internet search functionality on its
MSN service, but it had never seen search as a cen-
tral feature. This changed with the rise of Google, a
company that didn’t even exist until 1998. At the core
of Google’s rise was a search algorithm that cleverly
ranked the relevance of a page for a search query ac-
cording to the number of pages that linked into that
page. Google went to great lengths to make sure that
its search results were “pure.” It did not mix organic
and paid search results, thereby improving relevance
to the user (paid search results were originally placed
on the right hand side of a search page, separate from
organic search results).
What made Google a valuable company was its
combination of highly relevant search results with
a business model that made money out of search
activity—lots of money. This was the ‘pay-for-click”
model, where advertisers paid Google every time
someone clicked on an advertiser’s link. From a
standing start in 2001, by 2014 Google had grown
into a colossus with $68 billion in revenues, almost
$21 billion in net profits, 67% of the market for Inter-

net search in the United States, and an estimated 70%
of worldwide search marketing spend.
Along the way, Google had moved aggressively
into Microsoft’s turf. Reasoning that with the growth
of smartphones, ever more search would come through
mobile devices, Google had pushed into the smart-
phone business with its Android operating system,
which it licensed to hardware manufacturers for free.
The economic logic was that Google would be the de-
fault search engine on Android phones, so every time
someone search for something on an Android phone,
and clicked on an advertising link, Google would make
money. Google also developed its own Web browser,
Chrome, which it distributed for free. The economic
reasoning was similar. Since search is conducted with-
in a Web-browser environment, and Google was the
default search engine on Chrome, Google would cap-
ture more search based advertising collars if its own
browser were widely used. Both of these products were
phenomenally successful. By mid 2014, Android was
found on 85% of the world’s smartphones, and Chrome
was the browser of choice on 46% of all desktops and
tablets (relegating Microsoft’s Internet Explorer, the
long time market leader, to second place with 20%).20
Microsoft tried to counter Google’s rise in the
Internet search business, but its success was limited,—
and very expensive. Microsoft adopted Google’s pay
for click search model, and developed a similar search
algorithm, but was unable to gain much market trac-
tion and its market share remained stuck under 10%.
Part of the problem was brand confusion. Microsoft’s
search feature was initially known as MSN Search,
sounded dull and uninspiring next to Google. In 2006,
MSN search was rebranded as Windows Live Search,

and given some new features. A year later, the name
was changed again to Live Search. Ultimately, Micro-
soft came to the realization that the “Live” brand was
not resonating with consumers, who found it confus-
ing. In June 2009, Microsoft’s search engine was re-
branded Bing. Microsoft supported the Bing launch
with a $100-million ad campaign.
In 2008, in an attempt to grow its share of the U.S.
paid-search market, Microsoft launched an unsolic-
ited takeover bid for Yahoo. Yahoo was number 2 in
02277_Case20_rev02.indd 161 01/10/15 6:03 PM
the US search market. Microsoft was number 3. Ya-
hoo rejected the bid. A year later, however, following
management changes at Yahoo, Microsoft and Yahoo
entered into a 10-year partnership under which Bing
would be the exclusive search platform on Yahoo.
Although the precise terms of the deal were not made
public, it is known that Microsoft pays Yahoo for
search traffic. In 2013, 31% of Yahoo’s revenue ap-
parently came from Microsoft payments.21
Product diversification: smartphones
and tablets
Microsoft was an early leader in the smartphone busi-
ness. It first offered an operating system for smart-
phones, Windows Mobile, in 2002. By 2007, 42% of
all smartphones used the Windows Mobile operating
system. Smartphone manufactures such as Motoro-
la and HTC paid a licensing fee to Microsoft to use

Windows Mobile. As was normal at the time, Win-
dows Mobile powered smartphones had a physical
keyboard and a small screen. The devices were pri-
marily sold to enterprise customers, who used the
phones for email, appointments, text messaging, and
Web browsing.
In 2007, Apple introduced the first iPhone, which
revolutionized the smartphone market and signifi-
cantly expanded demand (see Table 1). The com-
bination of a touch screen, virtual keyboard, larger
screen size, elegant design, and ease of use made the
iPhone a huge hit in the consumer marketplace. Busi-
ness people too, bought iPhones in droves, leading
many companies to adopt a policy of “bring your
own device” with regard to smartphones. Growth of
the iPhone got a further boost from the development
of third-party applications and the opening of the
Apple App store in 2008, which made it easy for us-
ers to find and download apps onto their phones. The
supply of Apps was facilitated by efforts on Apple’s
part to make it easy for third-party developers to
write Apps for the iPhone. In 2010, Apple introduced
its tablet offering, the iPad. The iPad used the same
iOS operating system as the iPhone and had most of
the same attributes, including elegant design, a touch
screen, and access to the App store through wireless
connectivity. All of this helped drive rapid growth in
consumer demand.
When Apple released the iPhone, Google already
had its own operating systems for a touch screen phone
in development. Google had acquired the original de-
veloper, Android Inc., in 2005. The first smartphones
running on Android appeared in 2008. Google’s busi-

ness model was to offer Android for free and make
money from advertising linked to mobile search. By
2013, Android was the dominant smartphone OS, fol-
lowed by Apple’s iOS (see Table 1). Tablets that ran on
Android stated to appear soon after the launch of the
iPad in 2010, and by 2014 Android was also dominat-
ing the tablet OS market (see Table 2).
year android ios (apple) Microsoft BlackBerry nokia
2007 3 15 12 78
2008 11 17 23 73
2009 7 25 15 34 81
2010 67 47 12 47 112
2011 220 89 9 52 93
2012 451 130 17 34 0
2013 759 151 31 19 0
source: Gartner.com, various press releases.
table 1 Global smartphone sales (millions) 2007–2013
02277_Case20_rev02.indd 162 01/10/15 6:03 PM
The introduction of the iPhone, and then Android
phones, decimated Microsoft’s market share (see

Table 1). By 2011, Microsoft’s OS was found on just
9 million smartphones shipped that year. Android
was on 220 million phones, and Apple sold 89 million
iOS phones. The situation in the tablet market was no
better, where Microsoft was caught completely flat-
footed by the introduction of the iPad. Google, on
the other hand, adapted very quickly and soon gained
market leadership.
In response to the rapid emergence of Apple and
Android, Microsoft developed a new operating sys-
tem for touch screen smartphones, Windows Phone.
Windows Phone had an active-tile, “Metro” interface,
rather than the on-screen icons used by Apple and
Android. The first Windows Phones started to appear
in late 2010. Microsoft also established its own App
store, the Windows Phone Store.
In early 2011, Microsoft entered into an alliance
with Nokia to jointly develop Windows Phones. Like
Microsoft, Nokia had been caught off guard by the
emergence of the iPhone and had seen its market
share slide. Nokia had used its own Symbian operat-
ing system in its smartphones. Like Windows Mobile,
Symbian was a primitive, first-generation smartphone
OS that lacked the full features and functions of
Android and iOS, including touch screen capability,
a virtual keyboard, and a supply of third-party apps
that could be downloaded onto the device. Under
the alliance, Nokia agreed to phase out Symbian and
switch to Microsoft’s Windows Phone OS. The first
products of this alliance, Nokia’s Lumina phones,
were introduced in late 2011.
Despite some favorable reviews, the Lumina
phones grew more slowly than the market, and

Microsoft’s market share remained in the low sin-
gle digits in most nations. Reasons given to explain
this included the lack of appeal of the Metro in-
terface and relative paucity of third-party apps for
Windows Phone.
In September 2013, Microsoft announced its in-
tention to acquire Nokia’s mobile phone business for
$7 billion. In justifying the acquisition, Ballmer argued
that merging the two companies would streamline
product development processes, lower costs, and re-
sult in better phones and higher gross profit margins.22
It was also noted that Nokia was the only company
still willing to make Windows phones, and if Nokia
pulled out, what would happen to Microsoft’s phone
business? Critics wondered whether an acquisition
that made Microsoft a phone maker might not alien-
ate other phone makers, such as HTC, who would
now see Microsoft as a direct competitor.
In addition to the phone business, Microsoft entered
the tablet business with its Surface offering. The Surface
was positioned as a cross over between a conventional
laptop and a tablet. Introduced in late 2012, it used a
Windows 8.1 operating system, which by that time was
also being used for Windows Phone. Like the Windows
Phone, the Surface garnered some favorable reviews,
but sales were slow to pick up and the product initially
failed to make a dent in the dominance of Android
and iOS in the tablet market. However, following the
introduction of the Surface Pro 3 in mid 2014, sales ap-
peared to be accelerating. In the last 6 months of 2014,
Microsoft sold $2 billion worth of Surface tablets.
Windows offerings Under Ballmer

Windows Vista was the first version of Windows com-
pletely developed under Ballmer’s leadership (although
Bill Gates oversaw the project). Vista started out as a
more ambitious project with the code name of Long-
horn, but when that ran into difficulties, it was recast
as Vista. A primary goal for Vista was to increase secu-
rity. Released in January 2007, more than 5 years after
its predecessor, Windows XP, it was not well received
by the marketplace. Vista took 2 years longer than ex-
pected to develop and it was several billion dollars over
budget. It was a huge program—with 50 million plus
lines of code—and utilized a lot of computer memory
to run, resulting in unacceptably slow performance for
many users. It quickly drained battery life on laptop
year android ios (apple) Microsoft
2011 17 40 0
2012 53 61 1
2013 121 70 4
2014 160 65 11
source: Gartner.com, various press releases.
table 2 Global tablet sales (millions)
2010–2014
02277_Case20_rev02.indd 163 01/10/15 6:03 PM
computers. Moreover, it irritated users with constant

popup authorization prompts for user account control.
Many potential adopters simply stuck with Windows
XP rather than switch to the much-maligned Vista.
By October 2009, Windows Vista had 19% of the PC
operating system marketplace, while Windows XP,
an 8-year-old OS, still enjoyed a 63% share.
Many insiders blamed the poor performance of
Vista on a development process that got out of hand.
One problem was “too many VPs in reporting struc-
tures too narrow.” There were 12 layers of manage-
ment between Bill Gates and a developer at the base
of the Windows organization. As one former Win-
dows development lead noted:
“I once sat in a scheduled review meeting
with at least six VPs and ten general manag-
ers. When that many people have a say, things
get confusing. Not to mention, since so many
bosses are in the room, there are often negotia-
tions between project managers prior to such
meetings to make sure no one looks bad . . .
In general, Windows suffers from a proclivity
for action control, not results control. Instead
of clearly stating desired outcomes, there is a
penchant for telling people exactly what steps
they must take.”23
Other insiders complained about a lack of ac-
countability, constant churning of features and speci-
fications, with new features often being added without
adequate testing, leading to system crashes and fur-
ther development delays. Several people also noted
that with Gates heading Vista, CEO Steve Ballmer
was unwilling to step in and resolve problems that
were resulting in delays and cost overruns.

Once Vista shipped, many of the top engineers
on the project retired. Steve Sinofsky, who had been
running Office, was bought in the run Windows. At
Office, Sinofsky had run a very tight ship, releasing
new versions on schedule like clockwork. The Office
organization was also much flatter than the Windows
division, with only four levels of management.
Sinofsky flattened the Windows organization, re-
ducing the number of levels of management from
12 to 5. He pushed developers to get Vista’s successor,
Windows 7, to market quickly. Originally conceived as
an incremental update to Vista, Windows 7 was a more
streamlined program that fixed many of the perfor-
mance problems and irritations with Vista. Introduced
in 2009, reviewers saw Windows 7 as a big improve-
ment over Vista, and the operating system sold well.
Once Windows 7 shipped, Sinofsky and his team
turned their attention to Windows 8. Released in
2012, Windows 8 was positioned as an operating
system for the new era of digital devices. Windows 8
used the same Metro-style, tile-based interface that
had first been used on Windows Phone. Despite the
lukewarm reception of the Metro interface on the
phone, Microsoft saw the interface as an important
differentiator. Sinofsky was a major advocate of the
Metro interface, going so far as to push Microsoft
to kill a competing interface for tablets being devel-
oped within the company because it was inconsistent
with the Metro theme that he wanted on all devices.24
Known as the Courier, the tablet was the brainchild
of a group within Microsoft’s Entertainment and
Devices Division, headed by Jay Allard. The Courier

was on track to hit the market in 2010, just months
behind the iPad. Widely admired within Microsoft,
Allard was the force behind the creation of the Xbox
business and was instrumental in pushing Microsoft
to embrace the Web back in 1995.
The Courier was a two-screen tablet that folded
like a book and had a touch screens. Early prototypes
had elicited rave reviews from outsiders who had seen
it, some preferring what they saw to prototypes of
the iPad, which was then under development. But the
Courier used a modified version of Windows as its
operating system, and the interface departed substan-
tially from the Windows norm.
When the Courier dispute surfaced, Ballmer
found himself in the position of having to choose be-
tween two of his best managers. Unable to make up
his mind, he brought Gates into the decision. Gates,
who by now had given up all day-to-day operating re-
sponsibility, met with Allard and his team. His criti-
cism was that Courier didn’t align with Microsoft’s
key Windows and Office franchises. Not only did it
use a customized version of Windows, and a nonstan-
dard interface, but it also did not include an Outlook
email client (Allard pointed out that users could get
email through an onboard Web browser). For Gates,
this was a fatal flaw, and the Courier was cancelled.
Within months, Allard had left Microsoft along with
his boss, Robbie Bach. It would be another 2 years
before Microsoft had a tablet offering, the Surface.
In addition to the Metro interface, Windows 8 also
supported touch screen technology and could be used
02277_Case20_rev02.indd 164 01/10/15 6:03 PM

on a tablet in addition to desktop and laptop PCs.
Released in 2012, Windows 8 received decidedly
mixed reviews. Although reaction toward its perfor-
mance improvements, security enhancements, and
improved support for touchscreen devices was posi-
tive, the new user interface of the operating system
was widely criticized for being potentially confusing
and difficult to learn. Many users particularly disliked
the fact that Microsoft had removed the start menu.
Market take-up of Windows 8 was slower than Mi-
crosoft had hoped. Sinofsky abruptly left Microsoft in
December 2012. Recognizing that the Metro interface
was not resonating with many users, Microsoft an-
nounced that it would release an update, Windows 8.1,
in October 2013. Windows 8.1 tried to address some
of the criticisms, and gave users to ability to dispense
with the Metro interface and revert to the traditional
start button and menu. Despite this, adoption con-
tinued to be slow. By mid-2014, only 12.5% of PCs
were using Windows 8 or 8.1. Most consumers and
corporation stuck with Windows 7.
the cloud computing initiative
By the mid-2000s, serious conversations about cloud
computing were taking place within Microsoft. The
“cloud” referred to the idea that data, operating
systems, and applications could be hosted on server
farms comprising of thousands of machines, rather
than on servers and PCs within an enterprise. These
conversations were based on a realization that in a

world where computing device users were always con-
nected to the Internet through wired or wireless links,
there were compelling economic reasons for moving
computing power and programs off servers located
within enterprises and onto server farms. Specifically,
the cloud could deliver more value to users at a lower
cost than traditional client-server networks.
On the value side, there was clearly great utility as-
sociated with storing files on the cloud and being able
to access those files anywhere anytime through any
connected device. The files could be in the form of
documents, music, video, or databases. Moreover, by
reaching out and accessing programs and data stored
on the cloud, users with simple devices such as smart-
phones and tablets could theoretically access vast
amounts of computing power when they needed it.
On the cost side, it was apparent that moving com-
puting resources onto the cloud could save businesses
a lot of money. Corporate IT departments tradition-
ally shouldered the costs of buying and maintain-
ing computer hardware and software, activities that
accounted for almost 90% of all IT costs. Servers,
however, often only ran at 5 to 10% capacity, while
much of the software installed on corporate servers
and PCs was only rarely used. By moving data and
applications onto a server farm, demand for comput-
ing resources could be aggregated and servers could
be run at closer to 90% capacity. This implied signifi-
cant economies of scale in the costs of computation.
Microsoft’s estimates suggested that, under optimal
conditions, shifting to a cloud-based model could re-
duce IT costs by as much as 80%.25 Moreover, instead
of paying for software that was rarely used, corpora-

tions might be able to pay for software only when they
used it.
Microsoft proposed to build a cloud-computing
business that would host data and applications for
corporations, taking the burden of infrastructure and
maintenance costs off their hands. In return, corpora-
tions would pay a fee for storing data, and either a sub-
scription or runtime fee for executing applications. As
early as 2006, Steve Ballmer had stated that Microsoft
had no choice but to go “all in” on the cloud.26 By
2010, this commitment had developed into Microsoft’s
Azure cloud-computing initiative, which was located
within the company’s Server & Tools Division.
Cloud computing was seen as comprising of three
segments; infrastructure as a service (IaaS), platform
as a service (PaaS), and software as a service (SaaS).
IaaS refers to basic hosting of data, websites, and the
like. Amazon’s AWS is primarily an IaaS offering.
PaaS refers to the idea of building a software platform
upon which software applications can be built and
run. Microsoft’s Azure platform is essentially a PaaS
offering that uses Windows Server technology. Think
of Azure as Windows for a server farm of 10,000 ma-
chines. SaaS is the idea that software applications can
be hosted and run on the cloud. Salesforce.com was
an early leader in SaaS with its customer relationship
management (CRM) software.
By 2011, Microsoft was committed to competing
in all three segments. The company would host data
for enterprises and consumers (IaaS), it would con-
tinue to develop Azure so that enterprises could write
applications that would run well on the cloud (PaaS),
and it would reposition many of its products such as

Office, SQL Server, and Dynamics, as software as a
02277_Case20_rev02.indd 165 01/10/15 6:03 PM
service (SaaS) offerings. In June 2011, Microsoft in-
troduced Office 365 to enterprise users. Office 365 was
a cloud version of its bestselling Office suite. In 2013,
Office 365 was offered to consumers. Enterprises paid
a licensing fee and consumers an annual subscription
fee for Office 365. Users could download the pro-
gram to multiple devices (for consumers the limit was
five). They could also store Office documents on Mi-
crosoft’s Cloud using its One Drive storage offering.
Microsoft shifted to a rolling—release model for de-
veloping Office 365, updating the program on a quar-
terly basis—a marked departure from the historic 3- to
5-year development schedule at Microsoft.
One problem Microsoft had to grapple with in
shifting toward a cloud-computing model was that
it represented a change in the underlying econom-
ics of its business. In the traditional model, most of
Microsoft’s costs were associated with the fixed costs
of developing programs such as Windows and Of-
fice. The marginal costs of producing more versions
of a program were very low, so that at high volumes
Microsoft earned gross margins in the 90% range on
Windows and Office. In the cloud-computing model,
however, Microsoft had to build and maintain server
farms, which could cost anywhere from $500 million
to $2 billion each in fixed costs, and which consumed
large amounts of electricity. There was a general be-

lief that even at high volumes, the gross margins as-
sociated with a cloud-computing business would be
significantly lower than what Microsoft was accus-
tomed to. As people within the company were fond of
saying, “in the cloud business we actually have costs
of goods sold.”
On the other hand, while cloud computing was still
a small business in 2013, generating perhaps less than
$10 billion in revenues industrywide, rapid growth
was predicted going forward. Industry revenues were
projected to balloon to $150 billion by 2020. Clearly
Microsoft had to embrace this business.
satay nadella
takes charGe
By early 2013, Ballmer was coming under increasing
pressure from Microsoft’s board of directors. De-
spite robust revenue and earnings growth under his
leadership, Microsoft’s stock price had stagnated.
Microsoft had lost its technological leadership in the
industry to Apple and Google. The company’s prob-
lems with Vista and Windows 8, and its failures in the
smartphone, tablet, and Internet search businesses,
had led directors to question the direction of the com-
pany. Ballmer agreed that it was time for someone else
to take the helm, and the board started to look for his
successor.
Satay Nadella was picked to succeed Ballmer
and took charge on February 4, 2014. Nadella was
a native of Hyderabad, India. In 1988, he received
an engineering degree from the Manipal Institute of
Technology. He then travelled to the United States

and earned a Masters in computer science from the
University of Wisconsin. Later, while working full
time at Microsoft, he earned an Executive MBA from
the University of Chicago. Nadella had worked at
Microsoft since 1992. He was senior VP of R&D for
the Online Service Division from March 2007 until
February 2011, when he was appointed president of
the Server and Tools Division. This division grew at
a healthy pace under his leadership. Moreover, the
Azure cloud-computing initiative was based within
this division. Nadella was credited for his adept lead-
ership of the nascent cloud-computing business.
Nadella moved quickly to put his stamp on Micro-
soft. Emphasizing a break with the past, Microsoft,
he said, was competing in a “mobile-first, cloud-first”
world. In this world, said Nadella, Microsoft must
empower people to get things done. By June 2014, he
was talking about Microsoft being the premier “pro-
ductivity and platform company for the mobile-first,
cloud-first world.”
In March 2014, Nadella announced that Micro-
soft would offer a version of Office 365 for the iPad.
A version had been in the works for some time, but re-
lease had been delayed because of fears that it would
boost demand for the iPad and hurt Microsoft’s Sur-
face tablet. Nadella asserted that in a world where
Android and iOS are widely used, Microsoft had to
make its applications run on those platforms too.
By Fall 2014, Office for the iPad had over 30 million
downloads. Also in March 2014, Nadella announced
that Windows would be free for devices smaller than
9 inches, meaning smartphones and tablets. Clear-
ly this was an attempt to jump-start adoption of
Windows on digital devices, and to match Google’s

strategy of giving away Android for free.
02277_Case20_rev02.indd 166 01/10/15 6:03 PM
In June 2014, Nadella sent a long letter to em-
ployees stating that the company would be taking
“important steps to visibly change our culture.” He
talked about the need to obsess over customers, to
streamline engineering processes and reduce the
time and energy it takes to get things done, to limit
the number of people involved in making decisions,
to drive greater accountability, and to flatten the or-
ganization. In making these statements, Nadella was
implicitly acknowledging that Microsoft’s culture had
been too bureaucratic and political, and that there
had not been sufficient accountability. He also an-
nounced that, as part of its efforts to streamline the
organization, Microsoft would lay off 18,000 employ-
ees, 12,500 of them in the newly acquired Nokia unit.
These were the most significant layoffs in Microsoft’s
history. Coming at a time when the company was still
making very healthy profits, they sent a clear signal
that Nadella believed company needed to become
more efficient to compete effectively going forward.
In January 2015, Microsoft unveiled Windows 10,
which would be available in late 2015 (Microsoft de-
cided to skip the Windows 9 designation). Windows
10 represents a move away from the tile-based, Metro
interface. The traditional start menu that was in Win-
dows 7 is back. Windows 10 will run on all devices,
from desktops and laptops to tablets and smart-

phones. Applications written to run on Windows 10
should run on any device, which promises to remove
a major headache for app developers. Moreover, the
ability to tap into the wider Windows ecosystem
might create an incentive for developers to write more
apps for Windows devices. In a bold departure from
its prior strategy, Microsoft announced that Win-
dows 10 would be free to any Windows 7 or 8 users
that downloaded it for the first year after its release.
Estimates suggest that this would result in $500 mil-
lion in lost revenue for the first year Windows 10 is
on the market.
Also in January, Microsoft announced its earnings
for the last quarter of 2014. Among the highlights on
the consumer side of Microsoft’s business, sales of the
Surface tablet were accelerating and hit $1.1 billion
during the quarter. Search and advertising revenues
jumped 23% over the same quarter a year ago. Bing’s
U.S. market share increased and was up 150 basis
points to 19.7%. Office 365 consumer subscribers also
jumped 30% over the prior quarter, to 9.2 million.
On the enterprise side of the business, cloud revenue
grew by 114%, driven by strong enterprise adoption
of Office 365, Azure, and Dynamics CRM online.
Microsoft’s cloud business was now generating annu-
alized revenues of $5.5 billion and growing rapidly.
On the other hand, sales of traditional Windows and
Office products to consumers and businesses were ei-
ther flat or down. Clearly, the shift to the cloud was
rapidly gaining momentum, and Microsoft was start-
ing to cannibalize its own businesses.
NOTEs

1. A. Covert, “Will Google Docs Kill Off Microsoft
Office,” CNN Money, November 13, 2013.
2. International Data Corporation press release,
“Worldwide Server Market Revenues Declines
23.7% in the Third Quarter,” February 24, 2014.
3. K. Mackie, “Microsoft Admits Windows Use at
14%,” redmondmag.com, July 14, 2014.
“Smartphone OS Market Share, Q1 2014.”
5. E. Protalinski, “Strategy Analytics: Android Tab-
let Shipments Up to 65.8% in Q1 2014,” thenex-
tweb.com, April 28, 2014, http://thenextweb.com
/insider/2014/04/28/strategy-analytics-android
-tablet-shipments-65-8-q4-2014-ios-fell-28
-4-windows-secured-5-8/.
“IDC Expects PC Shipments to Fall by 6% and
Decline Through 2018,” March 4, 2014.
7. J. D’onfro, “Here’s a Reminder of How Massive
Amazon’s Web Services Business Is,” Business
Insider, June 16, 2014.
8. Comment made to the author.
9. S. Nadella, “Mobile First, Cloud First” press
briefing, San Francisco, March 27, 2014.
10. Much of the material in this section is drawn from
P. Freiberger and M. Swaine, Fire in the Valley:
The Making of the Personal Computer (McGraw

Hill, 2000); A. R. Harris, Microsoft: The Company
and Its Founders (ABDO Publishing Company,
2013); J. Wallace and J. Erickson, Hard Drive: Bill
Gates and the Making of the Microsoft Empire
(New York: Harper Business, 1992); information
gleaned by the author during nearly two decades
of teaching in-house executive education courses
at Microsoft.
02277_Case20_rev02.indd 167 01/10/15 6:03 PM
11. The full Gates memo is archived at www.wired
.com/2010/05/0526bill-gates-internet-memo/.
12. J. Bick, “The Microsoft Millionaires Come of
Age,” New York Times, May 29, 2005.
13. B. Herbold, “Inside Microsoft: Balancing Cre-
ativity and Discipline,” Harvard Business Review,
January 2002.
14. Ibid.
15. J. Brustein, “Microsoft Kills Its Hated Stack
Rankings. Does Anyone do Employee Reviews
Right?” Bloomberg Businessweek, November 13,
2013.
16. The best description of this process can be found
in M. Cusumano and R. Selby, Microsoft Secrets:
How the World’s Most Powerful Software Com-
pany Creates Technology, Shapes Markets and

Manages People (New York: Free Press: Touch-
stone Edition, 1998).
17. Business Software Alliance, Ninth Annual BSA
Global Software Piracy Study, May 2010.
18. K. Powers, “Showdown,” Forbes, August 11, 2003,
pp. 86–87.
19. A. Wilhelm, “Inside Microsoft’s Earnings:
Windows 8 and the Xbox Money Machine,”
thenextweb.com, April 19, 2013, http://thenextweb
.com/microsoft/2013/04/19/inside-microsofts
-earnings-windows-8-and-the-xbox-money
-machine/.
20. P. Dekho, “Google Android Lords Over 85%
of Smartphone OS Market Share,” Financial
Express, September 1, 2014; C. Buckler, “Browser
Trends September 2014,” Site Point, September 2,
2014.
21. R. Nieve, “Yahoo Gets 31% of Search Revenue
from Microsoft Deal,” CBET, December 10, 2013.
22. T. B. Lee, “Here’s Why Microsoft is Buying
Nokia’s Phone Business,” The Washington Post,
September 3, 2013.
23. Cited at http://blogs.msdn.com/b/philipsu
/archive/2006/06/14/631438.aspx.
24. J. Greene, “The Inside Story of how Microsoft
Killed Its Courier Tablet,” CNET, November 1,
2011.

25. The Economics of the Cloud, Microsoft White
Paper, November 2010.
26. The author was an observer at a Microsoft strat-
egy conference when Ballmer made this comment
in response to a presentation suggesting that Mi-
crosoft take a cautious approach to the cloud.
“No,” said Ballmer, “this is wrong, we have to go
all in on this one.”
02277_Case20_rev02.indd 168 01/10/15 6:03 PM
Running head: CASE CONCEPTUALIZATION FOR MARCUS'
ALCOHOL DISORDER 1
CASE CONCEPTUALIZATION FOR MARCUS' ALCOHOL
DISORDER
7
Case Conceptualization for Marcus
Charlotte Wilkins
Nova Southeastern University
June 16, 2019
Case Conceptualization for Marcus' Alcohol Disorder
Client reported he cannot stop drinking or using marijuana
(smokes for depression and anxiety) and cannot stop using
methamphetamine. Marcus is 25-year-old Caucasian American
who has been struggling with alcoholism since he was 12.
Client reported girlfriend is in treatment also. Marcus lost his
job because missing work often and showing up to work
intoxicated. This caused him to increase his daily alcohol
intake, causing his condition to deteriorate further. As a result,

Marcus was referred by his family to Palm Health Care (PHC)
for counseling and treatment. Before seeking services at PHC
clinic, the client has attempted numerous self - rehabilitation
but he had not managed to recover from alcoholism fully or
marijuana for depression and anxiety.
History
Marcus is presented healthy, and his hygiene was respectable.
He is currently on felony probation. His is cooperating with
staff and currently denies suicidal ideation. What he is
experiencing from his prolonged use of substance include racing
thoughts, agitation, listless (low energy), anxiety, fatigue, mood
swings, emotional, restlessness, stress and stress sensitivity, he
is very agitated and irritable. Marcus mood shifts between
anxious, sad, depressed, irritable, calm and happy. client pain
level is low, but his cravings are high. His thought process is
circumstantial, concentration impaired. Marcus developmental
stressors have been identified at all stages of development.
Marcus reported that he first experimented with alcohol during
his early childhood age 12, age 16 for methamphetamine and
marihuana. Marcus was introduced to alcohol by his mother an
active addict. Marcus reported mother absent a lot, emotionally
disturbed, struggle with education until 11th grade when he
quit. From then onwards, he would drink or smoke marijuana
whenever available. However, growing up from pillar to post or
homeless shelters he began drinking heavily. He was 20 years
old and in a troubled relationship with a child. Although
Marcus’ heavy drinking was identified to his troubled love life,
the condition could also be attributed to family history. For
instance, his mother, was also an alcoholic/addict who escaped
death twice in accidents caused by driving while drunk and high
(DUI’s). He attempted suicide after his best friend, who he sold
drugs to overdosed and died. When he mentioned this event, it
had a profound impact on him not to mention his life. Marcus’
dad neglected him, his mother also neglected and rejected him,
yet she was still in his life. He had been struggling with alcohol

disorder for over a decade.
Other than the biological or family background, Marcus drinks
heavily to forget his mother, his baby mama, and his troubled
love relationship. He has not been able to sustain positive
relationships. He has had over 10 girlfriends and two fiancées
who have abandoned in unclear circumstances. At different
times, he had moved in with his fiancées, but they could not
stay together for long due to substance use. As he argues, he
can only avoid mental frustrations caused by his failed
relationships and termination from work by drinking heavily
(American Psychiatric Association, 2013). Moreover, peer
influence also compels him to indulge in alcohol. Over the time,
he has made many friends in his drinking sprees. Some buy him
shots regularly whilst he has also exhausted his savings on
them.
Multi-Axial Diagnosis
As the clinician assessed Marcus, the clinician embarked on a
multi-axial diagnostic criterion for his alcohol use disorder. To
make a successful diagnosis for his condition:
Psychiatric Diagnosis
F1020 – Alcohol Use Disorder
F1520 - Amphetamine-type Substance Use Disorder, Severe
F1220 - Cannabis Use Disorder, Severe
Z720 - Tobacco use
F331 - Major depressive disorder, recurrent, moderate
F411 - Generalized anxiety disorder
F4310 – Posttraumatic Stress Disorder
G4709 - Other insomnia
Medical Diagnosis
J4540 – Moderate persistent asthma, uncomplicated
Marcus revealed that, in every drinking session, he takes more
alcohol than he could anticipate, his love life has been affected

by his alcoholism, he complains his mother is straining him
financially as she uses every penny on drugs and alcohol, he/she
is consuming almost a gallon of alcohol every day, he has
difficulties decreasing his intake alcohol, he has a strong
craving for vodka and other spirits, and has perpetually used
alcohol even after being diagnosed with depression and anxiety
which he smokes marijuana to focus and concentrate. Moreover,
he confirmed that whenever he missed drinking, he experienced
severe withdrawal symptoms. This included depression and
anxiety where he is smokes marijuana to manage daily living.
Other withdrawal symptoms included sweating profusely,
shaking and mood disturbances, which are all synonymous with
symptoms of someone with an alcohol disorder (Berman, 2015).
Such mood swings, he says, exacerbates his cravings for
alcohol, marijuana and methamphetamine. In Addition, from the
intake/biopsychosocial assessment, it measures sustenance a
diagnosis of (PTSD) posttraumatic stress disorder
309.81 (F43.10). Marcus, experiences dreams and nightmares
of his best friend lying dead with needle in his arm. Marcus
exhibited evidence of emotional breakdowns, depression and
anxiety and fear of best friend family.
Treatment Goals and Objectives
Marcus’ treatment will focus on augmenting social support
besides endeavoring to develop a sense of productiveness (APA,
2013). Thus, his treatment goals will include:
Goal 1: Consistent abstinence from alcohol for the entire
duration of treatment and counseling;
Goal 2: Increasing his social support so that he can get along
well with his family and potential girlfriends or fiancées;
Goal 3: Increase his sense of industriousness. Specifically, this
will help him to explore his career interests with an aim to
return to the labor market either as an employee or self-
employed.
Goal 4: Verbalize the powerlessness and unmanageability that

result from using addictive behavior to cope with depression.
Goal 5: Identify the pattern of using drugs or alcohol abuse as a
means of escaping from depression and verbalize more
constructive means of coping.
Goal 6: Maintain a program of recovery, free from addiction an
excessive anxiety.
Goal 7: Assist the patient by educating and encouraging him of
dysphoric mood due to grief, and come to the understanding
(that selling the drug is not what killed his best friend, what he
did was wrong by law, but it is not his fault for the overdose).
Marcus will then begin to understand the trauma of bad dreams
and nightmares.
Client continues to work towards treatment plan goals and
objectives. Client will continue to identify these triggers and
utilize more learned coping skills while in treatment. Client will
participate in 3 groups daily, 4 times a week (M, T, TH, F).
Client will have individual therapy sessions 1 time per week
with initial projected length of treatment 1-2 weeks with
assigned
counselor Jerry Egan.
Accordingly, these goals will be monitored even after the client
has left PHC to ensure he does not go back to alcoholism or
substance use. Therefore, in future, the treatment plan for
Marcus will entail attending counseling sessions regularly of
group therapy, psychotherapy and pharmacotherapy to ensure he
is permanently cured of his disorder. With this combination
Marcus will develop coping strategies for thoughts of death,
flashbacks, and skills to self-control his self-defeating
behaviors and feelings.
Theoretical Approaches
Cognitive Behavioral Therapy (CBT) is the theoretical approach
that will be utilized to help the client to understand his
condition. Marcus’ family background and exposure to an
alcoholic/substance abuse mother and peer pressure have

created cognitive emotions that make him to take refuge in
alcoholism. This theoretical perspective will help in addressing
and changing his thinking patterns and habits associated with
alcoholism. Martin (2019) explained that “Cognitive
Behavioral Therapy (CBT) is a short-term, goal-oriented
psychotherapy treatment that takes a hands-on, practical
approach to problem-solving”.
Cognitive Distortions
Marcus is experiencing some cognitive distortions due to his
depression and anxiety issues. As distortions, his thought
pattern is flawed, and it leads to making some wrong decisions.
Some of the distortions that Marcus is experiencing are:
1. Control Fallacy
This situation is brought about in the situation where he feels
that he must be in control of every situation around him. This
has in the past led him to give money to his mother to fuel her
alcohol and other drug problems, and this has left him
financially drained. It has also affected his planning and
formulation of positive ideas that can help in his life, since he
feels that every situation that happens around him is tied to him
and therefore, he must do something about it.
2. Catastrophizing
In this situation, Marcus’ ability to make long term or even
short-term goals is affected. He is constantly battling feelings
that tragedy is going to happen in his life. This can be majorly
attributed to the kind of past that Marcus has had with his
parents, also his work, his love life, and even his social life. At
every turn, he seems to face a stumbling block, and this pushes
him back a step. He cannot make long term of even short-term
goals because he expects that something might go wrong in the
end. In addition, Marcus still believes that it is his fault that his
best friend died because he sold him the drugs.

Lastly, Marcus identified troublesome thoughts by journaling,
examine the evidence, began using self-talk, thinking in shades
of gray and what was he gaining with this behavior. Client is
making progress in meeting treatment goals and objectives.
Client reports he will complete treatment upon discharge,
continue working with sponsor and attending 12 step meetings.
Client is motivated for change and recovery but will still need
to develop the skills that will allow him to follow through with
his plans. Client desire is to return to work but some traumatic
circumstances with post traumatic syndrome disorder,
alcoholism, substance abuse will lead to depression and anxiety,
but client will develop a reality based positive cognitive
message which will increase his self-confidence in coping with
irrational fears by utilizing Individual Therapy, Core Group,
Behavior Group, Emotions, Feelings and Coping Strategies
Group to not only identify, but handle situations, problems and
circumstances with healthy defense mechanisms.
In conclusion, client understands that it is important to build
social network of people in recovery to increase his chances of
staying sober and abstinent. Client is recommended to enter
transitional housing. Client is at an imminent risk of relapse
without following through on clinical recommendations.
References
American Psychiatric Association (APA). (2013). Diagnostic
and statistical manual of mental
disorders (5th ed.). Washington, D.C.: American Psychiatric
Publishing.
Berman. (2015). Developing case conceptualizations and
treatment plans. Sage Publications, Inc.
Martin, B. (2019). In-Depth: Cognitive Behavioral
Therapy. Psych Central. Retrieved on June 16,
2019, from https://psychcentral.com/lib/in-depth-cognitive-
behavioral-therapy/

�Excellent job discussing the cognitive distortions. Please add
some information regarding how you would incorporate
behavioral therapy, part of CBT, into the conceptualization.
How does CBT applies to the client? How are her symptoms
reinforced according to the behavioral approach

C-151Microsoft froM Gates to satya Nadella20I.docx

Recommended

Recommended

More Related Content

Similar to C-151Microsoft froM Gates to satya Nadella20I.docx

Similar to C-151Microsoft froM Gates to satya Nadella20I.docx (20)

More from jasoninnes20

More from jasoninnes20 (20)

Recently uploaded

Recently uploaded (20)

C-151Microsoft froM Gates to satya Nadella20I.docx