Using Innovation To Expand Microsoft’s Markets

How Chris Capossela and His Marketing Team Are Harnessing a Wave of AI Infused Offerings to Drive Growth

Chris Capossela has been leading worldwide marketing for Microsoft across both the consumer and commercial businesses since 2014. In that time, Capossela has been quietly transforming the Microsoft brand. Over the last nine years, coincident with Satya Nadella’s tenure as CEO, the financial value of the Microsoft brand has grown fourfold (to $278 B). The stronger brand gives the company expanded permission to move into the large and growing markets for cybersecurity, cloud software, and AI.

While Capossela and his team had a lot to do with that outcome, he gives most of the credit to the vision, processes, and team Nadella put in place when he took over as CEO. “Marketing has been part of building the brand, but this is a team sport,” says Capossela. “That’s the way we're structured. So the growth in brand value is always a reflection also on the performance of the overall leadership team - engineering, sales, finance, legal - and the financial performance that team has achieved since Satya became the CEO.”

The growing power of the brand affords Microsoft the credibility to expand into a much wider range of markets that extend well beyond their legacy in PC operating systems like cloud computing and cyber security. ”Our security business has become a real juggernaut for us,” says Capossela. “The same goes for the development community which has come to rely on our tool set. A decade ago, the notion that GitHub would be part of a thriving ecosystem of open source development within Microsoft might seem foreign.” Today over 100 million developers worldwide use the Microsoft owned open source platform to build, ship and maintain software

“I think one of the things we've really learned is the power of the Microsoft brand is stronger than the power of any individual product name - even with something as big or as important as Windows or Xbox,” says Capossela. That ability to expand and extend the brand into new product areas is important given the size, breadth, and variety of growth markets the company has before it. In the last decade, a confluence of secular trends has dramatically expanded the market for Microsoft’s evolving portfolio of productivity, intelligent cloud and personal computing products. For example:

· The mainstream shift to cloud computing and “as a service” models across industries has created a fast growing market for enterprise cloud infrastructure that will exceed $250 Billion this year, according to Synergy Research Group forecasts;

· Artificial Intelligence (AI) offers the potential to eliminate and automate drudgery and unlock the creative and innovative potential of humans. A Microsoft external analysis of 31,000 global workers and trillions of Microsoft 365 productivity signals found that nearly 2 in 3 workers struggle to free up time for innovation and strategic thinking because they are swamped with mundane tasks that should be rationalized or automated;

· The recent pandemic redefined the nature of work by creating diverse, digital, dynamic and distributed workforces that rely on the type of collaboration, communications, and productivity tools Microsoft creates in their day-to-day work;

· The untapped market for cybersecurity is measured in the Trillions of dollars and experiencing 35% job growth in an uncertain economy where many technology functions are experiencing layoffs;

· The gaming industry - which is eclipsing movies and television as the primary source of entertainment – is expanding even faster as it moves to the cloud;

· Low-code development tools like Microsoft Power Apps and Azure will account for 75% of new application development by 2026, according to Gartner.

Microsoft is well positioned to become the dominant player in these markets. For example, the mainstream shift to cloud computing has fueled the growth of Microsoft’s Intelligent Cloud Solutions – centered around the ascendence of the Azure Cloud Computing platform – to comprise over 40% of the company’s revenues and command a quarter of the global cloud infrastructure market.

AI is opening up an equally large market for the company. The recent excitement over OpenAI’s ChatGPT’s generative AI tool has demonstrated the art of the possible in a wide range of consumer, workplace and commercial applications. The ChatGPT’s generative AI tool has reached 1 million users 12 times faster than the iPhone, 60 times faster than Facebook, and 200 times faster than Netflix streaming video. Microsoft has invested heavily in OpenAI and is now investing to lead in the new AI wave across all of their solution areas to exploit the unprecedented speed at which generative AI applications are being adopted by businesses and consumers according to the CEO in their most recent earnings call. The company is expanding applications of generative AI across modalities - from audio (VALL-E) to video (GODIVA) and 3D (RODIN-Diffusion) - and use cases like DNA sequencing (MoLeR), code generation (GitHub Copilot) and data engineering (Copilot in Microsoft Fabric).

“AI is being infused to drive innovation across our entire infrastructure product portfolio,” says Capossela. For example, the company is committed to turning Azure into an AI supercomputer for the entire world. Azure is the exclusive cloud provider for every tool OpenAI (the maker of the revolutionary ChatGPT tool) has in the works. “Our Build conference for the developer community is focused on AI from start to finish,” he continues. At the conference, Microsoft CEO Satya Nadella announced 50 AI Copilots available to developers with thousands more on the way.

From a productivity perspective, Microsoft has introduced a wave of solutions and partnerships that are leveraging AI to make work more productive and creative. These range from the core Microsoft 365 application suite, to the Power Platform BI tool, to using AI in Teams to make it faster to prepare for, execute, and follow up on meetings. According to Capossela, all of these solutions support the core mission of Microsoft because they aim to solve the twin challenges of the modern workforce – eliminating drudgery and unlocking creative and innovative potential. “When we saw the potential upsides and downsides of AI and we saw what we thought we could do with Word, with Teams, with Visual Studio, GitHub, and Azure, this notion of Copilot emerged,” he continued. “We're not going to automate people away from their work. We are going to be their Copilot. We're going to take the drudgery away from them, but they're still completely in control.” For example, the Dynamics 365 Copilot works across CRM and ERP systems to bring the next generation of AI to employees in sales and finance to automate burdensome tasks like manual data entry, content generation and notetaking.

“Great companies position themselves for secular trend changes,” he continues. “We've been quite fortunate that Satya has been able to do that first with the cloud. Now I would say AI infused technology will be the second most important shift that hopefully will power the next 10 years for the global economy. And that's what we’re busy doing.” Microsoft’s founder Bill Gates believes the impact of a future AI -enabled personal assistant - or “copilot” - will be so profound that the first company to develop it will transform the way work gets done and the future of the search, commerce, and internet industries as we know them today.

“As a marketing team, we still have to position ourselves with the right products in those segments to capitalize on those secular shifts,” warns Capossela. That is no small task given the breadth of market opportunity AI opens up for Microsoft. Microsoft operates in a marketplace cluttered with hundreds of rapidly converging software categories, over 30,000 SaaS software companies, and hundreds of thousands of apps, products, and solutions for sale. More are on the way. So Capossela and his team have had to find smart ways to simplify and focus their messaging and positioning despite the wide array of AI infused innovation Microsoft’s product teams are introducing into this crowded marketplace in 2023.

One way has been to lean more on the company brand rather than proliferate product brands. “More and more of our teams have learned and want to lean into more of a companywide approach on something like naming or branding,” he continues. “That's been a huge change that I've gotten to witness. It used to be everyone wanted their own thing with their own everything, your own icon, their own message.”

Another way to communicate the wide range of innovation that AI has spawned across its product line (from productivity solutions to search and cloud computing) is by focusing on a handful of solution areas rather than hundreds of new product launches. Each of these individual solution areas represents an enormous expansion market for Microsoft - propelled by secular trends and market tailwinds. “We focus on what we call ten customer solution areas,” says Capossela. “These are the ten core businesses we're in. Gaming is one of them. Security is another. The others include cloud infrastructure, data and AI, modern work and digital and app innovation. We have a different way to go to market in each of these ten solution areas.”

“One of the gifts Satya gives me as the CMO is an organization structure that allows us to look left to right so we can manage packaging and pricing across all of our products as it relates to AI and move with more speed,” says Capossela. His span of control as CMO includes: product marketing, business planning, brand, advertising, events, media buying, communications and market research as well as all digital direct and retail sales for all Microsoft products and services. “By having a centralized marketing organization, you can do those naming decisions and business model design in a far more comprehensive end to end way than if you have seven or ten different presidents of ten different businesses, all who have their own marketing, pricing, licensing and finance teams,” he continues. “That allows us to say, this huge wave is coming – how do we think about naming this stuff? How do we think about packaging and pricing this stuff?”

For example, in terms of naming, rather than introduce dedicated AI products, or product variants, the company has introduced the notion of an AI Copilot that can be applied to many of the solutions in the portfolio to improve individual productivity and unlock human creativity. “We decided that the word Copilot was an important word for us to latch on to, because despite all of our products, almost everything we do is to empower somebody else to do what they want to do,” says Capossela. AI “copilots” are being infused into a wide range of solutions and tools in the Microsoft portfolio – Microsoft 365, Dynamics CRM, Bing search, Edge browser, the Power Platform BI tool, and the biggest canvas of all – the flagship Windows product.

Another way that Chris’s marketing team has become more effective is by actually using Microsoft tools and analytics to leverage the mountains of customer engagement data generated by the modern commercial model. Capossela views the ability to harness the first party customer interaction data their organizations generate as a key to succeeding in their jobs going forward. “Great data with great analytics with machine learning is a really, really transformative recipe for marketers,” he emphasizes. “Most marketers I know have access to lots and lots of data. We're lucky that we do too. And a lot of it is first party customer data. But it's the tools and the analytics that have gotten much, much better. In our case, we've been able to make very fast project progress in just a handful of years because of the power of the technology we have at our disposal across our product and partner ecosystem. Whether that's things like Azure Machine Learning which we now use extensively, or the power of these Copilots that we’re building into our products, or social listening that we can do with our own technology and also partners. As marketers, we are using these tools to become very smart about the audiences we focus on. who those people are, the language that they use on social, what their perceptions are towards Microsoft, the stories that resonate with them, the ways we can target them – all of which we can do analytically without even having to do research necessarily.”

In recognition of his contributions to the marketing craft, Chris is being inducted into the AMA Marketing Hall of Fame this June 7^th in New York City. The Hall Of Fame award celebrates the world’s best marketers, recognizing brilliance in marketing and innovation across the marketing profession.