The measurement of business success provides organizations with vital information, which guides them through strategy formulation and implementation to achieve sustainable success. Another goal of performance measurement is to facilitate the assessment of the success of an enterprise in relation to the established goals and competitive position. Companies often set performance thresholds to gauge their progress, and they use financial parameters as the major indicators of the progress. The following instruments will be beneficial to measuring business performance for Microsoft:
Profit
It is no doubt that profitability is a major indicator of organizational success. The profit of a firm is determined by diverse factors, which must be optimized for improvement in financial growth. The managers and leaders of business organizations strive to collect the relevant data to aid the formulation of decisions that can lead to greater profitability. The profit level can be used to measure diverse attributes of organizational success, which include operational efficiency, effective resource management, efficient cost control, strong market, and high customer satisfaction, among others. Besides, the profit-generating capacity of an enterprise is instrumental in assessing its success in terms of employee performance, which is an essential component of the entire business performance. The use of profitability ratios is one of the common approaches that companies adopt to enhance performance assessment using profit.
Essentially, these ratios comprise a group of metrics used by firms to assess their capability to generate revenue. They indicate the efficiency of companies in using their assets to generate revenue, as well as shareholder value. Gross profit, EBITDA, return on assets, return on capital invested, and return on equity are some of the examples of profitability ratios, which are computed using the financial data of the company. The computation of these ratios will guide the management of Microsoft in formulating and implementing effective policies to enhance its financial success. One of the ways in which the profit of the company can be used to measure its progress is by examining the trend in profitability over the years. The historical trend in the company’s profitability allows the managers and firm owners to determine whether they have attained their performance goals. For instance, the return on assets for Microsoft was 8.80% in 2017 and 13.69% in 2019, while its return of equity was 29.29% and 38.35%, respectively (Stock Analysis on Net, 2020). Certainly, such a change is an indication of improvement in business performance. The assessment of the business performance of the company can also involve benchmarking, where the profitability of Microsoft is compared to its key competitors. Microsoft has not been able to outperform its key rivals in the industry, particularly Apple, which is one of its close competitors. However, it is clear that the profitability of Microsoft increased significantly, indicating performance growth.
Competition
The market share of a firm is a crucial indicator of its business performance, and it is commonly measured in terms of competitive capacity. In the contemporary highly dynamic and competitive business landscape, firms must continue to adopt strategic approaches to enhance and sustain their market positions. One of these techniques entails market share enhancement, which is a critical indicator of organizational success. An improvement in market share is an indication of enhanced competitive strength and a growth in customer base. Undoubtedly, an increase in the size of the market often leads to higher sales revenue and profitability. Microsoft’s market share in the Intelligent Cloud segment is 28.12%, while that of competitors is 71.88% (CSIMarket Inc., 2020). Given that the company has numerous competitors, its ability to command 28.12% of the market is an indication of strong performance, although the company must continue to enforce more effective strategies to improve and sustain this position. Therefore, the management of Microsoft can assess the trends in its business performance by analyzing the changes in its competitive position. An increase in the market share of the company is an indication of performance improvement. Thus, the company can expand its market by evaluating the strategies adopted by its rivals.
New customers
The number of new customers to the company is another metric for measuring business performance. As noted, Microsoft adopts a product design that ensures that its products meet the need of customers in various demographics. By so doing, the company has been able to increase its customer base consistently. Additionally, the use of digital technology to undertake marketing has contributed to the attainment of a significant milestone in increasing the number of clients for this organization. For example, the company has made a considerable investment in social media marketing, which allows it to reach new consumers in various parts of the globe. Brand name and firm reputation are other contributors to the capacity of this company to attract new customers, leading to continued performance enhancement. In most cases, companies strive to widen their customer base by offering a wide range of products and services. However, consumers must consider other attributes of the products like prices and quality. Thus, the management of Microsoft can assess the business progress of the company by adopting strategies for enhancing customer satisfaction in terms of quality and price.
Customer satisfaction
The ability of an enterprise to satisfy its customers measures its business success in diverse ways. The sales revenue and profitability of companies increase when they enforce measures that boost their customer satisfaction capacity. In most cases, company managers undertake market research in a bid to understand the needs of their customers. The leadership and management of Microsoft must engage in constant market assessments to identify the critical areas that require improvements to increase customer satisfaction. It is imperative to note that the level of buyer happiness is a demonstration of the effectiveness of various business decisions. For example, employees are in direct contact with customers and, therefore, high consumer satisfaction is an indication of the effectiveness of human resource management of the company. Microsoft can assess the success of its strategies for performance enhancement in different ways. Undeniably, a high market share is an indication of consumer satisfaction. In addition, companies attribute their sales revenue and profitability improvement to customer satisfaction because their customers would not make higher purchases if they are not satisfied with the specific products and services of the company.
Discuss potential sources, drivers, and patterns of adoption of innovation appropriate to your organisation’s goods or services.
It is no doubt that innovation is one of the major factors that determine the success of business organizations. Essentially, innovation entails the addition of new knowledge in business enterprises to allow them to implement strategies that can improve their capacity to address their challenges effectively. Companies can gain innovative power from diverse sources, which depend on such factors as the creativity of their workforce. However, analysts have noted that the majority of business innovations emanate from a purposeful search for opportunities for innovation, which exist in four key areas within an organization. Notably, these areas include incongruities, unexpected occurrences, industry and market changes, and process needs. Other essential sources of innovation in business organizations include new knowledge, demographic changes, the intellectual and social environment of the company, and changes in perception.
Unexpected occurrences
As companies strive to explore solutions to various challenges, they often develop innovative strategies, which contribute immensely to their success. It is no doubt that contemporary firms operate in a highly evolving world, which is characterized by uncertainties. As a result, new developments are constantly emerging, and this factor has driven a significant number of firms to innovate. For example, IBM designed the first accounting machine for the banks in the early 1930s, but in 1933, banks refused to purchase the machine. After fifteen years, when people believed that computers were developed for sophisticated scientific work, businesses unexpectedly expressed interest in computers (Peter, 2002). Thus, unexpected success or failure can lead to innovation. Microsoft operates in the technology industry, which is characterized by numerous uncertainties, particularly for products that are likely to become obsolete as a result of technological advancements. For this reason, it must continue to explore effective ways of aligning its products with the prevailing demand.
Process needs
Change is inevitable in modern companies as they are confronted with diverse challenges that compel them to adopt changes that can align their operations with current needs. Companies utilize systems to produce different products as well as delivering their services. Since the primary objective of firms is profit maximization, the adoption of strategies for enhancing the efficiency of the process is integral to organizational success. The competitiveness of Microsoft Corporation can be improved by adopting strategic approaches to address its process needs. Innovation arises from process needs because companies must innovate as they respond to their demands. For example, as Microsoft continues to explore the challenges it encounters during marketing, it has adopted social innovation, which leads to greater efficiency in the marketing process. The company has continued to develop new approaches in its attempt to address both structural and institutional challenges. Competition has also compelled the company to seek effective strategies, and new innovations emerge during this process.
Industry and market changes
The structures of industries and markets constantly evolve, exposing firms to diverse challenges. Notably, the changes occurring in markets and industries are essential compelling forces that drive innovation among firms. As noted, technological advancements are among the key changes that frequently occur in contemporary firms, and they have forced companies to improve their innovative capacity in different ways. Analysts have noted that the changes occurring in different industries create tremendous opportunities for innovation. Undoubtedly, a large number of companies develop innovative solutions in their attempts to address the challenges affecting their success at the industry and market level. For example, changes in the industry structure have led to massive opportunities for innovation in the American healthcare sector. Some of the innovations that have taken place in this sector include the adoption of new surgical procedures and communication systems to enhance service delivery. The market structure for technology companies is constantly evolving, creating new opportunities for the introduction of new products. As a consequence, new forms of competition have evolved, prompting the firms to seek effective tactics for sustaining their survival. For example, Microsoft has continued to review its production models to maintain its position in the industry and the market.
New knowledge
The emergence of new social, technical, and scientific knowledge has played a contributory role in enhancing the innovative capacity of business organizations. As noted, innovation is one of the essential determinants of firms’ competitiveness, and it influences business performance in diverse ways. The majority of knowledge-based innovations have proved effective in supporting the success of business enterprises. In addition, these innovations are hard to direct, capricious, and temperamental. The theory of entrepreneurial banking is one of the models that have been used to explain new knowledge as a source and driver of innovation. The leadership of Microsoft Corporation has managed to increase the growth of the company by creating an environment for employees to undertake research, meaning that the rate at which new knowledge is acquired can be used as a parameter for measuring the success of the company in research and development activities (Fast Company, 2020). The acquisition of new knowledge has also been found to boost strategy formulation and implementation in business organizations, particularly in areas requiring improvements to promote organizational success. For example, Microsoft can use this factor as a tool to assess the level and effect of brand and model differentiation, which are vital determinants of competitiveness and overall success of business enterprises. The company can improve its organizational capability by acquiring new knowledge, which will enhance not only its competitive power but also the efficiency of operations.
Assess the information requirements needed to maintain and manage an appropriate level of innovation within your organisation
Innovation plays a pivotal role in promoting organizational growth and performance. Additionally, innovation has proved to be an essential factor in enabling firms to gain sustainable competitiveness and long-term success. Thus, the effective management of innovation is incredibly vital to fostering organizational success. However, managing innovation effectively is a relatively complex task, as several organizational parameters must be taken into account. Organizational leaders and managers must adopt effective strategies for addressing diverse challenges associated with the maintenance and management of the appropriate level of innovation. The efficiency with which innovation is maintained and managed depends on the availability of specific information, which is relevant to the formulation of effective management policies and decisions. The common type of information needed include:
Competency
Business organizations have a unique history and set of capabilities that influence their innovation competency. The degree of performance improvement in business enterprises hinges considerably on the level of competency, which is influenced by the skills, knowledge, and creativity of employees, among other factors. Analysts have contended that the capacity of enterprises to maintain their innovative power is based on the effectiveness of their training programs as they instill useful knowledge to employees (Greg, 2013). Additionally, the level of competency is used to assess the capability of enterprises to adopt innovative strategies for boosting organizational success. The management of Microsoft Corporation can use information concerning the level of competency to evaluate its capacity to improve its innovative power. One of the factors considered when adopting new technologies in business organizations is the level of knowledge and skills possessed by the company’s workforce. In most cases, companies subject their workers to training before adopting specific techniques (Abulrub and Lee, 2012). However, firms whose employees have a diversity of skills have a greater capacity to maintain their innovative power because they can easily adopt new techniques. As previously noted, innovations are linked to new knowledge because companies often develop innovative solutions during their search for knowledge regarding effective approaches for addressing their organizational challenges. Competency can be expressed in terms of the human resource capacity, which significantly determines the level preparedness of organizations to adopt new knowledge and innovation. It is no doubt that the information concerning the capability of the workforce of an entity to solve its problems using new technological solutions is based on the extent to which employees have knowledge regarding these solutions. Uncertainties are essential predictors of innovation, and they are often classified into the market, technological, and regulatory uncertainties. Thus, the information pertaining to the resource capacity and the stability of the organization with regard to response to uncertainties will play a significant role in determining the organizational capability for managing and maintaining innovation.
Strategy
Microsoft can determine its capacity to sustain its innovation through the assessment of its strategy. The availability of resources has been identified as a critical determinant of not only the capacity of the company to innovate but also to sustain its innovations. Information about the strategy used in leadership, management, and resource allocation is incredibly vital in determining the sustainability of innovation in business enterprises. Analysts have indicated that the managerial capability of an enterprise is deterministic in enabling it to identify relevant innovations and managing them effectively for continued support in addressing various business challenges. Additionally, leaders must adopt strategic approaches to mobilize human resources in the company to embrace and improve the adopted innovations to enhance their sustainability.
The sufficiency of the resources allocated to different innovative solutions is instrumental in determining their continued effectiveness in enabling the organizations to deal with their structural, institutional, and technical issues more effectively, resulting in considerable performance enhancement. Experts have indicated that there should be an alignment between innovation and strategic objectives, meaning that the information concerning the strategic objectives of the company is essential in determining its ability to manage innovation effectively (Greg, 2013). The determination of the capability of Microsoft to maintain and manage its innovations effectively depends on its strategies and how they align with its resource capacity. Additionally, information related to the training programs of the company is necessary for determining the extent to which it can manage and maintain the knowledge and strategies acquired through innovations. For example, Microsoft has faced considerable challenges in sustaining its innovation, due to the emergence of disruptive technologies and imitation of its business strategies by the rival companies. Although the company has invested significantly in research and development activities, there is a need for constant audits to facilitate the assessment of the effectiveness of different innovative solutions and how they can be enhanced to sustain their contribution to business performance.
Management
Innovation management is an integral component of the overall management, meaning that the information concerning the management strategies of the company is vital to determining its capacity to manage and maintain its innovations. The depth of research that Microsoft has conducted to explore alternative methods of sustaining its innovative capacity is an indicator of its success in managing innovation effectively. Microsoft is a superior innovator, but it must continue to develop effective approaches for protecting its innovative solutions against imitation for them to remain unique and relevant to the company’s business. For example, the company leadership engages in constant communication with employees to enhance their participation in the formulation of effective managerial decisions. Certainly, such an approach is instrumental in promoting innovation management.
Evaluate the risks and uncertainties that innovation might create in relation to the performance of your organisation.
Despite the numerous benefits associated with innovation, researchers have identified diverse risks and challenges that organizations face as a result of adopting various innovative solutions. Innovation poses a number of challenges to business enterprises, which often reduce its effectiveness in achieving performance improvement goals. As companies explore solutions to major issues affecting their business success, they are exposed to diverse perils, meaning that firm owners and managers must be ready to address the key issues by carrying out cost-benefit analysis prior to adopting specific solutions. Notably, innovative activities are associated with a high degree of uncertainties, which can lead to business failure. Although the primary goal of adopting different innovations is to boost business performance, companies with ineffective structures for addressing the issues associated with innovation often fail to achieve their goals. Research outcomes have shown that innovation-based risks depend on the organizational structure (Boukis, 2016, p. 271). Leaders and managers must ascertain that the structure of their enterprises is aligned with their risk management strategies to ensure that the adopted innovative strategies are effective in addressing organizational challenges. It is no doubt that a large number of innovative activities constitute organizational change, which often faces resistance from employees and other stakeholders. In organizations with autocratic leadership, workers are less involved in the formulation of essential decisions, and, as a result, they are less willing to implement various innovative solutions. The lack of connection between the organization and external stakeholders is another challenge that hinders the effective adoption of innovations. For example, customers are essential pillars of organizational success, and their input in the adoption of specific innovative solutions, particularly those with an impact on the prices and quality of products is vital.
Incorrect measurement of innovation is another challenge that a large number of organizations face, especially when they are unable to ensure appropriate alignment of their innovative solutions with their strategic objectives and resource capacity. Notably, the measurement and benchmarking of innovation is core to improving its success constantly. However, the failure to assess the need for innovation correctly can lead to misappropriation of organizational resources, a factor that may undermine business success. Another essential risk that usually accompanies technological innovations is the increased exposure to cyber-attacks. Undeniably, contemporary firms cannot avoid new technologies as they must align their organizational progress with changes in digital transformation. However, this development has been found to expose their information infrastructure to the loss of business secrets, imitation of strategies, and disruption of operations, among other challenges. Microsoft operates in the technology industry, which is highly characterized by threats from changes in technology. One of the critical challenges that most firms face when developing an innovation strategy is the unpredictability of the consequences of innovation, as it is relatively difficult to predict the outcomes of new developments. Factually, most companies do not have accurate models for estimating the potential hazards that certain innovative solutions might pose to their business. The disruptions arising from technological innovations may interfere with the efficiency of the business model of the company, leading to the reduced capacity to achieve its vision.
Adaptation to organizational changes created by innovation is a critical challenge faced by a large number of enterprises. The assessments of the risks associated with innovation have revealed that a significant number of companies face the challenge of determining whether and how their employee will adapt to the changes brought about by certain innovations. Notably, the majority of financial and technological innovations are relatively complex and, therefore, it becomes difficult for firms to develop mathematical modeling for determining the adaptability of employees to the changes involved (Innovation risk, 2013). As previously noted, the understanding of the capability of employees to use the adopted solutions to solve the problems of their companies is integral to enhancing the effectiveness of various innovations. Microsoft operates in a highly dynamic industry, and it cannot avoid the adoption of new solutions. For this reason, its management must continue to explore effective ways of minimizing the challenges of employee inability to adapt to changes. Continuous enforcement of training programs allows the company’s employees to gain high adaptive capacity, thereby increasing the effectiveness of various innovations in boosting organizational growth.
Ready to get an essay instead of browsing samples? – Do it now! Order personalized help me write my essay service according to your requirements!
Reference list
Peter, D. (2002). The discipline of innovation. [Online][Accessed 06 June 2020]. Available at: https://hbr.org/2002/08/the-discipline-of-innovation
Fast Company. (2020). The most innovative companies: Microsoft. [Online][Accessed 06 June 2020]. Available at: https://www.fastcompany.com/company/microsoft
CSIMarket Inc. (2020). MSFT sales vs. Its competitors Q1 2020. [Online][Accessed 06 June 2020]. Available at: https://csimarket.com/stocks/compet_glance.php?code=MSFT
Stock Analysis on Net. (2020b). Microsoft Corp. (Nasdaq: MSFT). Analysis of profitability ratios. [Online][Accessed 07 June 2020]. Available at: https://www.stock-analysis-on.net/NASDAQ/Company/Microsoft-Corp/Ratios/Profitability
Boukis, A. (2016). Managing innovation within organizations. In Product Innovation through Knowledge Management and Social Media Strategies (pp. 266-290). IGI Global.
Abulrub, A. H. G., & Lee, J. (2012). Open innovation management: challenges and prospects. Procedia-Social and Behavioral Sciences, 41, 130-138.
