1. 8-3. Does it seem reasonable that Satya Nadella and his leadership team were attempting to reorganize Microsoft to make it more competitive? Explain.

2. 8-4. List five questions that Nadella should have asked himself in exploring how best to reorganize Microsoft.

3. 8-5. Explain why it would be important for Nadella to ask each of the questions you listed.

Read the case and answer the questions that follow. Studying this case will help you better understand how concepts relating to organizational structure can be applied in a company such as Shutterstock.

The idea for Shutterstock came from founder Jon Oringer’s experience as a “serial entrepreneur.” 55 Oringer saw that prospects are much likelier to look at information about a company if stories about it include pictures, but buying professional photographs is expensive for a start-up. One stock image could cost hundreds of dollars. Oringer thought that if he could make photographs easy and affordable to buy online, the volume of sales could make an attractive market for buyers and sellers alike.

Oringer got started on his own. He bought a camera, took 100,000 photos, and chose 30,000 to upload into an online database. He sold customers $49 subscriptions for the right to use any of the photos. Even with his limited photography skill, Oringer soon had a growing business. He began signing up professional photographers, eventually building his database to contain more than 32 million images, including illustrations and videos. Now the standard subscription rate is $249 for the right to use up to 25 images a month, with extensive users paying more. Even with the higher prices, Shutterstock boasts about half a million users. The cost is still a bargain compared with other art/photograph sources, and the volume of sales has generated a comfortable living for many of the artists and photographers who work with Shutterstock. Being online has helped Shutterstock build an international customer base, and it now operates in 14 languages and obtains work from 100 countries.

To serve the growing demand, Shutterstock hired software engineers to build the system’s capabilities and then hired specialists in support functions. (The photographers are not employees but have contracts with Shutterstock and may sell their work to other agencies as well.) Although Shutterstock’s growth strategy focuses on automation, the company has grown to include more than 200 employees.

To handle the growth, Oringer has had to figure out how to organize the company. The company’s basic structure involves functional divisions such as products, marketing, technology, and finance. About two-fifths of the staff work on either the technology or the product line. For example, engineering employees figure out new ways for users to search the database—say, generating results by color. Product-focused employees include reviewers of submitted photos; only approved images go on the site. Each division has its own objectives to meet and functions independently.

With a functional structure, coordination is especially important because employees in different functions may not share the same outlook. Once a year, Shutterstock brings employees together in 24-hour hackathons to develop new product ideas. The idea of a hackathon is to be resourceful and pull an idea together quickly; teams of employees all present their ideas (in just two minutes per team), and managers select the best ones for possible development. Although this kind of activity is traditionally associated with programmers and software engineers, the teams include employees from different divisions, and nontechnical employees find that they have valuable ideas to share. For example, in a recent hackathon, the senior manager of business development saw that she could contribute an understanding of business needs while her team members focused on the software.

So far, the structure is working for Shutterstock. The company is growing quickly, began selling stock to the public in 2012, and has posted profits above $30 million. A key question will be whether the structure needs tweaking as Shutterstock’s horizons continue to widen. 56