Microsoft overhauls engineering structure in AI-driven reorganization

Chime COO says pace of organizational change outstrips worker comfort

Microsoft is releasing a “Frontier Playbook” today that draws on lessons from its own experience, the company said. The reorganization at its software engineering division is among the highest-profile examples of a major corporation redesigning its organizational structure around generative AI capabilities rather than grafting AI tools onto existing workflows.

Charles Lamanna, executive vice president of Copilot, agents, and platform, said the shift goes beyond coding. He told the WSJ Leadership Institute’s Steven Rosenbush that the era of software development “as we once knew it” has ended, and with it the traditional vertically aligned organizational structure of his 20,000-person unit. Microsoft is now using AI to design end-to-end workflows across its organizations, from software engineering to sales, according to the Wall Street Journal report.

The scale of Microsoft’s transformation stands in contrast to the broader pace of enterprise AI adoption, which surveys suggest remains halting. Over the past 12 months, Deloitte found that 34% of companies were using AI to transform their business. A separate Publicis Sapient survey found that 42% of organizations admitted they were not ready to capture AI’s value. PwC’s survey of operations leaders found that only 27% said they had fully embedded an AI strategy across business units.

Panelists at this week’s WSJ Technology Council Summit described organizational culture as a significant barrier. “This is a massive amount of change coming at them way faster than they’re comfortable with,” said Janelle Sallenave, chief operating officer of fintech firm Chime. She said leaders often underestimate the need for culture change to capture AI’s return on investment. “I think as leaders there is a thing that we often maybe diminish because we’re so focused on the tech side of how do we make the right culture change so that we are able to lean in to and use and get the ROI and get the change we are looking for,” Sallenave said.

Coding remains the area where generative AI has seen the most uptake, and smaller AI-native software startups have been fastest to adopt AI-powered workflows. The Microsoft reorganization suggests that even large incumbents are beginning to reshape their organizational structures in response to the technology’s capabilities.