The Satya behind Microsoft’s revival

In 2014, Satya Nadella was named as the third Microsoft CEO since the tech firm’s founding in 1975. When Nadella took the helm, he inherited a company that was beginning to flag. But in less than five years he resurrected it and made it the most valuable company in the world for the first time since 2002. Microsoft’s triumph is absolutely the top business comeback of the last decade. But, the soft spoken CEO will not celebrate Microsoft’s near trillion dollar ($987 billion) valuation as that would “mark beginning of its end”

Satya Nadella took the control of Microsoft as CEO five years ago. When he took over the tech firm was in dire shape. Microsoft’s stock prices were crashing and the company’s products were not selling. The once-dominant software giant had missed almost every significant computing trend of the 2000s—mobile phones, search engines, social networking.

Windows 8 was a flop, the iPhone and Android left Windows phones in the dust, and Bing was nowhere near Google for searches.

With technology advancing at a rapid pace and consumer demands rising, the cricket loving electrical engineer from Hyderabad, who had been at Microsoft for 22 years, believed that no company can rest on its laurels. He showed his team how not to look at the past and feel very self-satisfied with the success they’ve had.

So for becoming relevant again, he created a culture steeped in innovation. He made it his priority to establish company-wide practice to ensure that the software behemoth took care of two critical constituencies—customers and employees. Microsoft’s resurgence began with Satya Nadella’s first email to employees as CEO of Microsoft. “Our industry does not respect tradition – it only respects innovation.” Microsoft emerged as a major provider of cloud-computing services and embraced open-source development.

His focus on business diversification, cloud computing and investment in future technologies has today made the company more valuable than Apple. The software company’s market capitalisation is now well above $1 trillion, joining the likes of Apple and Amazon in achieving a trillion dollar market capitalisation. He set the tone, the direction, the strategy and the culture for turning around Microsoft’s fortunes and making it the most successful tech company in the world amid stiff competition.

Here is how Nadella brought Microsoft out of decline:

Redefined Microsoft’s mission

Nadella changed Microsoft co-founder Bill Gates’ famous mantra of “a computer on every desk,” around a purpose-driven and much more customer-focused aim of: “to empower every person and every organisation on the planet to achieve more”. The company’s new mission had a deeper meaning: Microsoft has shifted its focus from products to people.

One Microsoft: Culture fix

After taking office he asked the company’s senior executives to read Marshall Rosenberg’s Nonviolent Communication. The move was his plan to transform Microsoft’s long-standing infighting culture, which was toxic, rigid, hierarchical and arrogant.

He announced that the company is judged by team success rather than individual achievement. The culture fix paid off. He changed the cut-throat internal culture of competition between colleagues. He got managers to support one another, rather than snipe at each other. Pitch meetings that were famous for intense grillings became encouragement sessions.

Know-it-all beat learn-it-all

Based on the observation that when a company has enjoyed great success and has invented many crucial concepts, it has a temptation to believe it has mastered everything. And that temptation needs to be resisted, he believed. So he created an environment focused on learning. He changed Microsoft from a know-it-all to a learn-it-all company where learning, exploring and experimenting is the norm. From a fixed mindset, all Microsoft employees contributed to building growth mindset habits, processes and environments that became the norm at the company.

Corporate empathy

Nadella views empathy as a key source of business innovation. According to him, empathy makes you a better innovator... “Having a deep sense of customers’ unmet and unarticulated needs must drive our innovation….”

Acquisition of Nokia’s mobile and devices division

One of Nadella’s first major tasks was overseeing the completion of Microsoft’s $7.2 billion acquisition of Nokia Corp.’s mobile-device business. The transaction had been announced in 2013 by his predecessor Steve Ballmer despite reservations of various Microsoft executives, including Nadella. Microsoft had bought Finish company Nokia, when Nokia had almost lost their entire market hold to Apple, Samsung and slew of other Android device makers. After taking charge, Nadella didn’t waste any time dropping the company’s previous focus on “devices and services.” He was quick to wield the axe. Microsoft cut 7,800 jobs primarily in its phone business, and the company wrote off $7.6 billion related to its acquisition of the Nokia phone business.

Open to Collaboration

Nadella laid out his new vision of cooperation. While he was going to compete. He also was going to cooperate where it made sense. Embracing new ideas that didn’t have to originate within Microsoft, is one of Nadella’s core strategies. And so the firm partnered with long-standing competitors like Dropbox, Red Hat, Salesforce and even its cloud services rival, Amazon. That also includes once-unthinkable things like turning Microsoft into an ally of the open-source development community, bringing some of its software to the Linux operating system. The firm embraced the rival Linux operating system on the Microsoft Azure cloud releasing Microsoft Office for the Apple iPad. Microsoft committed to a partnering strategy to expand the market for their current products, including offering Microsoft Outlook on Apple (iPhone and iPad) and Android devices.

Next, Microsoft built new products to compete in its markets, introducing their first laptop ever (Microsoft Surface Book). With his strategic moves, he proved that his core principle was to make Microsoft an innovative technology company that exists to help other businesses thrive.

Moving Beyond Windows

Heavily reliant on its Office desktop software and Windows operating system, Microsoft appeared frozen in time in a world where consumers and businesses had long since gone mobile and were using the cloud for much of their software. Under Nadella’s watch, Microsoft has learnt to look beyond Windows. He managed the transition from a world where Windows was at the centre and the business was built on software licensing, to a world of cloud, mobile and AI, where the model is moving away from licence towards subscription. And it made substantial leaps transforming its original software business from permanent licenses, where revenue is a one-time affair, to subscriptions, where revenue is recurring.

"His focus on business diversification, cloud computing and investment in future technologies has today made the company more valuable than Apple"

Cloud Computing

Determined not to miss the next big wavecloud computing-under Nadella’s leadership, the company has spent the past five years selling cloud-based services. Nadella steered Microsoft to a phenomenal growth by venturing into new areas such as virtual reality, cloud computing, artificial intelligence and cybersecurity. Microsoft has now become the second biggest player in cloud computing services.

Acquisitions

Nadella’s aggressive acquisition strategy using the Redmond, Washington-based company’s cash to buy companies big and small have done wonders as well. The most expensive acquisitions were LinkedIn for a whopping $26.2 billion in 2016 and GitHub, the code-sharing site where much of the content is designed to run on Linux-based operating systems, for $7.5 billion in 2018. Both platforms have added tremendous value to the company. LinkedIn, with over 500 million members, continues to be a consistent revenue generator for Microsoft. He even acquired the popular game Minecraft.