Satya Nadella’s 11 Best Startup Lessons on Leadership From Complete Transformation of Microsoft
When he was 24 years old, Microsoft poached him from Sun Microsystems. He has been described as calm and quiet but very decisive and extremely intentional. Satya Nadella was not an obvious pick for the CEO position at Microsoft after the end of Steve Ballmer’s era in 2013. A lot of tech media outlets were highlighting former Ford CEO, Allan Mullaly, as a possible hire for the position because Microsoft was doing terribly and needed a person with a different perspective, preferably an outsider, to bring the tech giant back to life.
For the first decade of the 21st Century, Microsoft was the biggest tech company. It capped at about $600 billion within that period. For the whole of that decade, it was the undisputed most valuable company in the world, bettered by none. In 2010, it was toppled by Apple after the Steve Jobs revolution had taken shape with the iPhone. Since that period, Microsoft’s market cap had greatly reduced for a lot of years since it capped at the $600B mark, partly due to the aggressive buying back of shares during that period too.
The company had gotten stuck under Steve Ballmer’s era. All the company’s new products under Ballmer were not doing as well in revenues like Windows and Office. Ballmer’s attempt at destroying Google using Bing had failed as Google grew in bounds, the Nokia acquisition and launch of Lumia mobile phones only served to show how late Microsoft was in the consumer mobile phone business especially with the struggling Windows Phone OS, Zune and Kin were not doing any better. Suffice to say, the company was nowhere near its glorious days.
Against predictions by analysts, Microsoft decided to appoint an insider for the CEO position once more. This time, a 24-year veteran at the time. Satya Nadella took over the company in February 2014. In his first speech to shareholders, he did not mention Windows or Office. No one took notice at first. What he did mention was “cloud first, mobile first.”
Satya had grown in the company slowly over a 24-year period to become a senior executive. But despite the existing culture during much of Bill Gates’ and Steve Ballmer’s era, Satya had known what to pick from his predecessors and what to leave. He came in with fire to transform the company, to improve on the vision, and to enhance intelligence and creativity. His way of leadership was different from Bill Gates who was extremely aggressive, and Ballmer who built on that aggressiveness with more competitiveness. The new CEO, instead of carrying on with the culture which was clearly failing, decided to follow transformational leadership by idealizing influence, inspirational motivation, individualized consideration, and intellectual stimulation.
Satya wanted to focus more on people learning, collaborating in the way of teamwork, being creative and stimulating intellectuality. More than anything at all, he wanted the whole company to be results-oriented
4 years since taking over when the company’s shares were trading between $25 and $40, Microsoft’s shares are now trading at $101 as of today, and the company’s market cap has grown to $800B. In such a short time, Satya Nadella has managed to bring back Microsoft from a deep uncertain hole to a place of belief. People are starting to love Microsoft again, a love that has not been experienced much ever since Bill Gates stepped down from the CEO role at the company.
At the height of the Bill Gates era, desktop software was the revolution. Bill’s mission to ensure that every home in the US had a personal computer which would be running Windows OS had more than been achieved as Microsoft owned 99% of that market. During the era of Steve Ballmer who took over from Gates, the market began to shift desktop software first mentality. It is during those 10 years when Microsoft was the most valuable company in the world that innovation peaked but Microsoft didn’t listen soon enough to get in on the game early enough.
From desktop software, the tech revolution was now focusing on social media networks, search engines, mobile devices, and cloud computing. In a way, Microsoft was late in all these facets, except for cloud computing. They were not in mobile devices and only attempted a dive into the market later on leading to a $7 billion loss in the Nokia acquisition. Ballmer launched Bing in 2009 when Google was long in the game and innovating in every sense of the way. The company didn’t own any social network. However, it was not too late in cloud computing. One drive launched in 2007, albeit early enough to make a good run in cloud wars. Dropbox had just launched a year earlier, a startup, that didn’t have the financial muscle to outfight Microsoft at the time. Google drive came 5 years later, in 2012, when One Drive had made quite some important steps.
How did Satya Nadella Reinvent Microsoft?
1. Cloud Computing
In every sense of the way, Satya Nadella’s “cloud first, mobile first” statement only worked to favor the most promising part of the business where Microsoft had gotten in early enough. Despite very aggressive competition from Apple’s OS X, Microsoft’s Windows still controls the desktop OS market share worldwide in both enterprise and personal computing. Microsoft has leveraged this 78% market share to make One Drive and Azure as popular as possible. As of today, Windows 10 has taken over the commercial devices market share at 52%, tipping the scales against Windows 7 at 36%. In each of that Windows 10 installation is a One Drive folder, automatically inbuilt in the software.
It is not a surprise that the company’s target to beat $20 Billion in revenue will probably come to pass when they release their next financial results. They did $18.9 Billion in their last annualized financial releases. They are the biggest company in cloud computing and they are doing revenues that are much bigger than Amazon, Salesforce, IBM, Oracle, Google, and SAP. It’s good to note that none of these competing companies are doing badly either. Fair to say that Satya Nadella is the undisputed CEO of Cloud wars at it stands, and with the rate Microsoft is moving at, it will be very difficult for its closest competitors in this niche (Amazon and Salesforce) to get anywhere close.
Upon taking over Microsoft, Nadella embarked on the task of building data centers around the world that would support the cloud computing business. He laid every foundation early, and it is now paying off quite well.
2. Microsoft Subscriptions
Since the company launched in 1975 under Bill Gates and the late Paul Allen, Microsoft’s revenues were one-time affairs from permanent licenses for Windows and later for Office. The licenses were quite pricey, but as the company didn’t have any worthy competitors it still dominated that market and the business model worked for decades.
By 2014 when Satya came in, he had seen that it was important to find a recurring revenue channel. Microsoft 365 was launched in this regard to offer an intelligent subscription solution that would include Office 365, Windows 10, and Enterprise Mobility and Security. This package is now a beloved feature by companies for business and enterprise. Office 365 revenues alone are quite staggering and growing by huge percentage points every year. The company has figured out how to get recurring customer revenue without having to sell traditional one-time licenses.
3. Acquiring LinkedIn
It is true that Microsoft was not in any social network business for a long time. But the kind of financial reserves that the company has meant that it can buy off a lot of things if it really wants to. In 2016, Satya Nadella sanctioned a $26 Billion acquisition of the world’s biggest professional social network putting Microsoft firmly in the social media business.
LinkedIn was bought with all its suite of numerous platforms including Slideshare, Lynda, Glint, among others. Satya positioned Microsoft at the center of the game when it comes to hiring for business and engaging professionals with one another. This didn’t look like a big move at the time and companies like Google had mulled over buying LinkedIn before Microsoft came and swept the deal off under the radar.
Today LinkedIn has 450 million monthly users who display their professional and company data on the platform, and use this very platform to hire the best talent around the world; data that Microsoft will use to shape how Microsoft’s biggest products are adopted and integrated into the enterprise, business, and personal computing markets. The customer data potential is huge, and Microsoft is firmly in charge of it. Additionally, LinkedIn revenue from advertising contributed $1 billion to Microsoft’s total revenue in the past financial results release.
4. Letting Go of Company’s Mistakes
Recognizing that Microsoft had made some mistakes in strategy, as well as acquisitions, was important for Satya Nadella’s progress. Bing had failed to surmount Google in the search engine wars, so Satya reduced the focus on Bing. He sanctioned the sale of Bing’s mapping data assets to Uber.
Nokia was a $7-billion-dollar acquisition mistake by Microsoft. Satya took over Microsoft in 2014 while the deal was in the works and it was finalized later that year. He ran with that acquisition and tried for 2 years to make Nokia work by launching the Windows Phone OS and empowering as many developers as possible to develop mobile apps for the Lumia line of phones. Microsoft Lumia was not turning out quite as expected, and eventually, in 2016 Satya stopped trying to make that ill-advised Nokia acquisition work and sold the business to HMD Global for only $350 million. A huge fall and loss from the billions of dollars spent on the company three years earlier.
5. Internal Action
Taking over a mammoth of a company with thousands of employees, of course, comes with taking over all the behavioral mess, organizational structures, infighting, and unhealthy competition between employees.
These were real issues at Microsoft. And this issues showed in the decision making of the company and eventually affected how the company’s customers viewed them over time. Satya had to ensure these are broken or addressed.
His first order of business was to shred to pieces all the organizational structures and product-group silos which had stifled creativity and growth. The growth of a company really depends a lot of on how fast the product and innovation teams can get their ideas to the CEO, or anyone else with the mandate to sanction that the innovation proceeds.
At Microsoft, this would take quite long at the time because manager X had to get to manager Y who would then get it to manager Z. By the time the CEO gets to see anyone’s idea, time would have been already badly spent; time within which companies like Apple and Google would have launched a new product or made serious inroads to their businesses.
These organizational structures were long and pointless and Satya figured they had to go. Microsoft needed to function like a startup again; a really big startup.
6. Reimagining and Reshaping
There is a major shift in what the digital revolution is looking like around the world. Satya Nadella knew this too well. Microsoft could no longer rely on income from desktop software and permanent licenses. That mindset needed to go because the world is moving from desktop to mobile and from expensive permanent licenses to more affordable subscriptions.
The company’s CEO is a big believer in enterprise cloud, digital transformation, and artificial intelligence (AI). He has repositioned the company to focus on what opportunities are coming up in AI and cloud computing. He has done this quite well, as artificial intelligence continues to grow and be informed by data which the company has in plenty, and leading in the cloud computing business. LinkedIn plus Dynamics 365 gives you AI. Microsoft is firmly positioned to control artificial intelligence in the future.
The company needed to unlearn some things and reimagine what the future of work looked like. It needed to be reshaped in terms of focus. Employees at Microsoft no longer focus on how many Windows and Office licenses they need to sell, but on how close it is to the goal of controlling AI, growing the subscriptions business, doubling cloud computing revenue and influencing the future of hiring. Upcoming opportunities in the market indicate that this is where Microsoft should go and Satya has put the company firmly in the forefront.
7. Sense of purpose
Facebook’s CEO, Mark Zuckerberg is a huge believer in a company having a sense of purpose. It seems that Satya Nadella has that belief too as a core guide of leading Microsoft. He has united the company’s employees behind one sense of purpose; to ensure that the company’s platforms and tools help drive small business productivity, large business competitiveness, and public sector efficiency.
It doesn’t just stop there but the company wants to support new startups, improve educational health and health outcomes, and empower human ingenuity.
The team understands that the sense of purpose of Microsoft is in customer success. In the continuous effort to renew the company, Nadella has promised to invest in the highest growth opportunities, lead innovation in the cloud and AI, and bring Microsoft’s technology and products together into experiences and solutions that unlock new value for customers.
This renewed sense of purpose has given Microsoft employees something to fight for. They wake up with the desire to create transformation and support small businesses around the world. It is such a sense of purpose upon which a company thrives because everyone feels like they are contributing to a bigger cause; something much bigger than them.
8. Reiterating the company’s mission
Microsoft’s mission according to Satya is to empower every person and organization on the planet to achieve more. What a simple mission statement!
In his most recent tour of Europe, Satya repeated this mission at the beginning of his speech everywhere he gave it. For public relations, this is important. Putting the whole world in the know about the exact mission your company intends to fulfill is a great way of driving the story about the company home. The airwaves will speak of this very message as will the media outlets that publish in print and online. The achievement is that as your mission is noble and keeps spreading, you get a lot of goodwill from the people that know about your company and hear this message.
In a myriad of ways, this has been a PR strategy that helped Microsoft change how people view it. It has assisted in lifting the company’s perceptions by developers, industry participants, investors, and consumers. Sometimes, the best PR strategy is to ensure that you repeat the same message over and over again as Satya’s last 4 years have demonstrated.
9. Growth Mindset
The Microsoft CEO is a huge proponent of the growth mindset. He advises against taking things for granted. In his world, every assumption needs to be checked against new or old data; and new data needs to inform new decisions.
He believes that there is no growth if your knowledge plateaus. This is why he is an extremely avid reader. Reading books exposes him to new knowledge. New knowledge informs new decisions. It’s a continuous habit of learning. He believes that leaders are readers.
10. Find the rose petals in a pile of shit
One time after he took over, a senior executive went to complain about a lot of other senior executives to Satya. After listening to his rants, Satya called a meeting of all senior executives and managers. He explained to them that they were not being paid to complain about how bad things are at the company, or about their colleagues. That they were being paid to “find rose petals in that pile of shit.”
He explained that he would not tolerate senior managers who dwelt on constraints and always had something to complain about. Their job, he said, was to keep the Microsoft team’s eyes on the prize. It didn’t matter how much things went wrong, what mattered was if you can find something beautiful in all that mess.
11. Culture change
All of these transformation points just point to one major shift in the company; change of culture. Satya changed the teams from complaining and negative aggressiveness to working as an actual team. He transformed how people thought about their purpose at work by making them believe that they were doing something that will help mankind from a very noble perspective. He showed them the new focus, cloud computing, and AI, and the team set the eyes on the prize.
From thousands of employees who were anything but cohesive, he made them believe that by working as a team their creativity would absolutely explode. And that would be great for the company.
Satya Nadella is the hope that the Microsoft investors and employees so badly wanted. He came in at the right time, the best part is that he has learned so much from the past such that he does not want to repeat mistakes, and he reads so much so there can only be more hope that his decisions will enhance the growth mindset to benefit Microsoft for a long time to come.