How to think like Satya Nadella: The Microsoft Turnaround

Satya Nadella’s transformation from an amateur cricket player to Microsoft CEO is almost as impressive as his turnaround of Microsoft.

Born in India, Nadella came to the US for a Masters in Comp Sci and to join Sun Microsystems. He then joined Microsoft in 1992, completing an MBA by flying to Chicago every weekend so he wouldn’t have to stop working.

Since that point, Nadella has held pretty much every leadership position in the company: from the Head of Bing to the EVP of Cloud & Enterprise. One of the first believers in Cloud Tech, he popularized Microsoft Azure and helped make the product a huge success.

Nadella’s pre-CEO career was phenomenal, but his performance as CEO has put the world on notice.

Microsoft’s stock reads as a bit of a puzzle. After it’s IPO in 1986, Bill Gates led the company to consistent growth until his retirement in 2000.

From 2000 to 2014, under Steve Ballmer, Microsoft’s stock plummeted- never reaching its initial point. Many attribute this dip to Ballmer’s inefficient leadership- with a series of bad acquisitions (Nokia for $7.6B) and rigid culture.

Ballmer left the company in rough shape. Windows 8’s release was subpar, the company was destroyed in the iPod market (Zune), and innovation stagnated.

This created a complex problem for the newly minted Nadella, who was expected to turnaround the company even though he considered himself “a product of Steve Ballmer and Bill Gates’ Microsoft.”

But somehow, Nadella has succeeded. With ~84% growth in the stock price over the last three years, Nadella has been heralded as the savior of Microsoft by Silicon Valley and Wall Street alike.

Let’s look at the four major ideologies that led him to success.

I. Don’t run away from a challenge

Early on in Nadella’s career, he was recruited to Amazon by Jeff Bezos.

In response, Steve Ballmer offered him the position of Head of Bing. Ballmer said:

“Look, this is the most important challenge I have. I don’t think this is maybe even a smart decision for you, but I want you to do it. Think wisely, and choose. And by the way, if you fail, there’s no parachute. It’s not like I’m going to come and rescue you and put you back into your old job.’”

After hearing a mentor tell him that a job was almost certainly career suicide, Nadella rejected Bezos’ offer and took the position head on.

He quickly realized that Microsoft’s cloud infrastructure behind Bing was the real value add to customers, and it could be used in place of Microsoft’s own server business. This led to his appointment as the Head of Cloud Infrastructure (Azure).

II. Go big or go home

You just took over as CEO from two tech legends, with the world angry about bad Microsoft acquisitions, and what do you do? Make a $26.2B acquisition of LinkedIn.

Unlike the Nokia acquisition, which was awfully integrated into Microsoft’s platform, LinkedIn’s integration was almost perfect.

With Reid Hoffman joining Microsoft’s board, the company fixed it’s awful Silicon Valley reputation as a company that didn’t work with anybody.

LinkedIn is now integrating with Outlook and Dynamics 365, strongly improving recruiter -> candidate conversations.

III. Why compete when you can win at something else?

Through Ballmer’s reign, Microsoft cemented a long standing rivalry with Apple- not even allowing office apps on any iOS device.

Nadella quickly changed this philosophy, even using an iPhone to demo an outlook app.

He realized that it was futile to continue competing with the likes of Apple and Samsung in their phone business. Instead, the crafty CEO pushed Cloud, fixing Microsoft profitability problems of the past.

This has led to 90% growth in Azure, up over $7B during a quarter.

Nadella also rolled out the Surface laptops, touch screen PC’s that was coined by many as the “Most Exciting Product of The Year.” At the same time, Apple announced the new Macbook Pro, with almost no new external features.

Somehow, Microsoft has started to beat Apple at its own innovation game.

IV. “Culture eats strategy for Breakfast, Lunch, and Dinner”

From his first company letter as CEO asking employees to “compare achievements to Apple and Amazon” to his mission of “empowering every person and organization on the planet,” Nadella’s impact on Microsoft culture has been incredible.

He disposed of the “walled garden” feeling at Microsoft, where “jealousy guarded technology,” and partnered with companies all around the world.

Nadella’s humility has also played a large role in Microsoft’s success. Soft spoken and without ego, he has allowed his employees to be the true stars of the show.

In his first public outing, he allowed a General Manager (Julia White) to give the entire presentation. She later remarked:

“With Satya in his very first public moment, I was, like, This is a whole new place now.”

Central to this was replacing the ridiculously competitive culture in Microsoft, where all staff members were graded on a curve, where the worst members were fired.

Nadella has outpaced all expectations over the last three years, and I’m certain that he will make Microsoft the face of technology over the next decade.

Hopefully we can all take something away from the way he leads.

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(This article was repurposed from LinkedIn! I published it in both places just so I could reach the people that knew me here as well as business contacts, etc. You can check out my LinkedIn if that’s a better place to see these- and feel free to add me there as well.)