Leadership effectiveness in the digital age — Satya Nadella
Introduction
The task of transforming a behemoth, traditional software giant into a digital, platform powerhouse is a significant one. To add to the task, having to convince a highly profitable business unit that a new product line with lower margins is a good strategy, would be daunting. This was the challenge set for Satya Nadella of Microsoft Corporation as he stepped in the CEO role in 2014. Satya, a long-term Microsoft employee, had made his way from a high school in Hydrabad, India to the boardroom of Microsoft, developing software engineering and leadership skills along the way.
This report will look at the media presence of Satya, the internal changes he has successfully made in the organisation and a critique of Satya as a digital leader. In evidence of Satya’s impact, an interview with a current Microsoft Vice President, provides valuable insights into how Satya has changed the culture of Microsoft.
The Leader
Satya must be one of the more prominent and liked CEOs in the media today and no doubt quadrupling the share price since his appointment has something to do with that. He has been leading Microsoft from a software behemoth to a digital platform company with adaptive strategies and ecosystem partnerships that were unheard of in the past. The digital era is driving traditional organisations to increase their speed, agility, and adaptability in the face of fierce competition (Bersin et al 2017). IBM, Oracle and other traditional technology companies have failed to transform in the way Microsoft has, despite this pressure.
Microsoft has felt the changes of the 4th Industrial Revolution, with greater fluidity and the pressure to release software when the market determines, as opposed to when Microsoft saw it fit to release (Miller 2019). In a study by Deloitte, the pace of change was found to be the most common difference identified between traditional business and digital business (Kane et al 2019).
Satya realised Microsoft had been playing catch up in the areas of cloud computing, as Amazon and others disrupted the market. He had to convince executives from the client server part of the business that an aggressive investment in cloud was the way of the future, despite that department being a cash cow for Microsoft (Nadella 2018). This is a common challenge for successful, traditional organisations as they move to digital.
Adaptive Leadership
The following sections focus on Satya’s approach to adaptive leadership and the impact he has had at the working level of the organisation.
Learning Organisation
Satya too has pushed the narrative within Microsoft for life-long learning and encouraging an open mindset (Hougaard 2019). In fact, Satya has introduced a monthly call that highlights people who have demonstrated an open mindset (Hougaard 2019). The past 2–3 years have seen Microsoft adopt a life-long learning and learning organisation posture (MS VP 2021). Microsoft focus’ on 70:20:10 ratio for learning, from on-the-job experience, interactions with others and formal education respectively (MS VP 2021). This is a standard ratio in organisations today (Training Industry 2014).
Satya has used a global, annual hackathon for staff to find solutions for 2,700 real world problems. Brinks (2020) highlights that innovation typically comes from ones existing knowledge domain, hence the need bring together cross-functional experiences in a positive environment for ideation.
Adaptive Leadership
Satya once said the three top traits of a great leader are: 1) ability to create clarity 2) generate energy 3) deliver success regardless of the circumstances (Keijzer 2021). While Satya was not responding directly to a question about leading in the digital era, it’s fair to suggest he was responding about the traits of a leader in this modern era. The point on delivering success is interesting, as it juxtaposes the position of fail fast and experimentation. Pisano (2019) highlights the reality that most innovative companies have a tolerance for failure however not a tolerance for incompetence. I think this the point Satya is alluding to.
Abbatiello et al (2017) found the most common three leadership traits required as: the ability to communicate vision and purpose, innovation and getting people to think differently.
Adaptive leadership can also be applied to the execution strategy of an organisation. An example of this would be Satya’s adaptive approach to venture into cloud computing where multiple innovations were pursued, with not all being successful (Reeves et al 2019). Satya has also realised that adaptive leadership is required in the partner ecosystem, teaming up with once rivals Salesforce and Adobe. Randel & Jaussi (2019) propose that this environmental dynamism has a positive effect on the emergence of creative leadership.
Critiques of Satya Nadella propose that he wants to be portrayed as the new, digital leader however he is old school Microsoft to the core (Economist 2020). This is somewhat evident when Satya carefully links the organisations current vision with the innovative spirit held by Microsoft at the time of its infancy. While there is no direct evidence he is doing this to gently caress long term Microsoft staff on the journey, it’s not too farfetched either. If so, this would demonstrate Satya’s ability to strategize for future markets, while not appearing too extreme for long term Microsoft pundits.
In many ways, Satya’s leadership style is reminiscent of what doesn’t change when transitioning to digital as he portrays characteristics of owning the transformation, setting his teams up for success and clearly articulating the vision (Kane 2019). Success at the scale of Microsoft can often lead to complacency, hence Satya is reshaping that has been largely living off past innovations and marketshare.
Ambidextrous Leadership
A Microsoft VP (in person, 2021) confirms that ambidextrous leadership is used frequently in communications from Satya down through the leadership team. In fact, ambidexterity is one of the current key themes within Microsoft.
Satya has demonstrated ambidextrous leadership in his strategies for exploiting existing products and services while exploring disruptive technologies in coming horizons. As Microsoft cloud market share is only 50 percent of Amazon’s (Gartner 2021), Satya will need to continue to lead his team to exploit gains in this space.
Fail Fast
In a similar vein to the learning organisation and the principle of open mindset, Microsoft under Satya’s direction has introduced the concept of fail fast and experimentation (MS VP 2021). Over the past two to three years, the concept of Learning Friday’s has seen executives candidly talking with staff about key successes and failures they have had, with particular focus on encouraging staff to experiment (MS VP 2021). This open dialogue about failures and the principles of fast fail are valuable, tangible initiatives on the floor of the office and hence build trust in staff to have a go.
A Microsoft VP (2021) indicated this would certainly not have been the case perhaps 7–8 years ago, where failure was not tolerated. Nanyangwe et al (2020) propose that where there is a perceived, positive organisation support for creativity and a high organisational self esteem, individual experimentation (bootlegging) would be maximised.
Innovation
Satya has talked about innovation at length in his book Hit Reset. Satya talks about his three horizon strategy for innovation, addressing the needs of current products such as Windows/Office in the first horizon, while developing new capabilities in the second horizon, then finally in the third horizon the disruptive technologies such as mixed reality (Nadella 2018). McKinsey developed a 3-horizons model for achieving ambidexterity that defined how to service existing change needs while also investing in innovation (White et al 2000). The horizon narrative is embedded deeply within the Microsoft organisation today and features in different contexts, such as a) overall organisation strategic direction b) client innovation horizons c) ecosystem partner horizons (Stewart 2020).
Satya has removed innovation barriers as listed by Anthony (2019) through questioning the status quo, focusing intensely on customers (including them also in retreats), experimenting and empowering employees. Microsoft has made the transformation from a software company to a platform company. To that extent, Satya should be commended for leading the shift in mindset.
Global Leadership
Satya has also demonstrated a global leadership style that resonates with his informed, yet humble approach to his role. He has made global changes such as the addition of an annual hackathon and monthly calls to build the broader community, as well as inject energy into the global teams.
Amabile and Khaire (2008) highlight several ways a leader can encourage creativity such as open the organisation to diverse perspectives, providing intellectual challenge, embracing the certainty of failure and providing the setting for good work. Satya has achieved this in spades.
Conclusion
The market continues to sing the praise of Satya’s work and reward it through quadrupled market prices, however how long will Microsoft be able to maintain this given the subsidising of its cloud platform by other business units?
Satya has emboldened his executive leadership team with all the digital narratives and combined this with changes to culture on the floor. It would be wrong to suggest there is a single, successful leadership style for leading in the era of digital disruption. To that end, Satya seems to be a good balance between a traditional leader and a digital native CEO such as Jack Dorsey, who is a wildly different character. To measure Satya on the share price alone, is to ignore the rich embodiment of adaptive, ambidextrous leadership that he has injected into the organisation.
Time will tell if Satya’s focus on cultural shifts towards experimentation, ambidexterity and learning organisation will see lasting value creation, while innovations in Microsoft’s third horizon such as mixed reality, reach commercial reality and proliferation through the market.
References
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