The Rebirth Of Microsoft — How Satya Nadella Saved It (Or Did He?)
Microsoft today is a company on the rise, with its reach ever-expanding into new industries. But less than a decade ago, Microsoft had a very different image, one of stagnation, bureaucracy, and decline. The recent reinvention of the company has been a lesson for the history books, and in this article, we’ll see how it happened.
Failing the phone game
For most of Microsoft’s history, it was Bill Gates who was at the helm. It was under his guidance that Microsoft first conquers the operating system market, and in fact, he was so successful that the US government almost broke Microsoft up. But after 25 years of leadership, Bill eventually stepped down, and the man he chose to replace him, well, he had a much more different vision for Microsoft.
Steve Ballmer was not a technology guy, even though he was the 30th employee hired at Microsoft and had been around for decades.
He had worked in departments like business management and sales. In Steve’s eyes, it was these departments that were responsible for Microsoft’s success and so he did his best to reorganize leadership around the business people instead of the technology people.
As he himself put it, he wanted to break up the technology fiefdoms, which in his view were spending ridiculous amounts of money trying to develop new technology without any idea whether it would be beneficial to the dominance of Windows in the PC world. Steve saw that Windows worked and he tries to promote it as much as possible. That’s why the biggest move in his career was attempting to spread Windows to the mobile market, first through Windows Mobile and then Windows Phone.
In many ways, Steve was continuing the philosophy Bill Gates had adopted two decades earlier: an aggressive expansion and an outright war against competition. Unfortunately, Microsoft was too late in the smartphone game, so Steve’s dream of making billions by selling phones never materialized.
Satya Nadella takes over
Even though Microsoft’s revenue increased during this period, the loss of the smartphone market was just too much.
These years under Steve became a lost decade for Microsoft, and in 2014 when he announced his resignation, the stock jumped 7% on the news; that’s how badly investors wanted him to go away.
The biggest question then became who would be his successor, and everyone naturally assumed Microsoft would hire someone external to reshape the company, to bring it back on the path of innovation. The answer, however, was exactly the opposite. Not only was the new CEO a longtime insider Microsoft, but he was also the leader of one of the divisions Steve Ballmer himself created.
Satya Nadella had been around in Microsoft since 1998, and a decade later when Steve Ballmer announced the creation of Microsoft’s enterprise division, Satya became its executive vice president.
Of course, at the time, nobody considered Steve’s idea to push Microsoft into the enterprise business as viable. This was before Amazon Web Services had become profitable and before the cloud had really taken off in the mainstream. In reality, when Steve saw that Windows Phone wasn’t working, he wanted to pivot towards something else and enterprise was his idea. Unfortunately, this pivot began only a few years before he was forced to resign, but internally it was becoming clear that enterprise was indeed the way to go.
An accidental rebirth?
The immense success of Amazon’s cloud business convinced Microsoft’s board that they should work in that direction as well, and who better to execute that plan than the man in charge of Microsoft’s own cloud efforts? When Microsoft announced that Satya Nadella would be the new CEO, the entire world was confused.
To start things off, nobody even knew who he was. When you look at the search volume from Google Trends for his name, you’ll see what I mean.
So out of nowhere, a rather unknown executive becomes the CEO of Microsoft, and unsurprisingly, there is a lot of skepticism around the decision. But then something almost magical happens: the stock starts climbing up after a decade of stagnation and Microsoft’s cloud computing platform, Azure, starts growing rapidly and becomes incredibly profitable.
Within a few years, praise for Satya Nadella’s leadership is coming from across the world because everyone believes they’re witnessing a miracle. But the truth is that when Satya took over from Steve, Azure had been in development for over six years, and the enterprise division, which is now the bread and butter of Microsoft, had been profitable even during Steve’s time.
Ironically, even though during Steve’s leadership the stock price didn’t move, Microsoft’s net income more than tripled. So Microsoft’s rebirth at the hands of Satya isn’t an economic one. The fact of the matter is that Microsoft was wildly profitable before and continued being so after.
So what did Satya do?
What Satya did achieve was a philosophical rebirth, and while that might not sound nearly as impressive, it’s actually just as important. When Satya took over, Microsoft was suffering from decades of bad reputation, which was honestly very much deserved.
From anti-competitive practices to suppression of open source development, there were very few people saying nice things about Microsoft in 2014. And yet, the reorganization Satya enacted after he took over had an incredible effect.
Microsoft essentially did a 180-degree turn on its philosophy. It not only embraced open source development but actively started supporting it, so much so that one of Satya’s biggest moves was to acquire GitHub. It’s extremely telling that in Satya’s first-ever speech as CEO of Microsoft, he didn’t mention Windows even once.
In fact, during that speech, Satya announced that he’d be bringing Microsoft Office to iOS, and within a few months, he did the same for Android.
It turns out that in such an interconnected world, making friends is better than making enemies. Of course, none of what Satya gets credit for it today would have been possible without the groundwork Steve Ballmer laid a decade earlier.
While everyone is quick to praise Satya for economic achievements he might not have been fully responsible for, we should recognize his true contribution, taking decades of cutthroat aggression and transforming it into an attitude of productive collaboration.
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