[notes] Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone, by Satya Nadella

Chapter I: From Hyderabad to Redmond

I told them that we spend far too much time at work for it not to have deep meaning. If we can connect what we stand for as individuals with what this company is capable of, there is very little we can’t accomplish.

No one leader, no one group, and no one CEO would be the hero of Microsoft’s renewal. If there was to be a renewal, it would take all of us and all parts of each of us. Cultural transformation would be slow and trying before it would be rewarding.

Microsoft’s roots, its original raison d’être, was to democratize computing, to make it accessible to everyone. “A computer on every desk and in every home” was our original mission. It defined our culture.

Chapter II: Learning to Lead

That is what leadership is about. It’s about bringing out the best in everyone. It was a subtle, important leadership lesson about when to intervene and when to build the confidence of an individual and a team. I think that is perhaps the number one thing that leaders have to do: to bolster the confidence of the people you’re leading.

We came to understand life’s problems as something that cannot always be solved in the manner we want. Instead we had to learn to cope.

But it is impossible to be an empathetic leader sitting in an office behind a computer screen all day. An empathetic leader needs to be out in the world, meeting people where they live and seeing how the technology we create affects their daily activities.

We weren’t just building Bing, we were building the foundational technologies that would fuel Microsoft’s future. Building Bing taught us about scale, experimentation-led design, applied ML, and auction-based pricing. These skills are not only mission critical at our company, but highly sought after throughout today’s technology universe.

I realized that in a successful company it is as important to unlearn some old habits as it is to learn new skills.

In late 2010, Ray Ozzie announced in a long internal memo that he was leaving Microsoft. He wrote in his departure email, “The one irrefutable truth is that in any large organization, any transformation that is to ‘stick’ must come from within.”

As a company, we’d been very publicly missing the mobile revolution, but we were not about to miss the cloud. I would miss working with colleagues at Bing, but I was excited to lead what I sensed would be the biggest transformation of Microsoft in a generation — our journey to the cloud. I had spent three years, from 2008 to 2011, learning the cloud — pressure-testing its infrastructure, operations, and economics — but as a user, not as a provider of the cloud. That experience would enable me to execute with speed in my new role.

Leadership means making choices and then rallying the team around those choices. One thing I had learned from my dad’s experience as a senior Indian government official was that few tasks are more difficult than building a lasting institution. The choice of leading through consensus versus fiat is a false one. Any institution-building comes from having a clear vision and culture that works to motivate progress both top-down and bottom-up.

To win their support, I needed to build shared context. I decided not to bring my old team from Bing with me. It was important that the transformation come from within, from the core. It’s the only way to make change sustainable.

We had to meet the customers where they were and, more importantly, we needed to ensure that we viewed our opportunity not through a rearview mirror, but with a more future-oriented perspective.

Our team had to learn to embrace what I called “live site first” culture. The operational culture was as important as any key technology breakthrough. We would have on a single Skype call dozens of engineers plus our customer-facing field teams, all of whom would swarm together to coordinate and fix any problem. And every such incident would lead to rigorous root-cause analysis so that we could continuously learn and improve. I would, from time to time, join these calls to see our engineers in action. The key is to not have the top leaders infuse fear or panic but to help foster the actions that fix the issue at hand and the learning from it.

The cloud business taught me a series of lessons I would carry with me for years to come. Perhaps the most important is this: A leader must see the external opportunities and the internal capability and culture — and all of the connections among them — and respond to them before they become obvious parts of the conventional wisdom. It’s an art form, not a science. And a leader will not always get it right. But the batting average for how well a leader does this is going to define his or her longevity in business.

Chapter III: New Mission, New Momentum

There are many lessons a leader can take from the Nokia acquisition. Buying a company with weak market share is always risky. What we needed most was a fresh and distinctive approach to mobile computing. Where we went wrong initially was failing to recognize that our greatest strengths were already part of the soul of our company — inventing new hardware for Windows, making computing more personal, and making our cloud services work across any device and any platform. We should only be in the phone business when we have something that is really differentiated.

On my second question, where do we go from here, I became convinced that the new CEO of Microsoft needed to do several things very well right away, during the first year.

• Communicate clearly and regularly our sense of mission, worldview, and business and innovation ambitions.
• Drive cultural change from top to bottom,and get the right team in the right place.
• Build new and surprising partnerships in which we can grow the pie and delight customers.
• Be ready to catch the next wave of innovation and platform shifts.
• Reframe our opportunity for a mobile- and cloud-first world, and drive our execution with urgency.
• Stand for timeless values, and restore productivity and economic growth for everyone.

Culture can be a vague and amorphous term. In his perceptive book, Culture, the literary theorist Terry Eagleton wrote that the idea of culture is multifaceted, “a kind of social unconscious.” With razor precision, he separates culture into four different meanings, but the most relevant for an organization is the values, customs, beliefs, and symbolic practices that men and women live and breathe each day. Culture is made up of acts that become habitual and accrue to something coherent and meaningful.

Chapter IV: A Cultural Renaissance

I like to think that the C in CEO stands for culture. The CEO is the curator of an organization’s culture.

Of course, exhortations from the CEO are only a fraction of what it takes to create real culture change, especially in a huge, very successful organization like Microsoft. An organizational culture is not something that can simply unfreeze, change, and then refreeze in an ideal way. It takes deliberate work, and it takes some specific ideas about what the culture should become. It also requires dramatic, concrete actions that seize the attention of team members and push them out of their familiar comfort zones.

Our culture had been rigid. Each employee had to prove to everyone that he or she knew it all and was the smartest person in the room. Accountability — delivering on time and hitting numbers — trumped everything. Meetings were formal. Everything had to be planned in perfect detail before the meeting. And it was hard to do a skip-level meeting. If a senior leader wanted to tap the energy and creativity of someone lower down in the organization, she or he needed to invite that person’s boss, and so on. Hierarchy and pecking order had taken control, and spontaneity and creativity had suffered as a result.

The culture change I wanted was actually rooted in the Microsoft I originally joined. It was centered on exercising a growth mindset every day in three distinct ways.

• First, we needed to obsess about our customers. At the core of our business must be the curiosity and desire to meet a customer’s unarticulated and unmet needs with great technology. There is no way to do that unless we absorb with deeper insight and empathy what they need.
• Second, we are at our best when we actively seek diversity and inclusion. If we are going to serve the planet as our mission states, we need to reflect the planet. The diversity of our workforce must continue to improve, and we need to include a wide range of opinions and perspectives in our thinking and decision making. In every meeting, don’t just listen — make it possible for others to speak so that everyone’s ideas come through. Inclusiveness will help us become open to learning about our own biases and changing our behaviors so we can tap into the collective power of everyone in the company. We need not just value differences but also actively seek them out, invite them in. And as a result, our ideas will be better, our products will be better, and our customers will be better served.
• Finally, we are one company, one Microsoft — not a confederation of fiefdoms. Innovation and competition don’t respect our silos, our org boundaries, so we have to learn to transcend those barriers. We are a family of individuals united by a single, shared mission. It is not about doing what’s comfortable within our own organization, it’s about getting outside that comfort zone, reaching out to do things that are most important for customers.

Part of the culture change was to give people the breathing room, the space, to bring their own voices and experiences to the conversation. The last thing I wanted was for employees to think of culture as “Satya’s thing.” I wanted them to see it as their thing, as Microsoft’s thing.

Because I’ve made culture change at Microsoft such a high priority, people often ask how it’s going. Well, I suppose my response is very Eastern: We’re making great progress, but we should never be done. It’s not a program with a start and end date. It’s a way of being.

The key to the culture change was individual empowerment. We sometimes underestimate what we each can do to make things happen, and overestimate what others need to do for us. We had to get out of the mode of thinking in which we assume that others have more power over us than we do. I became irritated once during an employee Q&A when someone asked me, “Why can’t I print a document from my mobile phone?” I politely told him, “Make it happen. You have full authority.”

A Harvard Business Review survey found that senior leaders inside companies spend less than 10 percent of their time developing high potential leaders. If even top executives cannot find the time to unlock employee potential, the growth path for most corporate team members looks pretty static.

I told these high-potential leaders that once you become a vice president, a partner in this endeavor, the whining is over. You can’t say the coffee around here is bad, or there aren’t enough good people, or I didn’t get the bonus. “To be a leader in this company, your job is to find the rose petals in a field of shit.” Perhaps not my best line of poetry, but I wanted these people to stop seeing all the things that are hard and start seeing things that are great and helping others see them too. Constraints are real and will always be with us, but leaders are the champions of overcoming constraints. They make things happen.

Every organization will say it differently, but for me there are three expectations — three leadership principles — for anyone leading others at Microsoft.

• The first is to bring clarity to those you work with. This is one of the foundational things leaders do every day, every minute. In order to bring clarity, you’ve got to synthesize the complex. Leaders take internal and external noise and synthesize a message from it, recognizing the true signal within a lot of noise.
• Second, leaders generate energy, not only on their own teams but across the company. Leaders need to inspire optimism, creativity, shared commitment, and growth through times good and bad. They create an environment where everyone can do his or her best work.
• Third, and finally, they find a way to deliver success, to make things happen.

Changing the culture at Microsoft doesn’t depend on me, or even on the handful of top leaders I work most closely with. It depends on everyone in the company — including our vast cadre of middle managers who must dedicate themselves to making everyone they work with better, every day.

Reasoned judgment and inner conviction are what I expect from myself and from the leaders around me.

Internally, we needed to have strong partnerships — between leaders across the company among teams. But that same growth mindset was needed externally, too.

Chapter V: Friends or Frenemies?

Over the years we’ve developed the maturity to become more obsessed with customer needs, thereby learning to coexist and compete.

I wanted unambiguously to declare, both internally and externally, that the strategy would be to center our innovation agenda around users’ needs and not simply their device.

But the publicity value of working with old rivals was far down on my list of motivations for pursuing them. Sure, people like to hear about competitors getting along. But forging great business partnerships is too difficult if PR is the sole purpose. For me, partnerships — particularly with competitors — have to be about strengthening a company’s core businesses, which ultimately centers on creating additional value for the customer. For a platform company, that means doing new things with competitors that can accrue value back to one of the platforms.

In today’s era of digital transformation, every organization and every industry are potential partners.

When I became CEO, I sensed we had forgotten how our talent for partnerships was a key to what made us great. It’s the kind of thing that can happen to any great company. Success can cause people to unlearn the habits that made them successful in the first place. We knew we needed to retrain our partnership muscles. We had to look anew at our industry and find ways to add value for our customers whether they were on an Apple device, a Linux platform, or an Adobe product.

Trust is built by being consistent over time. It’s built by being clear that there are places where we are going to compete to be best in class, and there are places where we can work together to add value for each other’s customers.

Trust has many other components as well — respect, listening, transparency, staying focused, and being willing to hit reset when necessary. We have got to be principled about it.

Employees. Customers. Products. Partners. Each element needs time, attention, and focus if I’m going to create the value for which I am ultimately accountable. All four are important, and without discipline even the best managers can overlook one or more.

Chapter VI: Beyond the Cloud

A technology company that misses multiple trends like these will inevitably fall behind. At the same time, of course, it’s dangerous to chase untested future technologies while neglecting the core of the current business. That’s the classic innovator’s dilemma — to risk existing success while pursuing new opportunities.

Historically, Microsoft has struggled at times to get this balance right. We actually had a tablet before the iPad; we were well along the path toward an e-reader before the Kindle. But in some cases our software was ahead of the key components required for success, such as touchscreen hardware or broadband connectivity. In other cases, we lacked end-to-end design thinking to bring a complete solution to market. We also got a bit overconfident in our ability to fast-follow a competitor, forgetting that there is inherent risk in such a strategy. We were perhaps timid in disrupting our own highly successful business models. We’ve learned from all this. There is no formula to inventing the future. A company has to have a complete vision for what it can uniquely do, and then back it up with conviction and the capability to make it happen.

I had decided before becoming CEO that we would need to continue to invest, and to do so in an aggressive and more focused way, in new technologies and new markets — but only if we could satisfactorily meet our three Cs — do we have an exciting concept, do we have the capabilities necessary to succeed, and a culture that welcomes these new ideas and approaches?

To avoid being trapped by the innovator’s dilemma — and to move from always focusing on the urgency of today to considering the important things for tomorrow — we decided to look at our investment strategy across three growth horizons: first, grow today’s core businesses and technologies; second, incubate new ideas and products for the future; and third, invest in long-term breakthroughs.

The intellectual history of how computers augment the human intellect and build a collective IQ has always fascinated me. Doug Engelbart in the 1960s performed “the mother of all demos,” introducing the mouse, hypertext, and shared-screen teleconferencing. Engelbart’s Law states that the rate of human performance is exponential; that while technology will augment our capabilities, our ability to improve upon improvements is a uniquely human endeavor.

Chapter VII: The Trust Equation

What’s become clear is that the world needs a Digital Geneva Convention, a broader multilateral agreement that affirms cybersecurity norms as global rules. Just as the world’s governments came together in 1949 to adopt the Fourth Geneva Convention to protect civilians in times of war, this digital agreement would commit governments to implement the norms that have been developed to protect civilians on the Internet in times of peace. Such a convention should commit governments to avoiding cyberattacks that target the private sector or critical infrastructure or the use of hacking to steal intellectual property.

The dilemma framed by each of these high-profile cases — Sony, Snowden, San Bernardino, and the Irish data center — is the conflict between protecting individual liberties of privacy and free speech and civil society requirements like public safety. This conflict creates a moral or ethical dilemma, one which, of course, has been debated throughout history. Philosopher Tom Beauchamp defines such a dilemma as a circumstance in which moral obligations demand or appear to demand that a person adopt each of two (or more) alternative actions, yet the person cannot perform all the required alternatives. In such a circumstance, some evidence indicates that an act is morally right while other evidence indicates that it is morally wrong, but the evidence or strength of argument on both sides is inconclusive.

Chapter IX: Restoring Economic Growth for Everyone

…equally important, he says, is the intensity they employ in putting new technologies to work. Even when countries that were slow to adopt new technologies eventually catch up, it’s the intensity of how they use the technology — not simply the access — that creates economic opportunity. Are the technologies just sitting there or is the workforce trained to get the most productivity out of them? That’s intensity. “The question is not just when these technologies arrive, but the intensity of their use,” Professor Comin told me.

Unfortunately, in many underserved parts of the world, public and private attention is focused on attracting Silicon Valley companies rather than on growing local tech entrepreneurs. Successful entrepreneurs in developing nations often tell me they can’t even get meetings with their president or prime minister. Yet those same heads of state routinely meet with Western CEOs like me, looking for very near-term, foreign direct investment.

Most economists agree that perfect income equality is neither possible nor desirable. Capitalist economies reward qualities like innovation, risk-taking, and hard work — qualities that generate value, produce wealth, and usually lead to benefits for many people throughout the society. When rewards flow to the people who exhibit those qualities, unequal income distribution is the inevitable result. Edward Conard, a founding partner of Bain Capital, carries the argument even further in The Upside of Inequality. Conard concludes that inequality ultimately leads to faster growth and greater prosperity for everyone. Investors wait for good ideas that create their own demand for properly trained talent needed to commercialize ideas successfully. He sees two constraints on growth: an economy’s capacity and willingness to take risk and to find properly trained and motivated talent. But excessive inequality has the perverse effect of reducing incentives for many people. What happens when people work more and yet make less money? It is discouraging, leading many people to slacken their efforts, abandon dreams of launching or expanding businesses, and perhaps to leave the workforce altogether. It also weakens overall economic activity.

Afterword

Real business success, in fact capitalism generally, cannot be just the surplus that you create for your own core constituency, but also the broader surplus that is created to benefit the wider society.