It’s a brisk day at Microsoft headquarters in Redmond, Washington, just outside of the city of Seattle. The air is cold and crisp and there’s frost under the trees well into the afternoon. But the sky is clear, and the view of Washington state and America beyond from its great glass picture windows is not to be missed.
There had been a change in the weather. Just the day before, Seattle was smothered in a deep, thick fog that made air travel and driving damn near impossible. It also served up a nice, writerly metaphor for a meeting with Satya Nadella on the occasion of rounding out his first full calendar year as the CEO of Microsoft. (A job he started in February of 2014.) It’s a tough gig.
Microsoft was once the company that you used, if you used a computer at all. But it has lost that vitality, and as the industry transitioned to mobile the company has often seemed adrift. In 2012, Vanity Fair made a convincing case that Microsoft had suffered a “lost decade.”(By the next year, its longtime CEO, Steve Ballmer, was out.) The story described a company culture characterized by arrogance, infighting, and bureaucracy. It had gone from being the essential desktop software company to one that struggled for relevance in your pocket or backpack. That’s what Nadella is up against.
“I like to say that the real determinate of long-term success is the day-to-day culture of the organization,” says the 48-year-old, Indian-born CEO. He’s noticeably thin, lithe even, with a runner’s physique. But not in an ascetic sort of way. He’s also got an infectious smile and gregarious manner. It’s all very…different than Steve Ballmer.
It’s Ballmer’s culture that Nadella must oust. But, he says, he isn’t just trying to replace the old ways with a new style, he’s attempting to create a company where the culture continually evolves.
“We’ve got to have a model which goes beyond saying ‘let’s take culture A, unfreeze it, change it, and freeze it back’ because that model doesn’t work — because as soon as you freeze anything back it becomes irrelevant the next day."
Nadella’s been working, instead, to get the company and its leadership to embrace a theory called mindset, or growth mindset that focuses on constant evolution.
“The thing that we picked as the meme or the north star that drives this is something called the growth mindset," Nadella says. "I love that because it really puts the onus on each one of us, starting with me as the CEO of saying, 'Let’s move and transform ourselves from being the know-it-alls to learn-it-alls.'"
This outlook is very much the antithesis of the arrogant, hard-charging Microsoft under Ballmer. Under Nadella, Microsoft has shed other vestiges of the past as well: It took an $8.4 billion write-down on its Nokia business this year, and let nearly 9,000 people go in two rounds of layoffs (in 2014, Nadella said Microsoft would eliminate some 18,000 jobs as it restructured its business). Those cuts were, he says, the most difficult thing he’s had to do.
“The hardest personal decisions are always changes that impact other people,” Nadella says. “There’s no question. As a CEO those are the hardest ones. They’re necessary, because in order to be able to make sure that you are really positioning the company for opportunities ahead, sometimes you have to course-correct and that course correction has a human toll.”
Lately, Nadella has been steering Microsoft ever more into its cloud business, which he says is designed to deliver mobile experiences — where the things you do and actions you take follow you around from screen to screen. And he emphasizes the difference between a mobile experience versus a mobile device. Simply put, it means that your data and the way you interact with it is the thing that is always with you, rather than a single device.
“You and I throughout the day, we will use many devices,” Nadella explains. “Perhaps you start with a phone. But then you walk into your conference room where there are sensors, large screens, and small screens. And then you go back home to your TV or your Xbox. The idea is that ... your apps, your data, your context move from device to device [when] you are mobile.”
The focus on mobile experiences makes sense for a company trying to push into cloud services, especially because mobile as a category been a disaster for Microsoft. The latest Gartner report estimates that the company's share of the mobile market is a measly 1.7%. Nadella admits that’s unsustainable, but argues that the company is already trying to get to a world where the device matters less than the services it is accessing.
“I think we do ourselves a disservice if we measure our success by just looking at: What’s the market share of HoloLens? What’s the market share of Xbox? What’s the market share of PCs? What’s the market share of our phones?" Nadella says. "Go back to what I said about the mobility of experience. If you think of this more like a graph, these [devices] are all nodes. Sometimes the user will use all of these devices ... sometimes they’ll use only one or two of our devices and some other platforms — so be it. But we want to make sure that we are completing the experience across all of these devices.”
Maybe so, but in the meantime an entire generation of developers has flocked to iOS and Android. The one Ballmer mantra that truly made sense was his onstage developers-developers-developers rant. Apps make the platform, and developers make the apps. When I ask Nadella about this, he admits that Microsoft has lost much of that developer energy. But he also argues (of course) that with Windows 10 and its ability to move from device to device, Microsoft is going to get a lot of those developers back.
“What you’re referencing is what I’d call the elite developers, and a lot of them go to the volume platform," he says. "There’s no question that in the case of the smartphone, today, we are not that high in share. Now, with HoloLens we’re going to get back a lot of elite developers. And with Xbox becoming basically a Windows computer, we’re going to get back a whole lot of developers.”
It’s a strong assertion — but also it is impossible for anyone, Nadella and Microsoft included, to know what the future holds. That's even more true for those of us who try to analyze the company and read its future from the outside. Especially because, like many CEOs, Nadella tends to speak in paragraphs, but can be hard to pin down on specifics.
For example, when I ask him what books he’s read that have influenced his thinking since becoming CEO — a softball question intended to warm him up at the beginning of an interview — he offers this as an answer:
Everything that we do, every customer interaction we have, every product we build, how we shore up with our industrial partners, reinforces that sense of identity and sense of purpose and mission. For me, it’s very, very clear what that is. Our competitors, for some, their brand is their hero. For others, the customers’ data is the hero. In our case, it is our customers’ product which is the hero.
It could be a student writing a term paper, a small business driving productivity, or a large business doing something very innovative, using digital technology to disrupt their own industry, or their own business. To me, that’s why we exist. When I think about Microsoft, we talk about empowering every person and organization on the planet to achieve more. Of course, what we do is provide digital technology and digital technology platforms so that others can do things, get things done, make things happen. That’s that thing that drives, pretty much, everything. In fact, that’s the real sense of purpose that brought me, I guess, to the company 23 years ago and that’s what I want us to reinforce, because technology paradigms will keep changing. We now have a very different world that we live in, but it’s that reinforcement of that identity is probably the thing that I’m most focused on.
But here’s the thing: Microsoft’s cloud business (the division Nadella used to lead) is booming. The company is profitable. The hardest times seem behind it. It has some absolutely killer productivity products, like Outlook and Sunrise, that are best in class for email and calendaring (respectively) no matter which platform you use them on. Hololens is one of the most fun tech products I’ve ever tried. Despite the long-predicted death of consoles, Xbox continues to matter. And, holy shit, Minecraft. Minecraft! In essence, just about everything other than Microsoft's Windows business (see: death of the PC, lousy mobile market share, etc.) seems to be thriving.
And so, as the year comes to a close, the fog does seem to have at last lifted from Redmond. And Nadella is certainly course-correcting. Now he just needs to be sure he's going in the right direction.