USA TODAY International Edition
Microsoft chief at helm for 3 years
Company’s chief executive reflects on three years at helm in exclusive USA TODAY interview
“What I realize more than ever now is that my job is curation of our culture.” Satya Nadella
In March of last year, the company unveiled Tay. ai, a Twitter bot aimed at ushering in a new era of human-toartificial- intelligence conversation. Within hours, hackers turned Tay into a venom- spewing racist and the company quickly shut down the not ready for prime time product. In the old days of Microsoft, heads surely would have rolled. But Satya Nadella, 49, a one- time company engineer who took the reins of the $ 500 billion tech giant three years ago this month, sent the Tay team a note of encouragement.
“Keep pushing, and know that I am with you,” he wrote in an email. “All new things are hard. Any internal and external feedback is good and criticism is also something we take in the right spirit with deep empathy for anyone hurt by Tay. And ( the) key is to keep learning and improving.”
The team responded with Zo, a new AI chatbot that debuted in December. So far, no issues.
“It’s so critical for leaders not to freak people out, but to give them air cover to solve the real problem,” Nadella said in an exclusive interview with USA TODAY. “If people are doing things out of fear, it’s hard or impossible to actually drive any innovation.”
A seismic cultural shift is rocking Microsoft, one that Nadella sees as critical to pivoting away from an atrophying software license- based past and towards a cloud- based enterprise future.
“What I realize more than ever now is that my job is curation of our culture,” he says. “If you don’t focus on creating a culture that allows people to do their best work, then you’ve created nothing.”
Innovation is the lifeblood of any company, but especially those that traffic in the fickle world of technology. For every Facebook there’s also a Yahoo, a shooting comet that passed on a chance to buy Google and thought digital magazines would save the day.
For this one- time tech monolith now grappling with reinvention, a cultural shift capable of spawning revenue- generating ideas is no mere nice- to- have makeover. It’s vital to the company’s future.
“You have cloud massive growth in one direction, but drag from phone hardware and a move away from licensing, so there are a lot of things against them,” says Jan Dawson of Jackdaw Research.
“They’ve done well to get back to parity, but you won’t see the kind of growth they had a decade ago,” he says. “There’s so much legacy business with Microsoft, which is both a strength and millstone. Any new stuff seems to just offset the longterm decline on other fronts.”
Scott Kessler of CFRA Research lauds the stock bump under Nadella, a 70% jump since he took over as compared to 30% growth from the S& P 500. But he suggests the honeymoon may soon be over as investors look for restructuring moves to hit the bottom line.
“Nadella has done a good job and the stock reflects the positive perceptions, but it’s too early to suggest he has been wholly successful,” says Kessler, who rates the stock as a hold.
“FY18 ( fiscal year 2018) will be the year where Nadella has to transition from someone who is new and learning and making these significant changes, to one who is about execution, about demonstrating improvement and traction with products and financials,” he says.
Those significant changes are centered largely on making Microsoft a more attractive place to work. Since taking over in 2014 from former CEO Steve Ballmer, Nadella has encouraged campus hackathons to drive bottom- up ideas, started a monthly town hall meeting accessible to all 120,000 global employees, and asked top executives to travel more in order to better understand client needs. He also has begun inviting CEOs of newly acquired companies to annual retreats that had been reserved exclusively for veteran company leaders.
“The goal isn’t just to bring in new code, but to bring in new DNA,” says Scott Guthrie, who heads the company’s cloud and enterprise division. “These days, we acknowledge others may have better ways of doing things, as opposed to us saying, ‘ Here’s how we do it at Microsoft.’”
Nadella hasn’t been shy about buying his way into the digital future. Microsoft has acquired nearly 40 tech companies large and small in the past three years, with the biggest by far being a $ 26 billion purchase of professional networking site LinkedIn.
That shopping spree has turned heads in Silicon Valley.
Chuck Dietrich, a Salesforce veteran whose Mobile Data Labs AI company was bought by Microsoft in 2015, says Nadella is helping erase a reputation for being “stodgy, closed and insular. We’re being asked for our opinions, and even leading best practices meetings.”
So far, Nadella’s various strategic gambles appear to be paying off.
Microsoft stock hit an all- time high late last year and currently is trading at $ 64. The company’s cloud business is second only to Amazon Web Services and, at a $ 13 billion current annual run rate, is tracking to hit its 2018 goal of $ 20 billion a year.
Nadella and his senior leadership team are adamant that the company’s ultimate success depends on how well every employee embraces what they have dubbed a “learning mindset,” one that demands more listening than talking.
Nadella comes across as a man who feels pleased if not shocked at where his life journey has taken him — from an Indian kid working with Microsoft tools to an American citizen running Microsoft. And with that shock has come a deep sense of responsibility.
“Organizations should not be measured so much during a CEO’s tenure, but after,” says Nadella. “Because if it all falls apart after you’re gone, then you haven’t created an organization that is enduring.”