Nadella counts on culture shock to drive growth at Microsoft
Company’s chief executive reflects on three years at helm in an exclusive interview with USA TODAY
InMarch of last year, the company unveiled Tay. ai, a Twitter bot aimed at ushering in a new era of human- to- artificial- intelligence conversation. Within hours, hackers turned Tay into a venomspewing 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 e- mail. “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 made its debut 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 toward 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 also is 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.
“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 withMicrosoft, which is both a strength and millstone.”
Scott Kessler of CFRA Research lauds the stock bump under Nadella, a 70% jump since he took over as compared with 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.
“( 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,” Kessler says.
Those significant changes are centered largely on making Microsoft a more attractive place to work.
Since taking over in 2014 from Steve Ballmer, Nadella has encouraged campus hackathons to drive bottom- up ideas, started amonthly town hall meeting accessible to all 120,000 global employees, and asked executives to travel more to better understand client needs.
He also has begun inviting, controversially so according to some reports, CEOs of newly acquired companies to annual retreats that had been reserved exclusively for veteran company leaders.
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 being a $ 26 billion purchase of networking site LinkedIn.
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. But the headwinds facing Nadella are strong. A slowing global PC market continues to be a drag on revenue. Nadella also is unwinding a $ 7 billion Nokia acquisition.
Nadella comes across as a man who is 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 has come a deep sense of responsibility.
“Organizations should not be measured so much during a CEO’s tenure, but after,” he says. “If it all falls apart after you’re gone, then you haven’t created an organization that is enduring.”