It is an overstatement to say Microsoft is a phoenix rising from the ashes, but there has certainly been something special and new going on in Redmond after some tougher days. The company once dominated the technology business thanks to the Wintel alliance between Microsoft and Intel, and Microsoft led the PC revolution spurred by Bill Gates’ mission to have a PC in every home and on every desk.
But something happened along the way. It’s not fair to say the company stopped innovating. Windows 8’s touch-centric design could be seen as ahead of its time, if anything, and the Surface line proved a surprising success, eventually--once the line got past its a rocky start and a $900 million write-down of unsold inventory. But the argument can be made that the company had stopped making products that people loved to use.
Thanks to the rise of CEO Satya Nadella, the past two years have been a different and unexpected story for Microsoft. He was named CEO by the Board of Directors on February 4, 2014 and came to the position as Microsoft had just begun to recognize the need for change under the banner of a new campaign known as "One Microsoft." Previously, Microsoft was seen as a confederation of sorts of divided product groups that were in competition with each other. As this toxic culture consumed their creative efforts, Redmond watched as Google disrupted Office in the cloud with Google Apps and Apple set the new standard for mobile devices. Something had to change.
Very early in his tenure, Satya Nadella began speaking of new areas of growth by making Microsoft a "mobile first, cloud first company. At that time two years ago, there was not much clarity on what a mobile-first, cloud-first" company would look like. But if anyone could do it, it was the former Executive Vice President of Cloud and Enterprise Satya Nadella. He had been credited for helping bring Microsoft’s database, Windows Server, and developer tools to Azure. And now, two years later, we have a fuller picture of what Nadella has been working towards all along.
It starts with culture. In his email to the troops last year, Satya said:
“Perhaps the most important driver of success is culture. Over the past year, we’ve challenged ourselves to think about our core mission, our soul — what would be lost if we disappeared… we also asked ourselves, what culture do we want to foster that will enable us to achieve these goals?”
In the same email, he laid out a new mission for the company: “to empower every person and every organization on the planet to achieve more.” And he announced a reorganization of its business groups around a different strategy. Products and platforms would not be individually housed in their own groups, but rather aligned in broader groups that focus on specific purposes like “reinvent productivity and business processes, build the intelligent cloud platform, and create more personal computing.” These initiatives gave a vision for his employees to embrace, and it connected their day-to-day responsibilities to a higher and more fulfilling purpose of enabling people to simply “do more.”
He also recognized that the technology industry “does not respect tradition – it only respects innovation.” This imperative has played out time and again over the past two years as Microsoft continues to do the unexpected relative to the company’s traditions under previous CEOs Steve Ballmer, and even Bill Gates.
Nadella also restructured Microsoft Research, and spun off Microsoft Next to bring more innovations directly to products in a quicker manner, rather than have R&D be separate for the company’s core business activities in a more academic tradition.
Under Nadella’s leadership, Microsoft has been busy burying many hatchets from previous conflicting relationships. Once-foes are now friends, with partnerships between Microsoft and Salesforce, Box, and Dropbox. The tone of Microsoft’s relationship with Google has even changed as long standing patent cases have been settled. And of course Microsoft is entering into a new phase in its relationship with Apple.
The Office team was represented on stage at the launch of the iPad Pro to show off how great the device can be with Microsoft apps. The company even released this noble ad over the recent holiday season of Microsoft employees caroling “let peace begin with me” in front of Apple’s iconic glass cube store in Manhattan.
And while Microsoft’s new culture has been taking place, it has been delivering surprising new technologies that excite the imaginations of the public. A little over a year ago, consumers got their first look at the future of Windows 10 and how the operating system could power an augmented reality based computing experience with HoloLens.
Later last year, Microsoft had one of the best “one more thing” moments when Panos Panay revealed the Surface Book. The technology company has also been delivering great app experiences to iOS and Android users with staples like Office and Outlook, but also new projects from the Microsoft Garage like Send, NewsPro, Arrow and many more. And Office 365 has been a bright spot for the company as they surpassed the “disrupter” Google Apps for Work in market share.
Frankly, the list of impressive feats goes on and on. Everything from Microsoft's growing cloud computing business, to a revived Xbox experience that puts gamers first, to Microsoft Research making its deep learning toolkit CNTK open sourced. Not to mention totally new services like GigJam and Power BI changing the way companies collaborate.
But there have been some not so great moments. There was Nadella’s comments regarding women’s pay at the Grace Hopper event. Although, to his credit, Nadella offered a swift apology that has been followed up continually with more of a focus on diversity and programs that empower women.
There also remain big unanswered questions about the future of Microsoft. Will Windows 10 be fully embraced by users and hit its goal of one billion active devices? The verdict won’t be out for some time, but one thing is clear: the universal strategy of Windows 10 becomes a lot less universal if there is no robust mobile presence for it. Windows phone market share is less than a rounding error, and the quarter that saw the launch of the newest Windows 10 Mobile Lumias was one of the worst holiday seasons for Microsoft’s phone sales.
For now though, Nadella should be proud of what he has achieved. Aircraft carrier-sized companies like Microsoft don’t turn on a dime, and Microsoft has pulled off something special so far. The transition hasn’t been easy with massive layoffs, reorganizations, and the dissolving of the former Nokia, which Microsoft had to write-off to the tune of $7.6 billion.
But the company has the culture and the vision it needs to grow again, and to wow the public with unexpected great products and services. Nadella has been handsomely rewarded by the Board for his efforts, which echoes their vote of confidence in his leadership. And the market has responded with Microsoft’s stock soaring as multiple revenue streams continue to grow. I’m excited to see what is next. With Microsoft’s new culture and businesses in place, I think Satya Nadella’s vision for Microsoft is just getting started.