Author丨Dare Obasanjo

Compilation丨Noah

In 2007, Y-Combinator founder Paul Graham wrote an article titled "Microsoft is Dead." The gist of this article is that Microsoft has become irrelevant due to the combination of the Internet, Mac computers, and Google services. In fact, Y-Combinator didn't invite Microsoft to its demo day to meet any of their startups, but it did invite Yahoo, which was a more relevant company at the time.

I worked for Microsoft from 2002 to 2019. Around 2007, it was generally believed that Microsoft's vitality as an innovative technology company was almost exhausted. Microsoft, under then-CEO Steve Ballmer, had done a great job serving and developing software for enterprise customers, but it struggled to enter new areas and build competitive products. But failed repeatedly.

Microsoft has tried to develop mobile operating systems, consumer email services, social networking applications, search engines and music services, but none of them have succeeded. In addition, Microsoft's attempts at hardware also ended in failure. For example, tablet computers and Zune products failed to gain a foothold in the market.

This period was later described as Microsoft's "Lost Decade." As an employee who experienced that period, I remember that the stock price at that time always hovered around $27±$2, never fell below $25, and never exceeded $29. It wasn't until August 23, 2013, the day Steve Ballmer announced his resignation, that the stock price rose to approximately $34.

Satya Nadella took over the company on February 4, 2014, and immediately set about changing the company's culture and business performance. The market, employees and customers have responded positively to his change initiatives. Today, Microsoft's stock price is as high as $410 and has outperformed the Nasdaq Composite Index by three times since Nadella took office. His successful transformation of Microsoft has led many to call him the most successful CEO in the technology industry.

So here's the trillion-dollar question: How did Satya change Microsoft? Here are my observations on the key changes he made at the company that completely changed Microsoft's trajectory.

Lesson 1: Corporate culture trumps strategy

Nadella's first task after becoming CEO is to change Microsoft's corporate culture. He believed deeply in the company's mission, as reflected in his first letter to employees after becoming CEO, and he also recognized that the company's culture was hindering Microsoft's growth.

Complacency and arrogance were hallmarks of Microsoft's culture under Steve Ballmer. Despite failure after failure, many people in the company still believe that we have the two most successful software products in history, Windows and Office, and therefore Microsoft is still the leader in the industry.   

To challenge this mentality, Nadella directly advocates for all employees to adopt a "growth mindset." We want to be a company of “know-it-alls” rather than “know-it-alls.” Encourage employees to be curious, embrace change, and try new things. A comparison chart is posted in each conference room to show the difference between fixed mindset meetings and growth mindset meetings to promote corporate culture change.

In this way, Nadella strives to create a Microsoft that is constantly learning and actively adapting to changes in the environment, so that the company can continue to progress rather than resting on its laurels.

Nadella leads by example, encouraging everyone in the company to have the courage to try new things, learn from failures, and refuse to be complacent. He set out to change a lot of the way we did business because the company was stuck in a rut. It’s a transformational culture change that starts at the top but affects every team in the company. Through this cultural transformation, Microsoft gradually got rid of the constraints of the past, employees were given greater freedom to innovate and learn, and the entire organization showed a more proactive spirit.

Lesson 2: Forget strategy and do what’s best for your customers

Microsoft is a company that relies heavily on strategy. Every corporate move is viewed as a move on a chessboard designed to build lasting competitive advantage. This strategy has paid off significantly over the years.

A virtuous cycle is formed between Office and Windows. Enterprises buy Windows because they need it to run Office, and because Office is the best productivity software on the Windows platform, they will also choose to buy Office. With the successful introduction of Active Directory and Exchange, enterprise business spread like a vine, which in turn led to sales growth of other Microsoft products such as Sharepoint. Although this product was criticized both inside and outside the company, it quickly grew into a popular product of the year. Products with billions of dollars in revenue.

However, this overly strategic approach can sometimes be unfriendly to users. For example, the idea behind Windows 8, which is trying to transform the desktop version of Windows into an iOS-like operating system, is to prevent the iPad from subverting the Windows market. Therefore, creating a tablet that can both touch and run Windows desktop applications seems to be the best option. Best defense strategy. However, in this process, whether it can actually create a product with good user experience has not been taken into consideration.

In addition, although it is obvious that the web and mobile terminals are the future trend, and the Windows desktop system is gradually declining, Microsoft is still unwilling to bring its productivity applications to the web or mobile platforms.

Within a month of becoming CEO, Satya Nadella signaled his determination to change by announcing Office for iPad, signaling to both the company and its customers that the days of strategy-focused, sometimes neglected user experience were over. . In fact, the Office team had already started developing an iPad version, but believed that because it was inconsistent with the strategy at the time, it might never be approved for release. Subsequently, more customer-centric initiatives followed. For example, a few months later, Nadella announced that "Microsoft loves Linux" and made it clear that Azure would make hosting Linux virtual machines a priority and no longer focus primarily on hosting Windows virtual machines. machine.   

Microsoft, a company once known for championing the concept of a "strategic tax" in which the independent success of individual products is sacrificed for the sake of product integration, abandoned the idea under Nadella. Office no longer ignores the Web or iOS platform, even if it means that it may weaken the value of Windows; Azure no longer ignores Linux, even if it means that it may affect the value of Windows Server.

Lesson 3: The importance of timely stop loss

When Steve Ballmer was in charge of Microsoft, he had an almost fanatical pursuit of competitors. No matter how high the cost, he was willing to pay as long as he could keep up with his target competitors. In the process of competing with Google, Microsoft lost billions of dollars over the years on the Bing project; after being rejected by DoubleClick, it spent more than $6 billion to acquire aQuantive, and DoubleClick was eventually acquired by Google for $3 billion. , then Microsoft’s investment in aQuantive was almost completely written down to zero; in addition, Microsoft also acquired Nokia for US$7.2 billion in an attempt to catch up with the iPhone.

When Satya Nadella took over the company, it was clear that Windows Phone and Nokia's Lumia devices were lagging behind in competition with iPhones and Android phones. Nadella wrote down the entire cost of acquiring Nokia and laid off nearly 26,000 people within two years, including 18,000 in 2014 and another 7,800 in 2015.

What became clear at the time was that Nokia's smartphone business had no effective path to success. Therefore, Nadella ignored the sunk costs and decisively divested this business. During my time at Microsoft, I witnessed countless decisions like this: business cases with limited value for continued investment were calmly and decisively shut down.

I personally used to be very optimistic about the Microsoft Band product. It was Microsoft's smart bracelet to compete with Fitbit, but the product was discontinued in 2016. I remember asking Nadella about this during a leadership Q&A, and his response was that the business model was not ideal, and even Fitbit, the market leader at the time, had a business model that was not exceptional. Nadella was proven right, as Fitbit was acquired by Google for $2.1 billion while facing an uncertain future.

Lesson 4: Every investment has an opportunity cost

This lesson comes more from Microsoft’s Amy Hood than Satya Nadella. Although Amy is not widely known outside Microsoft, she is the most influential person in the company besides Nadella. As CFO, she strictly controls financial management.

I used to work on Bing Ads, and a question our team often asked was why, even though search relevancy could compete with Google in the U.S., our product performed so poorly in other markets like Latin America or Europe. . The answer turns out to lie in Amy Hood's decision-making.

During a leadership Q&A session, Amy shared her business philosophy of always looking at the opportunity cost of capital requirements raised by each business unit from a business perspective. For example, when the Bing team asked for $1 billion to increase search crawling and train AI models to improve search relevance in European and Latin American markets, she asked what the money would do if invested in Azure data centers. How much profit will come. Taking into account the lag effect of acquiring advertisers and adjusting ad algorithms after improving the relevance of consumer search experiences, the return on investment of this money in Azure is higher.

As someone who used to work on the Bing product team, this decision is really frustrating, and friends who still work on the team still complain about it. However, from a business decision perspective and as a Microsoft shareholder, I agree with Amy's decision.

It is important to note that this opportunity cost-based approach to decision-making should be used with caution, as in some cases investments that offer less short-term returns than other opportunities may make strategic sense.

Lesson 5: In a software company, engineers are the most important resource, and their voices must be listened to

In the era of Steve Ballmer, Microsoft gradually lost sight of its roots as a software company because its CEO's background came from sales rather than product teams. This means that some practices that the product team considered unquestionable were not approved for implementation during Ballmer's tenure. When I worked on cloud services like Windows Live and Bing Ads, I was surprised that we were using Microsoft software (like SQL Server) designed for B2B scenarios, rather than using open source, cloud-based software like other companies in the industry. s solution.

At the same time, Microsoft's hostile attitude towards open source technology, coupled with the above-mentioned practice of using B2B-oriented Microsoft software to build cloud services, is like running a race with its legs tied, which greatly limits its development speed and flexibility.

The situation initially improved after Satya Nadella took over. Microsoft begins allowing open source software to be used under audited conditions. I went through this process while working as a group product manager for Bing Ads, getting approval to create tutorials on advertiser tools using the WalkMe service. However, I found this audit process to be cumbersome and unreasonable. A software audit requires $20,000 from my team budget and is only valid for specific major and minor release combinations. If a new package version is released next week, I will need to pay another $20,000 for auditing and certification, or hope that another team within Microsoft has already completed this process.

After spending $20,000 auditing JQuery for use on Bing Ads (because WalkMe relied on it) and realizing that every library update would require finding the same amount of money to audit, I sent Nadella an email explaining How ridiculous this process is. He asked members of his team to follow up on the matter, and they said they had received a number of complaints about the process. I provided a lot of feedback, and before long, the software audit process was eliminated and Microsoft began using open source technology to build products like other technology companies.

This move has greatly improved the work efficiency of Microsoft's engineering team. Whether it was a major shift during Nadella's early tenure as Microsoft CEO (like migrating Windows source code to git) or a small tweak (like a hackathon), it was about listening to developers and making them more satisfied that transformed for higher productivity and morale.   

Reference link: https://dareobasanjo.medium.com/5-things-i-learned-about-leadership-from-the-death-rebirth-of-microsoft-3eaf42567061