Satya Nadella Talks Microsoft at Middle Age

The chief says he wants to turn a PC-centric company into one focused on the promise of cloud computing.

The following is a condensed and edited interview with Satya Nadella, CEO, Microsoft.

As Microsoft enters middle age, what do you want this company to be?
I think any company that has had tremendous success should be mindful that early success or big success can get in the way of creating new success. Somebody said to me a long time ago that the worst thing that can happen to anybody growing up is early success, because after that you really don’t understand what it takes to actually drive and strive and persist.

We’ve been tremendously successful. So we need to remind ourselves that every new business that’s going to grow at Microsoft is not going to grow in multibillion-dollar chunks. In fact, one of the big decisions I had to make even before I became CEO was to prioritize Azure [Microsoft’s cloud computing platform] as the future of our server business when it was a cumulative $5 million business and to say, “Oh, this is going to be the future of the $20 billion server business.” That is what companies like ours who have had success need to be able to do.

If tech companies don’t move to focus on the cloud, do they risk becoming obsolete?
I think all tech companies that do not catch and capitalize on technology waves with a good average will. It’s not about catching every wave. But if you don’t catch enough of them and don’t have a high batting average, then you will be obsolete.

And if I look at Microsoft—the fact that you’re talking to me 41 years after our formation means our batting average must be high. There are not that many 41-year-old tech companies that you’re probably talking to.

Microsoft’s working hard to move customers onto cloud-based computing, even though it may cannibalize some of your existing highly profitable businesses. Why?
The move to the cloud is actually not cannibalistic. There may be time frames where our business models are shifting. But in terms of total addressable market for us and our ability to add more value to our customers, it’s a massive total addressable market expansion.

Take Office 365 [Microsoft’s cloud-based productivity software]. We never sold Office 365-like capability to all the small and medium-size businesses. Now, guess what. We get to do that for every business, not just in the United States, but every country. That’s massive market opportunity expansion.

You just agreed to buy LinkedIn, the biggest deal Microsoft’s ever done. The company has not had a great history with large deals. What’s different this time?
There are key things that I’m looking at as we look at acquisitions. The first is, is the core business that we are buying something that we feel is healthy, we’re excited about, that’s got momentum? When I look at both Minecraft and LinkedIn, they’re great businesses that are growing. And so, in fact, if anything, our core job is to take that franchise and give it more momentum. In the case of Minecraft, it’s the biggest PC game, and we are the PC company. Their growth was moving to console. We have a console. Therefore, we were a perfect owner. Same thing with LinkedIn. They’re a professional network for the world. We have the professional cloud. Time will tell, but I’m very, very bullish.

You’ve worked very hard to overhaul the culture here at Microsoft. How is it going?
Culture is something that needs to adapt and change, and you’ve got to be able to have a learning culture. The intuition I got was from observing what happens in schools. I read a book called Mindset. In there there’s this very simple concept that Carol Dweck talks about, which is if you take two people, one of them is a learn-it-all and the other one is a know-it-all, the learn-it-all will always trump the know-it-all in the long run, even if they start with less innate capability.

That is true for boys and girls in schools. It’s true for CEOs in their jobs. It’s true for every employee at Microsoft. I need to be able to walk out of here this evening and say, “Where was I too closed-minded, or where did I not show the right kind of attitude of growth in my own mind?” If I can get it right, then we’re well on our way to having the culture we aspire to.

Is it hard to change the culture at such a big company?
All change is just hard. I mean, forget the company, just let’s individualize it. If somebody says, “Hey, today you’re going to have to change,” it’s the last thing anybody wants. It’s the most uncomfortable thing.

But we also all recognize that if we don’t, then the fundamental human quality of being able to adapt is not going to be exercised. If companies don’t change, they’re not going to be around.

What’s surprised you most as CEO on a personal level?
As a CEO, you have to be very, very careful of making sure that you just don’t opine without thinking through things, because the last thing you want to do is say something and then—you know, people will take it seriously and make it happen. You’d better know that’s really what you wanted done.

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You’ve talked about learning management lessons from cricket. What’s a lesson you learned?
I grew up in India, and this was pre-India becoming a cricketing power and winning even its first World Cup. We were playing a cricket match, and that was the first time we were playing a club that had some overseas players. These were Australians. We were in such awe of these overseas players, and we sort of were watching rather than competing. A business manager of the team saw that I was fielding very far away from the action and just watching. He put me right next to the action, and it was a great lesson to say, “Look, when you’re on the field, you compete. You can have a lot of respect for your competition, but you should not be in awe of them.”

Is the cloud the big technological change that we’re going to see over the next five years?
I think the big move that is happening today for sure is the cloud move and the mobile move. They sort of go together. And when I say mobility, it’s not the mobility of one device, it’s the mobility of the applications and the data across all your devices, because it’s about the ability of the human experience, not the device.

But I see three other broad platform shifts. One is what I’ve called conversations as a platform. If we can teach all our computers human language, can we democratize computers even more so than we have done today? Think about it. The model today of, “Well, I’ve got to learn the shell, learn to download 20 apps, and navigate between these apps to get stuff done”—what if none of that was a cognitive load on me, but I was able to simply talk, text, or voice and get my things done?

That’s a much more natural way for computing to surface. It’ll work for an 85-year-old person in China, and it’ll work for a 5-year-old in Bellevue [Wash.]. That, to me, is the next frontier and what we’re doing with [voice-enabled personal assistant] Cortana, what we are doing with our bots.

Bloomberg Businessweek Interview Issue 2016 Cover with Microsoft CEO Satya Nadella
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I’m also very, very bullish about making AI capability or machine learning capability available to every developer, every application, and letting any company use these core cognitive capabilities to add intelligence into their core operations. So that’s something that we’re doing with Azure and our Azure cognitive services.

The third one that I’m also very excited about is what’s happening with mixed reality.

This is basically augmented reality?
That’s right. To me, it’s the ultimate computer. If you think of your field of view as a human becoming an infinite digital display—so not only do you see the analog world, but you are able to see in it digital artifacts, any screen you want, any object you want. So that’s what we’re doing with HoloLens [Microsoft’s augmented reality goggles].

You use a software dashboard to track how much time you spend on different tasks. What are you hoping to accomplish?
The most valuable thing we have is our time. And I felt that one of the things that we should make sure we do for ourselves is to give people a sense for how are they spending their time so that they can then be more in control.

The thing that I most love to see is the amount of time I spend with people outside Microsoft vs. inside. The other thing that I love looking at is how much time am I spending in meetings vs. what I would call focused time. You absolutely need to be in meetings, because, after all, you don’t do a CEO’s job by locking yourself in your room. But at the same time, there’s got to be a right balance.

Are you trying to lower the number of meetings?
We have some measures [to ascertain] if you have lots of redundant layers of people attending meetings. You can in fact have a more effective meeting by having the right set of folks in there to be able to make the right kind of decision as fast as you can. So I would say it’s not the number of meetings that matter, it’s the effectiveness of the meetings.

We also look at the number of other meetings that got spawned because of the meeting, because one of the greatest wastes of time could be a CEO sets up a meeting, and there are 15 prep meetings in order to get to the CEO’s meeting.

What’s the worst piece of advice you’ve ever received?
The worst advice I would say is from people who have said, “OK, be either very long-term or be very short-term.” And it just never is like that.

Long-term orientation can be an amazing virtue when you know you’re on the right track, when you are in fact able to validate your hypothesis, when you are in fact making progress. But it can be terrible if you’re not able to quote-unquote break from the past, learn from your mistakes.

“If companies don’t change, they’re not going to be around”

You’ve done a lot of traveling in the spring to China, India, other countries in Asia. What did you learn from observing the way people there use technology?
Whenever I go to most countries, I visit schools just to see what’s happening. And there was this school in Jakarta I went to, and what was awesome was to see the tools the kids there used—Windows, PCs, in fact, I think they were using a two-in-one tablet and using OneNote [Microsoft’s note-taking software]. The same toolset that my daughter in Seattle uses is what kids in Jakarta are using. The fact that it’s been democratized is amazing.

The second thing is how small and medium-size businesses that never even had PCs, never had any servers for sure, are able to go digital. The cloud is perhaps one of the most defining democratizers because it makes it possible—through its business model and by lowering the friction—for any small business to enter the world of digital without the costs.

Will the key innovations and leadership in the tech industry remain heavily centered in the West, or will we see more of that move to Asia?
I believe the world is increasingly going to be digital. That means every company is going to increasingly be more digital. And if you say that, then you have to assume that the center of technology has to be more spread out. It can’t be that a few companies in the West Coast of the United States is the only set of people who are the technology providers for the world, because that’s too narrow a way to look at it.

In fact, my goal at Microsoft would be to empower every person and every organization on the planet to achieve more. Central to that mission is to make businesses everywhere successful with digital technology, whether it be an entrepreneur or small business, or a bank or retailer in Indonesia or Turkey, building their own e-commerce capability. That’s, I think, going to be existential for our own growth.

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