Hit Refresh

by Satya Nadella

  I was determined not to make the same mistake.

  Like that lead firefighter, I had to convince my team to adapt a counterintuitive strategy—to shift focus from the big server and tools business that paid everyone’s salary to the tiny cloud business with almost no revenue. To win their support, I needed to build shared context. I decided not to bring my old team from Bing with me. It was important that the transformation come from within, from the core. It’s the only way to make change sustainable.

  The team I inherited was more like a group of individuals. The poet John Donne wrote, “No man is an island,” but he’d feel otherwise had he joined our meetings. Each leader in the group was, in essence, CEO of a self-sustaining business. Each lived and operated in a silo, and most had been doing so for a very long time. My portfolio had no center of gravity, and to make matters worse, many thought they should have gotten my job. Their attitude was one of frustration—they were making all this money and now this little squeaky thing called the cloud came along and they didn’t want to bother with it.

  To break out of this impasse, I met with everyone on the STB leadership team individually, taking their pulse, asking questions and listening. Together we had to see that our North Star would be a cloud-first strategy. Our products and technologies would optimize for the cloud, not just for private servers that resided on an organization’s own premises. Though we would be cloud-first, our server strength would enable us to differentiate ourselves as the company that delivered a hybrid solution to customers who wanted both private, on-premise servers and access to the public cloud.

  This new framework helped reshape the argument, breaking down the resistance to going all-in on the cloud. I began to notice a new openness to innovation and a search for creative ways to meet the needs of our commercial customers.

  Unfortunately, Red Dog, which had become Windows Azure, was still struggling. They were trying to leapfrog with a new approach to cloud computing, but the market was clearly giving them feedback that they first needed to meet their current needs. Mark Russinovich, who was an early member of the Red Dog team and the current CTO of Azure, had a clear road map in mind to evolve Azure. We needed to infuse more resources into the team to execute on that road map.

  It was time to move Azure into the mainstream of STB rather than have it be a side project. People, the human element of any enterprise, are ultimately the greatest asset, and so I set about assembling the right team, starting with Scott Guthrie, a very accomplished Microsoft engineer. He had spearheaded a number of successful company technologies focused on developers. I tapped him to lead engineering for Azure on its way to becoming Microsoft’s cloud platform—our answer to Amazon Web Services.

  Over time, many others from both inside and outside the company joined our effort. Jason Zander, another key leader who built .Net and Visual Studio, joined to lead the core Azure infrastructure. We recruited the highly regarded Big Data researcher Raghu Ramakrishnan from Yahoo and James Phillips who had cofounded the database company Couchbase. We relied heavily on the expertise of Joy Chik and Brad Anderson to advance our device management solutions for the mobile world. Under their leadership we made our first major steps in providing business customers the technology they need to secure and manage Windows, iOS, and Android devices. Julia Liuson took over our Visual Studio developer tools, evolving it to be the tool of choice for any developer regardless of platform or app.

  Complementing these world-class engineers was world-class business planning and modeling. Takeshi Numoto moved from the Office team to join STB. Takeshi had been an important member of the team that had strategized and executed the transformation of Office products to a cloud-based, subscription model. And in his role as business lead for STB, he set about building the new commercial model that was based on creating meters to measure consumption of cloud services and inventing new ways to package our products for customers.

  One of the early decisions I made was to differentiate Azure with our data and AI capabilities. Raghu and team designed and built the data platform that could help store and process exabyte-scale data. Microsoft was developing machine learning and AI capability as part of our products such as Bing, Xbox Kinect, and Skype Translator. I wanted us to make this capability available to third-party developers as part of Azure.

  A key hire for Azure was Joseph Sirosh, who I recruited from Amazon. Joseph had been passionately working in ML for all his professional career, and he brought that passion to his new role at Microsoft. Now our cloud not only could store and compute massive amounts of data, it could also analyze and learn from the data.

  The practical value of ML is immense and incredibly varied. Take a Microsoft customer like ThyssenKrupp, a manufacturer in the elevator and escalator business. Using Azure and Azure ML, they can now predict in advance when an elevator or escalator will need maintenance, virtually eliminating outages and creating new value for its customers. Similarly, an insurer like MetLife can spin up our cloud with ML overnight to run enormous actuarial tables and have answers to its most crucial financial questions in the morning, making it possible for the company to adapt quickly to dramatic shifts in the insurance landscape—an unexpected flu epidemic, a more-violent-than-normal hurricane season.

  Whether you are in Ethiopia or Evanston, Ohio, or if you hold a doctorate in data science or not, everyone should have that capability to learn from the data. With Azure, Microsoft would democratize machine learning just as it had done with personal computing back in the 1980s.

  To me, meeting with customers and learning from both their articulated and unarticulated needs is key to any product innovation agenda. In my meetings with customers I would usually bring other leaders and engineers along so that we could learn together. On one trip to the Bay Area, we met with several startups. It became clear that we needed to support the Linux operating system, and we had already taken some rudimentary steps toward that with Azure. But as Scott Guthrie and our team walked out of those meetings that day, it was certain that we needed to make first-class support for Linux in Azure. We made that decision by the time we got to the parking lot.

  This may sound like a purely technical dilemma, but it also posed a profound cultural challenge. Dogma at Microsoft had long held that the open-source software from Linux was the enemy. We couldn’t afford to cling to that attitude any longer. We had to meet the customers where they were and, more importantly, we needed to ensure that we viewed our opportunity not through a rearview mirror, but with a more future-oriented perspective. We changed the name of the product from Windows Azure to Microsoft Azure to make it clear that our cloud was not just about Windows.

  To scale our cloud business, we not only needed to build the right technology but we needed to run a service to meet the exacting needs of some of the world’s largest customers. We were already running at-scale services such as Bing, Office 365, and Xbox Live. But with Azure we were now powering thousands of other businesses every minute of every day.

  Our team had to learn to embrace what I called “live site first” culture. The operational culture was as important as any key technology breakthrough. We would have on a single Skype call dozens of engineers plus our customer-facing field teams, all of whom would swarm together to coordinate and fix any problem. And every such incident would lead to rigorous root-cause analysis so that we could continuously learn and improve. I would, from time to time, join these calls to see our engineers in action. The key is to not have the top leaders infuse fear or panic but to help foster the actions that fix the issue at hand and the learning from it.

  Today Microsoft is on course to have its own $20 billion cloud business. We had looked beyond the packaged products that had made Microsoft one of the most valuable companies in the world to see greater opportunity in our cloud platform, Azure, and cloud services like O365, the online version of our hugely popular Office productivity suite. We are investing in and improving these new products, building new muscle as a service provider, and embracin
g Linux and other open-source efforts, all while keeping focus on our customers.

  The cloud business taught me a series of lessons I would carry with me for years to come. Perhaps the most important is this: A leader must see the external opportunities and the internal capability and culture—and all of the connections among them—and respond to them before they become obvious parts of the conventional wisdom. It’s an art form, not a science. And a leader will not always get it right. But the batting average for how well a leader does this is going to define his or her longevity in business. It’s an insight that would serve me well when an even bigger set of challenges was presented to me as CEO.

  Chapter 3

  New Mission, New Momentum

  Rediscovering the Soul of Microsoft

  On the morning of February 4, 2014, the day I would be formally introduced as CEO for the first time, I drove to campus early, rehearsing the messages I wanted to land with employees on day one. Over the Thanksgiving break I had banged out a ten-page memo responding to several questions the board of directors had posed during the search process. I then refined it on a road trip that took me to Dell in Texas and Hewlett Packard in Silicon Valley. The questions required a lot of soul-searching. What is my vision? What is the strategy to achieve it? What does success look like and where to get started? Now, a few months later, I reflected on what I had written and the process that led to this day.

  Finding the next CEO had been a long journey. Steve had surprised everyone by announcing in August that he would retire, just after he had led a major reorganization of the company and on the eve of announcing the $7.2 billion deal with the Finnish smartphone manufacturer Nokia. Throughout the fall, reporters routinely speculated about who would be named as his replacement. Would it be an outsider like Ford Motor Company’s CEO, Alan Mulally? Or the executive of a Microsoft acquisition like Tony Bates of Skype or Stephen Elop of Nokia? Several of us were asked to put our ideas on paper for the board of directors as a sort of audition for the job.

  In my memo to the board, I’d drawn on more than twenty years of experience inside the company, but I’d also drawn on something Steve Ballmer, the departing CEO, told me. He encouraged me to be my own man. In other words, don’t try to please Bill Gates or anyone else. “Be bold, be right,” he told me. Bill and Paul Allen founded Microsoft. Bill and Steve built Microsoft. As founder, Bill had famously recruited Steve out of Stanford business school in 1980 to become his first business manager. Steve, the passionate leader, salesman, and marketer, and Bill the technology visionary whose voracious reading and “think weeks” kept Microsoft ahead of envious competitors—together they formed one of the most iconic business partnerships in history, a pioneer in computing that would make Microsoft the most valuable company on the planet. Not only did they build great products, but they shaped hundreds of executives who today run global businesses everywhere, including me. They had given me more and more responsibility over the years, and taught me that our software can impact not just the lives of computer hobbyists but entire societies and economies.

  Despite my devotion to what they had built, Steve didn’t want me to be confused. He was inviting me to throw dogma out the window. He knew more than anyone that the company had to change, and he selflessly stepped out of his role as CEO to ensure the change happened in a deep way. As a consummate insider, I was being told to start anew, to refresh the browser and load a new page—the next page in Microsoft’s history. And so, my memo to the board called for a “renewal of Microsoft.” It would require embracing more ubiquitous computing and ambient intelligence. This means humans will interact with experiences that span a multitude of devices and senses. All these experiences will be powered by intelligence in the cloud and also at the edge where data is being generated and interactions with people are taking place. But this renewal would only happen, I wrote, if we prioritized the organization’s culture and built confidence both inside and outside the company. It would be only too easy to continue to live off our past successes. We had been like kings, albeit now in a threatened kingdom. There were ways to cash-cow this business and drive short-term return, but I believed we could build long-term value by being true to our identity and innovating.

  I pulled into a parking space outside Studio D, home of our Xbox development team. This part of the campus didn’t even exist when I started at Microsoft in 1992, and yet now it was surrounded by several dozen low-slung office buildings as far as the eye could see. Over the next hour Studio D’s glassy three-story atrium would fill with employees invited to an all-company meeting and webcast. I knew they were hopeful but also skeptical. One had only to look at a few industry charts to see why. After decades of steady growth in worldwide PC shipments, sales had peaked and were now in decline. Quarterly PC shipments were now around 70 million, while smartphone shipments were reaching over 350 million. This was bad news for Microsoft. Every PC sold meant a royalty payment to Microsoft. To make matters worse, not only were PC sales soft, but so was interest in Windows 8, launched eighteen months earlier. Meanwhile Android and Apple operating systems were surging, reflections of the smartphone explosion that we at Microsoft had failed to lead and barely managed to participate in. As a result, Microsoft’s stock, long a blue chip investment, had been treading water for years.

  Internally, the story was equally dire. That year, our annual employee poll revealed that most employees didn’t think we were headed in the right direction and questioned our ability to innovate. To bring this home, Jill Tracie Nichols, my chief of staff at the time, shared new focus group feedback from hundreds of employees so I could get a real-time pulse of the organization in the midst of the change. The company was sick. Employees were tired. They were frustrated. They were fed up with losing and falling behind despite their grand plans and great ideas. They came to Microsoft with big dreams, but it felt like all they really did was deal with upper management, execute taxing processes, and bicker in meetings. They believed that only an outsider could get the company back on track. None of the names on the rumored list of internal CEO candidates resonated with them—including mine.

  In an intense prep session two days before the announcement Jill and I sparred on how to inspire this disheartened group of brilliant people. In some ways, I was annoyed by what felt like lack of accountability and finger pointing. She stopped me mid-riff with “You’re missing it, they are actually hungry to do more, but things keep getting in their way.” Job one was to build hope. This was day one of our transformation—I knew it must start from within.

  A few minutes later, I stood onstage for a photo that would soon go viral. It captured the smiling faces of Bill Gates, Steve Ballmer, and me, the only CEOs in Microsoft’s-forty-year history. The image I remember even more vividly, however, is looking into the eyes of hundreds of Microsoft employees in the audience waiting for my presentation, their faces reflecting hope, excitement, and energy mingled with anxiety and a touch of frustration. Like me, they’d come to Microsoft to change the world, but now were frustrated by our company’s stalled growth. They were being wooed by competitors. Saddest of all, many felt the company was losing its soul.

  Steve kicked things off with a moving and encouraging speech. Bill spoke next, his dry sense of humor immediately present. Surveying the room, he feigned surprise at what a large market share Windows Phone enjoyed in this room. Then he got down to business. Bill succinctly captured the challenge and the opportunity that lay ahead. “Microsoft was founded based on a belief in the magic of software, and I’d say that opportunity today is stronger than it’s ever been. The magic of what we can do for people at work and at home with our software is totally in front of us. We’ve got some amazing strengths with the Windows platform, the things we’re doing in the cloud, with Office. And we’ve got some challenges. There are a lot of people out there on the cloud doing interesting things. There’s a lot of mobile activity, which we’ve got a slice of, but not as big a slice as we need to have.” Then he called me forward.


  When the applause subsided, I wasted no time in calling my colleagues and teammates to action. “Our industry does not respect tradition. What it respects is innovation. It’s our collective challenge to make Microsoft thrive in a mobile-first and a cloud-first world.” If there was any one theme I wanted to emphasize that day, it was that we must discover what would be lost in the world if Microsoft just disappeared. We had to answer for ourselves, what is the company about? Why do we exist? I told them it was time for us to rediscover our soul—what makes us unique.

  One of my favorite books is Tracy Kidder’s The Soul of a New Machine about another tech company, Data General, in the 1970s. In it, Kidder teaches us that technology is nothing more than the collective soul of those who build it. The technology is fascinating, but even more fascinating is the profound obsession of its designers. And so what is soul in this context of a company? I don’t mean soul in a religious sense. It is the thing that comes most naturally. It is the inner voice. It’s what motivates and provides inner direction to apply your capability. What is the unique sensibility that we as a company have? For Microsoft that soul is about empowering people, and not just individuals, but also the institutions they build—enterprises like schools, hospitals, businesses, government agencies, and nonprofits.

  Steve Jobs understood what the soul of a company is. He once said that “design is the fundamental soul of a man-made creation that ends up expressing itself in successive outer layers of the product or service.” I agree. Apple will always remain true to its soul as long as its inner voice, its motivation, is about great design for consumer products. The soul of our company is different. I knew that Microsoft needed to regain its soul as the company that makes powerful technology accessible to everyone and every organization—democratizing technology. When I first wore HoloLens, Microsoft’s holographic computer, I thought about how it might be used by large enterprises for design and in schools and hospitals, not just how much fun playing Minecraft will be.