This was a bit disheartening, but in retrospect it was completely understandable. Remember what I said about the aperture of those colleagues sitting in the darkened theater in Orlando. The opening through which a middle manager can see the organizational culture in the midst of his or her daily work is a crack when compared with the panoramic view a CEO enjoys. A Harvard Business Review survey found that senior leaders inside companies spend less than 10 percent of their time developing high potential leaders. If even top executives cannot find the time to unlock employee potential, the growth path for most corporate team members looks pretty static.
After reviewing the results, I seized on an upcoming meeting with about 150 of my top leaders to tell a few stories and to share my expectations with them. First off, I told them about an anonymous Microsoft manager who had come to me recently to share how much he loved the new growth mindset and how much he wanted to see more of it pointing out, “Hey, Satya, I know these five people who don’t have a growth mindset.” The guy was just using growth mindset to find a new way to complain about others. That is not what we had in mind.
I told these high-potential leaders that once you become a vice president, a partner in this endeavor, the whining is over. You can’t say the coffee around here is bad, or there aren’t enough good people, or I didn’t get the bonus.
“To be a leader in this company, your job is to find the rose petals in a field of shit.”
Perhaps not my best line of poetry, but I wanted these people to stop seeing all the things that are hard and start seeing things that are great and helping others see them too. Constraints are real and will always be with us, but leaders are the champions of overcoming constraints. They make things happen. Every organization will say it differently, but for me there are three expectations—three leadership principles—for anyone leading others at Microsoft.
The first is to bring clarity to those you work with. This is one of the foundational things leaders do every day, every minute. In order to bring clarity, you’ve got to synthesize the complex. Leaders take internal and external noise and synthesize a message from it, recognizing the true signal within a lot of noise. I don’t want to hear that someone is the smartest person in the room. I want to hear them take their intelligence and use it to develop deep shared understanding within teams and define a course of action.
Second, leaders generate energy, not only on their own teams but across the company. It’s insufficient to focus exclusively on your own unit. Leaders need to inspire optimism, creativity, shared commitment, and growth through times good and bad. They create an environment where everyone can do his or her best work. And they build organizations and teams that are stronger tomorrow than today.
Third, and finally, they find a way to deliver success, to make things happen. This means driving innovations that people love and are inspired to work on; finding balance between long-term success and short-term wins; and being boundary-less and globally minded in seeking solutions.
I love these three leadership principles. The heart of my message: Changing the culture at Microsoft doesn’t depend on me, or even on the handful of top leaders I work most closely with. It depends on everyone in the company—including our vast cadre of middle managers who must dedicate themselves to making everyone they work with better, every day.
I totally empathize with other leaders, and see my job as helping them become even better. Leadership can be a lonely business. It can also be a noisy place. When a leader steps into the arena, especially in today’s loud echo chamber of social media, he or she can be tempted to make decisions that will result in instant gratification. But we have to look beyond the temporal, discounting what someone will write in this moment’s tweet or tomorrow’s news. Reasoned judgment and inner conviction are what I expect from myself and from the leaders around me. Make the call, but don’t expect consensus.
Internally, we needed to have strong partnerships—between leaders across the company among teams. But that same growth mindset was needed externally, too. The competitive landscape had shifted seismically over the previous decade, and now new and surprising partnerships with friends and former enemies were needed.
Chapter 5
Friends or Frenemies?
Build Partnerships Before You Need Them
There was an audible gasp and more than a smattering of chuckles in the auditorium when I reached into my suit jacket and pulled out an iPhone. No one in recent memory had seen a Microsoft CEO showing off an Apple product. Especially not at a competitor’s sales conference.
“This is a pretty unique iPhone,” I told attendees at Salesforce’s annual marketing event as the crowd quieted down. Salesforce both competes and partners with Microsoft in online services. “I like to call it the iPhone Pro because it’s got all the Microsoft software and applications on it.”
On the giant screen behind me, a close-up of the phone appeared. One by one, the app icons flashed into view—iPhone versions of Microsoft classics like Outlook, Skype, Word, Excel, and PowerPoint as well as newer mobile applications like Dynamics, OneNote, OneDrive, Sway, and Power BI. The crowd erupted in applause.
Seeing me demo Microsoft software on an iPhone designed and built by Apple, one of our toughest, longest-standing competitors, was surprising and even refreshing. Microsoft versus Apple has been such a prominent and even contentious rivalry that people forget we’ve been building software for the Mac since 1982. Today one of my top priorities is to make sure that our billion customers, no matter which phone or platform they choose to use, have their needs met so that we continue to grow. To do that, sometimes we have to bury the hatchet with old rivals, pursue surprising new partnerships, and revive longstanding relationships. Over the years we’ve developed the maturity to become more obsessed with customer needs, thereby learning to coexist and compete.
In the previous chapter I wrote about the importance of building the right culture. Healthy partnerships—often difficult but always mutually beneficial—are the natural and much-needed product of the culture we’re building. Steve Ballmer helped me deeply understand this with his three Cs. Imagine a target with three concentric rings. The outer ring is concepts. Microsoft, Apple, or Amazon may have an exciting product idea, but is that enough? An organization may have a conceptual vision—a dream or imagination filled with new ideas and new approaches, but do they have what’s in the second ring: capabilities? Do they have the engineering and design skills required to actually build that concept alone? And finally, the bull’s-eye, is a culture that embraces new concepts and new capabilities and doesn’t choke them out. That’s what’s needed in order to build and sustain innovation-producing and customer-pleasing products—smart partnerships. Concepts are better and capabilities more comprehensive when the culture invites partners to the table. Two or more heads really are better than one.
A few years back, Apple had a concept they felt would benefit from a renewed partnership with our capabilities and culture. Shortly after becoming CEO I decided we needed to get Office everywhere, including iOS and Android. We had these versions in the works for some time, just waiting for the right moment to launch. I wanted unambiguously to declare, both internally and externally, that the strategy would be to center our innovation agenda around users’ needs and not simply their device. We announced that we would bring Office to iOS in March 2014, two months into my new role.
Soon Apple sent a cryptic note to our Office team asking for an engineer to sign a nondisclosure agreement and come to Cupertino for a meeting. This is standard operating procedure in our secretive industry where intellectual property must be guarded. After a few meetings, it became clear that what Apple wanted was for Microsoft to work with them to optimize Office 365 for their new iPad Pro. Apple told us that they felt there was a new openness at Microsoft. They trusted us and wanted us to be part of their launch event.
There was passionate debate internally about whether this was a good idea. At first some product-line leaders wit
hin Microsoft felt uneasy about partnering with their competitor; I definitely heard some resistance behind closed doors. One way to explain the logic is by turning to game theory, which uses mathematical models to explain cooperation and conflict. Partnering is too often seen as a zero-sum game—whatever is gained by one participant is lost by another. I don’t see it that way. When done right, partnering grows the pie for everyone—for customers, yes, but also for each of the partners. Ultimately the consensus was that this partnership with Apple would help to ensure Office’s value was available to everyone, and Apple was committing to make its iOS really show off the great things Office can do, which would further solidify Microsoft as the top developer for Apple.
On launch day, Apple’s Senior Vice President for Worldwide Marketing, Phil Schiller, teased the audience as he set up the next demo at the iPad Pro launch. “We’ve been lucky to have some developers come in to work with us on professional productivity. Who knows productivity more than Microsoft?”
Nervous laughter filled the room.
“Yeah, these guys know productivity.”
Kirk Koenigsbauer, the head of Office marketing, took the stage to proclaim that more than ever we are doing great work for the iPad.
But the publicity value of working with old rivals was far down on my list of motivations for pursuing them. Sure, people like to hear about competitors getting along. But forging great business partnerships is too difficult if PR is the sole purpose. For me, partnerships—particularly with competitors—have to be about strengthening a company’s core businesses, which ultimately centers on creating additional value for the customer. For a platform company, that means doing new things with competitors that can accrue value back to one of the platforms.
Sometimes that means working with old rivals and sometimes it means forging surprising new partnerships. We work with Google, for example, to make it possible for Office to work on their Android platform. We partner with Facebook to make all of their applications work universally across Windows products and, likewise, to help them make our Minecraft gaming applications work on their Oculus Rift, a virtual reality device that competes for attention with our own HoloLens. Similarly, we’re working with Apple to enable customers to better manage their iPhones within an enterprise. And we’re working with Red Hat, a Linux platform that competes with Windows, so that enterprises built on Red Hat can use our Azure cloud to scale up globally by taking advantage of investments we’ve made in local data centers around the world. Our partnership with Red Hat may not be as surprising to some as our work with Apple and Google, but when I stood onstage with a slide just over my shoulder proclaiming “Microsoft ♥ Linux,” one analyst concluded that hell must have frozen over.
Partnerships like these can exist, at times uneasily, with competitors in specific product or service categories. We compete vigorously with Amazon in the cloud market; there’s no ambiguity about that. But why can’t Microsoft and Amazon partner in other areas? For example, Bing powers the search experience on Amazon Fire tablets.
We have to face reality. When we have a great product like Bing, Office, or Cortana but someone else has created a strong market position with their service or device, we can’t just sit on the sidelines. We have to find smart ways to partner so that our products can become available on each others’ popular platforms.
In today’s era of digital transformation, every organization and every industry are potential partners. Consider the taxi and entertainment industries. Ninety percent of Uber riders wait less than ten minutes for a driver, compared with 37 percent of taxi riders. Netflix costs its viewers $0.21 per hour of entertainment compared with $1.61 per hour with the old Blockbuster video-rental model. These are some of the higher visibility examples of digital transformation, but it’s happening in every industry. We estimate the value of these transformations over the coming decade to be about $2 trillion.
Companies are focused on ensuring that they stay relevant and competitive by embracing this transformation. And we want Microsoft to be their partner. To do so, there are four initiatives every company must make a priority. The first is engaging their customer base by leveraging data to improve the customer experience. Second, they must empower their own employees by enabling greater and more mobile productivity and collaboration in the new digital world of work. Third, they must optimize operations, automating and simplifying business processes across sales, operations, and finance. Fourth, they must transform their products, services, and business models.
Every company is becoming a digital company, and that process begins with infusing their products with intelligence. Experts estimate between 20–50 billion “connected things” will be in use by 2020, presenting a significant opportunity for companies to drive their own digital transformation. GE has become a full-blown digital company with its Predix platform, which partners with Microsoft to connect industrial equipment, analyze data from those machines, and deliver real-time insights. Toyota has a connected auto division that has transformed their cars and trucks into next-generation digital-era vehicles—moving digital platforms that enable cars to communicate with other cars and even with the city’s infrastructure. Rolls-Royce is designing their engines as big-data platforms to predict failures and minimize breakdowns.
Our emphasis on strategic partnerships isn’t really new. It’s actually another example of how we have been rediscovering the soul of Microsoft. When I look at our founders, Paul Allen clearly saw the power of new computers and Bill Gates saw the power of software. Together they were able to create magic and, more importantly, democratize computing. I sometimes wonder: If Bill and Paul had not succeeded with Microsoft, what would the world look like? Would we have independent hardware manufacturers, independent software vendors, system integrators, and others? Our original business model was built on an ecosystem of partners—independent software developers like Adobe and Autodesk, video game makers like EA Sports, hardware manufacturers like Dell, HP, and Lenovo, and retailers like Best Buy. I don’t think Google would have existed but for the PC browser. Microsoft enabled Google to build a toolbar for our Internet Explorer, making Google services more visible and accessible. As a result of these and other partnerships, Microsoft and the PC helped nurture a host of billion-dollar companies—and Microsoft attracted millions of additional customers in the process.
When I became CEO, I sensed we had forgotten how our talent for partnerships was a key to what made us great. It’s the kind of thing that can happen to any great company. Success can cause people to unlearn the habits that made them successful in the first place. We knew we needed to retrain our partnership muscles. We had to look anew at our industry and find ways to add value for our customers whether they were on an Apple device, a Linux platform, or an Adobe product.
Fortunately, this instinct is part of my DNA. My very first job at Microsoft in 1992 was all about partnering. We were building Windows NT, a 32-bit operating system. But most of the backend applications that we needed to become viable had been built for Unix-based minicomputers, not Windows. And so my task as a young Windows NT technical evangelist was to move those applications onto the PC architecture. Lacking credibility as a serious enterprise player, Microsoft had to do a lot of hard work just to be considered. We built prototypes of applications for our PC platform, and then took them to customers in manufacturing, retail, and health care to show them that their big, robust minicomputer apps really could run just as well on a PC—maybe even better. They were surprised to see their mission-critical apps work with a graphical user interface on a device they’d thought of as a toy.
I can distinctly remember one of our first design wins. In retail, point-of-sales devices are ubiquitous and a lucrative market for technology. But there was no software standard to ensure that the cash register, the scanner, and other retail peripherals would all work together with the backend accounting and inventory systems. So my colleagues and I wrote up the standards and the specs that made it possible for Windows t
o enter the point-of-sales market. We started with nothing, but built up a major enterprise business.
To be sure, partnering has its challenges, even with longstanding partners. Sometimes we have to revive old relationships. Take Dell, for example, which over the years has shipped hundreds of millions of Windows computers. In 2012, when Microsoft decided for the first time to design and produce its own line of hardware, the Surface series, we morphed from pure partner into something murkier—a partner and a direct competitor. Then, to make things even more ambiguous, Dell took aim at one of Microsoft’s cherished businesses by purchasing EMC, a leading producer of cloud technologies. It remains one of the largest technology acquisitions in history. Yet, through it all, Dell and Microsoft continued to partner in areas of mutual benefit—such as Dell licensing Windows for its laptops and selling Microsoft Surface products through its massive global distribution operation. In fact, Dell, HP, and others saw the popularity of Surface and began to innovate with their own new line of two-in-one computers.
But the trade press wondered if the lifelong partnership between our two companies was on the ropes. Just after becoming CEO, I joined Michael Dell in Austin, Texas, at his annual strategy day dedicated to answering questions from the press and stock analysts. In 2015, just after the EMC merger, a puzzled Emily Chang of Bloomberg News asked Michael and me to describe our relationship: “Are you friends? Are you frenemies?” It’s a simple question, and I offered a simple answer: “We are longtime friends who compete for and serve many of the same customers.” But the real answer requires a more in-depth description.
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