CEO Satya Nadella and his team have achieved what many believed to be impossible. In less than five years since he took the helm, he and his employees at Microsoft have completely reversed the company’s trajectory and built a company that today is more valuable than Apple. Microsoft’s turnaround was beautifully executed. How did they do it and what could you learn from their approach?
In my view, by focusing on two critical constituencies—customers and employees—Microsoft also took care of a third critical constituency—their shareowners.
When Nadella took over, customers were unhappy primarily with Microsoft’s products. Windows 8 was a disaster, the iPhone and Android were beating Windows phones badly in the market, and Bing was not viewed as a viable alternative to Google for searches. Nadella and his team made several strategic product shifts to right the ship and regain lost market share.
First, they improved the quality of their current product offers (Windows). Second, Microsoft committed to a partnering strategy to expand the market for their current products, including offering Microsoft Outlook on Apple (iPhone and iPad) and Android devices. Next, they built new products to compete in their markets, introducing their first laptop ever (Microsoft Surface Book). Finally, they entered entirely new strategic markets quickly via acquisitions, including the $26 billion purchase of LinkedIn.
When Nadella took the reins, he inherited a dis-spirited employee base that needed his attention. Nadella and his team made several strategic shifts with the company’s human capital that others should look at as a play-book for unlocking innovation.
His specific leadership style set the tone from the top. It emphasizes continuous learning and risk-taking. But he also doubled down on reinforcing the company’s values:
- Innovation – encourage new ideas from everyone
- Diversity and inclusion – maximize every person’s contribution with diversity in all areas
- Corporate social responsibility – be transparent, and respectful of human rights
- Philanthropies – empower people by investing technology, money, employee talent, and the company’s voice in programs that promote digital inclusion
- Environment – lead the way in sustainability and use our technologies to minimize the impact of our operations and products
- Trustworthy computing – deliver secure, private, and reliable computing experiences based on sound business practices.
Nadella also clearly communicated his expectation that every employee played a leadership role at Microsoft. But there was a problem. His early investigation showed the company had over 100 different attributes tied to the word “leadership” depending on where you sat in the company. So he enlisted a diverse team of leaders to simplify the definition. Here it is:
- Synthesize the complex
- Define a course of action
- Ensure shared understanding
- Inspire optimism, creativity, and growth
- Create an environment where everyone does their best work
- Build organizations that are stronger tomorrow than today
- Drive innovation that people love
- Be boundary-less in seeking solutions
- Tenaciously pursue the right outcomes
Nadella is credited for having “made Microsoft cool again.” How did he do this? Not by focusing employees on “being cool,” but rather on “making others cool.” By shifting the focus outward, he was able to create what I call viral engagement. It worked.
In addition, Nadella built a new culture at Microsoft by encouraging a growth mindset, or the understanding that abilities and intelligence can be developed. In other words, he encouraged a learn-it-all mindset rather than a know-it-all mindset. This made it much easier for Chiefs at every level to emerge.
With intense focus on both customers and employees, another beneficiary of the team’s work are its shareowners. Today, in 2018, Microsoft’s stock price has almost tripled from when Nadella first took over.
What could your company learn from the lessons at Microsoft?