5 Things I Learned About Leadership from the Death & Rebirth of Microsoft

🌈 Abstract

The article discusses the transformation of Microsoft under the leadership of CEO Satya Nadella, who took over the company in 2014. It outlines the key changes Nadella made to revive Microsoft's culture, strategy, and business performance, which led to the company's resurgence and significant stock price growth.

🙋 Q&A

[01] Changing Microsoft's Culture

1. What was the defining characteristic of Microsoft's culture under Steve Ballmer? The defining characteristic of the culture under Steve Ballmer was complacency and a sense of hubris, where many people at the company acted like they were the best despite failure after failure.

2. How did Satya Nadella work to change the company's culture? Satya Nadella worked to challenge the complacent mindset by encouraging a growth mindset, where everyone was expected to be curious, embrace change, and try new things. He led by example in changing the way the company did business.

3. What were the key aspects of the cultural transformation under Nadella?

• Embracing a growth mindset rather than a fixed mindset
• Encouraging employees to try new things, learn from failure, and avoid complacency
• Satya leading by example in changing the company's practices

[02] Changing Microsoft's Strategy

1. How did Microsoft's previous strategy under Ballmer differ from Nadella's approach? Under Ballmer, Microsoft's strategy was very focused on competing with and blocking competitors, even at the cost of making its own products less successful. Nadella abandoned this "strategy tax" philosophy.

2. What were some examples of Nadella's customer-centric strategic changes?

• Releasing Office on the iPad, despite it being seen as "off strategy" previously
• Declaring that "Microsoft Loves Linux" and prioritizing hosting Linux VMs on Azure

3. How did Nadella handle Microsoft's failed acquisitions and investments under Ballmer? Nadella took a more dispassionate approach, writing off the failed Nokia acquisition and winding down other unsuccessful products and investments, rather than continuing to pour resources into them.

[03] Changing Microsoft's Financials

1. How did Amy Hood, the CFO, influence Microsoft's financial decisions under Nadella? Amy Hood applied a rigorous approach of evaluating the opportunity cost of business investments, prioritizing investments that had a better return on investment over those that would improve products but have a longer payback period.

2. What was an example of how this approach impacted the Bing product team? The Bing team wanted to invest $1 billion to improve search relevance in Europe and Latin America, but Amy Hood rejected this, as the return on that investment would be lower than investing the same amount in Azure data centers.

[04] Embracing Open Source

1. How did Microsoft's approach to open source software change under Nadella? Initially, there was still a process to audit and certify the use of open source software, which was cumbersome. After feedback from the author, this auditing process was removed, and Microsoft started leveraging open source software more broadly to build its products.

2. What were some of the benefits of this shift towards open source? The shift towards open source greatly improved the productivity of Microsoft's engineering teams and increased developer morale, as they were no longer constrained by the previous restrictive policies.