San Francisco Microsoft’s first Surface tablets were a flop. Too heavy, short battery life, memory too small, criticized critics. Not a good time back then for Panos Panay, head of the hardware division. Panay recalls how Chief Financial Officer Amy Hood took him aside and told the appalled manager that a billion dollars would now have to be written off.
Panay feared for his job. Securities analysts and the media demanded that heads roll.
A change at Microsoft, it would have been different in the past. Forbearance, error culture, compassion – long foreign words at the software giant. Yet these very values are a prerequisite for a culture of innovation in which fear of failure gives way to a new desire for change.
The changes under Nadella, who has been CEO since 2014, are making a big difference: Microsoft is suddenly showing itself to be agile and innovative in the cloud business and other business areas. In the past five years, Microsoft shares rose in value by over 450 percent, while the S&P 500 index made a little over 100 percent. With the second Goliath in the ring, Apple, Microsoft is fighting for the title of the most valuable stock exchange company in the world, which today means a market capitalization of three trillion dollars.
Nadella leads Microsoft empathically
An anecdote from Nadella’s early days at Microsoft shows what might have given the impetus: At the end of a day of countless one-on-one conversations with Microsoft managers, young manager Nadella sat in manager Richard Tait’s office many years ago. Should Nadella get an entry-level job in Redmond, Microsoft’s powerhouse?
Tait did not discuss programming trends with Nadella, however. “When you see a baby lying on the street, what do you do?” Was the seemingly innocuous first question. “I’ll call the police emergency number,” said Nadella simply, he remembers in his book “Hit Refresh”. Tait took him aside and said, “When a baby is on the street, you pick it up. What you lack is compassion. ”Nadella was back in the hallway.
“Still, I somehow got the job,” he writes. The shock was deep – and should shape the management style of the future Microsoft CEO, which should be determined by compassion and passion for the cause and people, not necessarily by assertiveness. Unlike Facebook CEO Mark Zuckerberg, for example, with his tough motto, which was painted on the wall for a long time in the headquarters: “Move fast and break things.” Move quickly and break everything to pieces.
It used to be tough at Microsoft too. But under Nadella, the company changed in Seattle.
Internal large meetings with speeches by top management gave way to multi-week “hackathons” with thousands of employees working on their own projects. Anyone can take part, including an administrative employee who has an idea but no programming skills. If he finds people who are enthusiastic about his vision, he starts. It comes around a bit – great. If not, then not. The main thing is to try it.
This preliminary work only served the goal of preparing the group for a new business model. Until now it was only about selling copies of software, but with the cloud, which Nadella had forced from the start, the customer was completely focused.
The cloud has to prove itself anew every day. If a customer actively uses it, money goes into the till. But only then. Sales also had to internalize this world first. “Today, a prospective customer demands,” says Markus Nitschke, Director of Customer and Partner Relations at Microsoft, “that we can explain exactly what he can achieve with our services.” Detailed knowledge of the industry and customer is required.
Microsoft organization chart showed guns instead of arrows
In his book, Nadella remembers a drawing that was often to be found in the company. The Microsoft corporate divisions were not connected with arrows in an organization chart, but with arms with pistols in their hands that were aimed at each other. The drawing annoyed him, he admits. But he thought that if there was something to it, that had to change.
Today nobody points a “pistol” at others who want to go other ways, according to the message. Open source software, Android or iOS got their chances in the group.
A search for solutions now replaces the search for “culprits”. Nadella doesn’t make a difference. When unlimited, free cloud storage space was introduced for “Onedrive” customers, it quickly became clear that the popular product was going to be a disaster, as an insider reported. The costs exploded, it was about “real money”, according to the Handelsblatt source. The offer had to be discontinued, which caused a lot of bad blood among customers and the media.
Nadella sent an internal memo to the team stating that he had also reflected on his own role. He did not “connect all the points”, did not see the whole. Now everyone would find a solution together. The old team was meant.
Nadella, who was born in India, has been leading the company founded by Bill Gates since 2014.
(Photo: Reuters)
An internal “fire brigade” for sales has been set up, which can be called in at any time if difficulties arise. If a customer is lost, a precisely defined evaluation process is set in motion with customer interviews, reports from sales and product specialists. Again, it’s not about “looking for the guilty”, but rather about learning together.
Employee and customer satisfaction increases
The developments of the new strategy are closely followed internally: “At the beginning of the transition to the new business model, for example, the satisfaction of German commercial customers initially fell continuously,” says Microsoft manager Nitschke. He does not want to give the exact numbers of the large quarterly customer surveys for competitive reasons. But “we assume that there were occasional uncertainties due to staff fluctuations”.
Then came the pandemic, and the survey paused in 2020. After the corona pause, the hoped-for upward trend to a level of satisfaction well above the starting point was evident, not least with rapidly increasing cloud activities.
In addition to 1.3 billion Windows installations and the dominant office software, the AR glasses Hololens, the Xbox gaming platform, the Mesh VR platform and the Minecraft game score with millions of users. The Azure cloud platform is growing at almost 50 percent per year, reducing the gap to number one, Amazon’s AWS. The latest advances come from the areas of AI and quantum computers.
History shows that many large corporations’ transitions simply fail or are only moderately successful. Nadella does not deny the great risks involved in such a total transformation. But there is no alternative, he writes in “Hit Refresh”. “Why does Microsoft exist” and “Why do I exist in my role here” are the central questions to which everyone must find an answer.
Every person, every organization, every state will at some point come to the point where these questions have to be answered in order to reinvent themselves. “Sports leagues do it, Apple does it, Detroit does it. One day companies like Facebook will stop growing too, and then they will have to. “
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