Microsoft CEO: ‘Tech shifts are easier to deal with than business model shifts’

Nadella was speaking at the Adobe Summit in Las Vegas

The chief executive of Microsoft has admitted the revamp of the organization’s business model and culture has been harder to implement than its evolving technology.

Satya Nadella, who took on the top role in 2014, said Microsoft has found it easier to adapt to a “first-class worldview of where the industry is going” than to “adjust to the harsh realities of the business model shift”.

This shift began when the brand hit somewhat of an existential crisis at the end of the 90s – a time when it had essentially accomplished its mission of landing a PC in every home and on every desk.

“We more or less achieved our goal, at least in the developed world,” he said at the Adobe Summit. “Ever since then we had to think of our next big mission.”

Nadella settled on ‘empower every person and every organization on the planet to achieve more’ in 2015. He said that for this to be embedded into Microsoft’s culture, a shift in mindset was required so that its staff began to think of themselves not as “know-it-alls” but “learn-it-alls”.

“We talk a lot about how we’re going to do all these wonderful things for customers and partners but until we can empower the people that work in our own enterprise with the best tools so they can then have pride in their craft it’s very hard to do these other things,” he said, adding that the company is currently in the process of figuring out a way to incentivize experimental failure, in order to stay ahead of the curve.

“One of the measures we’re trying to create internally is how quickly people are rewarded for disproving their hypotheses. Rather than saying, ‘You’ve got to be right all the time’, [we’re asking] how you give credit to people who come up with a hypothesis and prove themselves wrong."

He continues: "And that’s as much about culture as systems. I see the chief marketing officer and chief information officer as uniquely capable of creating that 'no regrets' system in the organization.”

The change in the internal mission statement is intrinsically linked to Microsoft’s business model. Now, rather than pushing proprietary phone hardware and operating systems, Nadella has sculpted a subscription-based offering that aims to teach companies how to become digital companies in their own right.

“It’s not about increasing dependence on us,” he said. “It’s more about enabling customers to build their own digital independence with us. I think that’s really at the core of what we’re doing.”

Nadella’s changes to Microsoft’s purpose and business model have found favor with shareholders and analysts. Moving focus from operating systems to the cloud and SaaS products saw its stock price triple between 2014 and 2018 while taking the onus off sales and onto the less tangible concept of empowerment has opened the company up to partnerships with likes of Amazon, SAP and Adobe.

The brand announced an expansion of latter tie-up yesterday (March 27). Now, marketers and salespeople using Adobe products will be able to dive into the data of Microsoft-owned LinkedIn in order to draw a clearer picture of the budget holders and decision makers inside big companies.

Get The Drum Newsletter

Build your marketing knowledge by choosing from daily news bulletins or a weekly special.