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Satya Nadella has served as Microsoft's CEO since February 4, 2014. During that decade, he has presided over a 10-fold increase in the company's stock market capitalization, adding about $2.8 trillion in value. What did Nadella do to contribute to this amazing success? What lessons can other business leaders take from his accomplishments?
A recent Nadella strategy -- to collaborate with ChatGPT creator Open AI -- has contributed to a near doubling in Microsoft's stock price since the beginning of 2023. As I wrote in my forthcoming book, Brain Rush, Microsoft decided to work with OpenAI after the company stumbled in its homegrown AI efforts. The move to outsourcing AI began when Bill Gates first met with OpenAI's management and was impressed with what the company was doing, according to Time.
Underlying Microsoft's flexibility in finding the best technology and team to serve its customers is the change in mindset Nadella brought to Microsoft's leadership when he took over. Simply put, he replaced his predecessor's Head in the Sand mindset with a Fast Follower one.
The most important lesson for leaders from Nadella's success is this: Two strategic mindsets have the potential to produce high payoffs -- a third is deadly. Below I explain each of the mindsets and describe where Nadella fits within this framework. As I wrote in my 2020 book Goliath Strikes Back, the three strategic mindsets are as follows:
Create the Future. The most valuable mindset is Create the Future, which is typical of the world's most celebrated entrepreneurs. Such leaders see where customer needs and technologies will be in the future and use those technologies to create new products that customers perceive as the most valuable on the market. Netflix CEO Reed Hastings embodies this mindset in a way that is more sustainable, because the company does not orbit him in the same way. While Hastings created revolutionary services -- DVD-by-mail and online streaming -- he prides himself on delegating much of the decision making and execution to talented and empowered executives and employees, as I wrote in November 2020.
Fast Follower. Leaders with a Fast Follower mindset have rescued many large companies that have lost their way after their founders departed the scene. Rather than focus on cost-cutting, those with a Fast Follower mindset start by looking at the company from the perspective of its customers and employees -- giving them irresistibly compelling reasons to keep buying from the company. A case in point is Hubert Joly, Best Buy's CEO from 2012 to 2019, who took over after the company posted a $1.7 billion loss. By the time Joly left, Best Buy was profitable, and its stock had soared 330 percent. Joly's Fast Follower mindset led him to listen to store associates, learn what was causing Best Buy's problems, and change its strategy and operations so consumers would come back and keep buying.
Head in the Sand. Leaders with a Head in the Sand mindset seek to discourage their teams from providing them with information about how their competitive environment is changing. Such leaders often stay at the top because of confirmation bias -- their past successes lock in a set of beliefs about what drives industry success. They use their power over the people who report to them to reward those who praise their adherence to those beliefs and punish those who challenge them.
How does this framework apply to Microsoft? Microsoft's Nadella has a Fast Follower mindset, while Steve Ballmer, Microsoft's CEO from 2000 to 2014, had a Head in the Sand mindset.
Ballmer's mindset hurt Microsoft's ability to adapt to changing customer needs. He created a polarizing, divisive, and antagonistic culture that used a rank-and-yank human resources policy to spur internal competition. Ballmer's attitude toward customers was insular and inwardly focused and pushed all-Microsoft products on customers. When Apple and Amazon created new growth from smartphones and cloud services, respectively, Ballmer was unable to seize the opportunity, according to Slate.
Nadella's Fast Follower approach propelled growth. His style was empathetic, inclusive, and collaborative. He empowered employees and fostered a growth mindset. Nadella found a way to give customers what they needed rather than pushing all-Microsoft products. With his experience starting Microsoft's cloud computing business, he successfully positioned the company to capture the growth headwinds of AI and digital transformation, as I noted in March 2018. Fortunately, Nadella was able to seize the generative AI initiative by collaborating with OpenAI -- whose leader, Sam Altman, had a Create the Future mindset.
The takeaway? If you have a Head in the Sand mindset, replace yourself with a Fast Follower leader like Nadella.
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The Essential Lesson From Satya Nadella's $2.8 Trillion Boost to Microsoft's Value
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07.02.2024
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Satya Nadella has served as Microsoft's CEO since February 4, 2014. During that decade, he has presided over a 10-fold increase in the company's stock market capitalization, adding about $2.8 trillion in value. What did Nadella do to contribute to this amazing success? What lessons can other business leaders take from his accomplishments?
A recent Nadella strategy -- to collaborate with ChatGPT creator Open AI -- has contributed to a near doubling in Microsoft's stock price since the beginning of 2023. As I wrote in my forthcoming book, Brain Rush, Microsoft decided to work with OpenAI after the company stumbled in its homegrown AI efforts. The move to outsourcing AI began when Bill Gates first met with OpenAI's management and was impressed with what the company........
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