Microsoft today is a company on the rise,
with its reach ever expanding into new industries. But less than a decade ago, Microsoft had
a very different image: one of stagnation, bureaucracy and decline. The recent reinvention of the company has
been a lesson for the history books and in this video we’ll see how it happened. This video is brought to you by Dashlane. Never forget your passwords again by registering
with the link in the description. For most of Microsoft’s history it was Bill
Gates who was at the helm. It was under his guidance that Microsoft first
conquered the operating system market and in fact he was so successful that the US government
almost broke Microsoft up. But after 25 years of leadership, Bill eventually
stepped down and the man he chose to replace him well, he had a much more different vision
for Microsoft. Steve Ballmer was not a technology guy: even
though he was the 30th employee hired at Microsoft and had been around for decades, he had worked
in departments like business management and sales. In Steve’s eyes it was these departments
that were responsible for Microsoft’s success and so he did his best to reorganize leadership
around the business people instead of the technology people. As he himself put it, he wanted to “break
up the technology fiefdoms,” which in his view were spending ridiculous amounts of money
trying to develop new technology without any idea whether it would be beneficial to the
dominance of Windows in the PC world. Steve saw that Windows worked and he tried
to promote it as much as possible. That’s why the biggest move in his career
was the attempt to spread Windows to the mobile market, first through Windows Mobile and then
Windows Phone. In many ways, Steve was continuing the philosophy
Bill Gates had adopted two decades earlier: aggressive expansion and an outright war against
competition. Unfortunately, Microsoft was far too late
in the smartphone game, so Steve’s dream of making billions by selling phones never
materialized. If you look at a chart of Microsoft’s stock
price under his tenure you’re gonna see just how bad things were: even though Microsoft’s
revenue increased during this period, the loss of the smartphone market was just too
much. These years under Steve became a lost decade
for Microsoft and in 2014 when he announced his resignation, the stock jumped 7% on the
news: that’s how badly investors wanted him to go away. The biggest question then became who would
be his successor and everyone naturally assumed Microsoft would hire someone external to reshape
the company and to bring it back on the path of innovation. The answer, however, was exactly the opposite:
not only was the new CEO a longtime insider at Microsoft, he was in fact the leader of
one of the division Steve Ballmer himself created. Satya Nadella had been around in Microsoft
since 1998 and a decade later, when Steve Ballmer announced the creation of Microsoft’s
enterprise division, Satya became its executive vice-president. Of course, at the time nobody considered Steve’s
idea to push Microsoft into the enterprise business as viable. This was before Amazon Web Services had become
profitable and before the cloud had really taken off in the mainstream. In reality, when Steve saw that Windows Phone
wasn’t working he wanted to pivot towards else and enterprise was his idea. Unfortunately, this pivot began only a few
years before he was forced to resign, but internally, it was becoming clear that enterprise
was indeed the way to go. The immense success of Amazon’s cloud business
convinced Microsoft’s board that they should work in that direction as well, and who better
to execute that plan than the man in charge of Microsoft’s own cloud efforts. When Microsoft announced that Satya Nadella
would be the new CEO, the entire world was confused. To start things off nobody even knew who he
was: when you look at the search volume from Google Trends for his name you’ll see what
I mean. So out of nowhere, a rather unknown executive
becomes the CEO of Microsoft and unsurprisingly there’s a lot of skepticism around the decision. But then, something almost magical happens:
the stock starts climbing up after a decade of stagnation and Microsoft’s cloud computing
platform, Azure, starts growing rapidly and becomes incredibly profitable. Within a few years praise for Satya Nadella’s
leadership is coming from across the world as everyone believes they’re witnessing
a miracle. But the truth is that when Satya took over
from Steve, Azure had been in development for over six years and the enterprise division
which is now the bread and butter of Microsoft had been profitable even during Steve’s
time. Ironically, even though during Steve’s leadership
the stock price didn’t move, Microsoft’s net income more than tripled. So Microsoft’s rebirth at the hands of Satya
isn’t an economic one: the fact of the matter is that Microsoft was wildly profitable before
and continued being so after. What Satya did achieve was a philosophical
rebirth, and while that might not sound nearly as impressive, it’s actually just as important. When Satya took over, Microsoft was suffering
from decades of bad reputation, which was honestly very much deserved: from anti-competitive
practices to suppression of open-source development, there were very few people saying nice things
about Microsoft in 2014. And yet, the reorganization Satya enacted
after he took over had an incredible effect. Microsoft essentially did a 180 degree turn
on its philosophy: it not only embraced open-source development, but actively started supporting
it, so much so that one of Satya’s biggest moves was to acquire Github. It is extremely telling that in Satya’s
first ever speech as CEO of Microsoft, he didn’t mention Windows even once. In fact, during that speech Satya announced
that he’d be bringing Microsoft Office to iOS and within a few months he did the same
for Android. It turns out that in such an interconnected
world making friends is better than making enemies. Of course, none of what Satya gets credit
for today would’ve been possible without the groundwork Steve Ballmer laid a decade
earlier. While everyone is quick to praise Satya for
economic achievements he might not have been fully responsible for, we should recognize
his true contribution: taking decades of cutthroat aggression and transforming it into an attitude
of productive collaboration. And speaking of productive collaboration:
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description and use the code ‘businesscasual’. Anyway, thank you for watching. In case you somehow missed it I just started
an Instagram page, where I’m gonna share awesome side content and teasers for future
videos, so go and follow me there. We’re gonna see each other again in about
two weeks, and until then: stay smart.