Satya Nadella’s early commute to Microsoft was a long one. After joining the business in 1992, he traveled between Chicago and Microsoft headquarters in Redmond, Washington, while earning his MBA. Over subsequent decades, Nadella led both enterprise and consumer businesses across Microsoft.
In 2014, he became the business’s third CEO, after Bill Gates and Steve Ballmer. Since then, he's taken the company in a bold, new direction. He's made fundamental shifts in business strategy, opening up Microsoft to working with competitors, acquiring a series of high-profile companies, and shifting the culture toward greater collaboration and inclusion. Nadella tells the story of Microsoft’s journey — and his own — in his recent book Hit Refresh.
Early Life Lessons
Nadella’s life story began in Hyderabad, India, where he was raised in the 1970s and ’80s.
“My father was a Marxist economist and civil servant,” he says. “He looked at my grades and was amazed someone could be so bad! But he said, ‘It’s a marathon. You’ll catch up.’ My mother’s only question to me was ‘Are you happy?’ ”
Early on, Nadella aimed for a career far from the tech domain: professional cricket. “Team sport teaches you about leadership,” he says. “Once, I was bowling trash for the high-school team and the captain took over, got a wicket — a big breakthrough — and returned the ball to me. I went on to the best bowling spell in my life! It was a leadership decision he made, to not break my confidence.”
After his arrival in the U.S., Nadella and wife Anu became parents. Their son Zain’s subsequent diagnoses of cerebral palsy and quadriplegia have resulted in important lessons: “I struggled with it at first, partly because I had all these plans for what life would be. Then I realized I had to step up and do my duty as a father. I began to see the world through my son’s eyes. That’s what empathy is all about.”
“Empathy,” he continues, “has everything to do with work. If innovation is about meeting unmet, unarticulated needs, how can you get in touch with those needs? To extrapolate requires empathy. Design thinking is empathy. At Microsoft we’ve put ‘respect’ into our parlance because that’s where empathy starts.”
The Unexpected CEO
When Nadella took leadership of Microsoft’s first cloud business, then-CEO Steve Ballmer reportedly warned there was “no parachute” if Nadella failed. “It was a way for him to communicate both why he cared about this business and his expectations,” Nadella says. “So he gave me the opportunity but also made clear that ultimately it's performance that matters.”
Though he performed well across high-profile roles, Nadella didn’t envision becoming CEO. “I didn’t think of a Microsoft where Bill and Steve weren’t actively engaged. Bill and Steve built the company,” he says. “Founder CEOs can take some things for granted because of who they are. I describe myself as a ‘mere-mortal CEO.’ And I wanted to make much more explicit our sense of purpose and culture. Strategies and markets come and go. Those don’t.”
He describes how that meant going back to the company’s original mission: “We build technology so that others can build technology. We empower people and organizations. That’s our core identity.”
He also saw the need for a cultural reboot. “In ’98 we became the world’s largest-market-cap company,” Nadella says. “You could see people walking around like, ‘Wow, we must be God’s gift to mankind.’ [Instead] I wanted a culture that reflected a learning organization.” He found inspiration to this end in Stanford psychology professor Carol Dweck’s thinking about growth mindsets. “Let’s not be know-it-alls,” he says. “Let’s be ‘learn-it-alls.’ ”
Today, Microsoft’s culture is built on three pillars: diversity and inclusion, customer obsession, and the concept of “one company” — versus a “series of fragmented P&Ls,” as Nadella says.
Leading by Example
“When I talk about what we espouse across the company,” Nadella says, “we have to ask how much of it is represented among the leadership team, starting with me. We have some amazing women on the team, for example. Are we making sure we really listen to them?”
“Every new Microsoft intern class is more diverse than before,” he continues. “But they get here and look around and say, ‘Where’s the diversity?’ So the real currency of the culture is inclusiveness.”
Some of that inclusion flows from Nadella’s “multi-constituent” view: “I didn’t realize how multi-constituent the CEO job is. Now I recognize it’s about customers; it’s about partners; it’s about all your employees, your investors, governments. It’s about all of them, all the time.”
Overall, Nadella embraces self-awareness as a leader — and for organizations: “If there’s criticism for what you’re doing, it’s appropriate to look in the mirror and understand whether there are changes needed. Large organizations should welcome such scrutiny. We need to think about unintended consequences of our technology, for example. It’s a time for self-reflection and change.”
In this context, Nadella defended the firm’s explicit policy of not withholding technologies from democratically elected institutions: “If we as citizens don’t like what the government does, we have this great opportunity to change it by voting. But we still need to advocate for ethical principles.”
The Humanity of AI
Nadella is a major proponent of AI technologies and applications.
“AI has done so much for people who need the most help,” he says. “If you have ALS, for example, Eye Gaze can help you type and communicate. AI can help kids with dyslexia learn how to read. But we also have to deal with AI issues around ethics and bias. We humans are the ones creating AI — we get to decide what it is. We can’t abdicate our responsibility to control the future.”
Part of that responsibility is about defining AI-related regulatory issues, as Nadella describes, “We participated in defining regulatory frameworks for facial recognition in the state of Washington. Even before regulation is in place, we have guidelines about the right use of this technology. Just like food safety, there should be AI safety.”
Nadella also is confident about the employment side of AI: “I don’t think it’s zero-sum. I think AI will lead to more jobs. We have to use all the levers we have, economic and social, to skill people for the jobs they’ll have. Those might be different types of skills from the ones we value today.”
Advice for Rising Leaders
The CEO offered advice for emerging leaders, including the Stanford MBA students at the event.
He says, “It’s easy to say, ‘When am I going to be CEO?’ But don’t wait for your next job to do your best work. Think about every job you get as the most important job, even as possibly your last job. I thought each job was fantastic until I got the next.”
On the topic of choosing a large or small employer, Nadella says, “Both have amazing opportunities. I’ll make the case for working for an organization like Microsoft to have impact at scale. Which other organization will impact small-business productivity, public-sector efficiency, and multinational outcomes in 190-plus countries?” People complain about the matrix and complexity in large businesses, he says, but small companies just have a different type: customers, board, VC. “You’ll never escape working with people.”
He also discussed work-life satisfaction. “It’s the journey of your lifetime to unpack who you are and what you’re good at — what makes you tick,” he continues. “What makes you happy, as my mother asked me. You also need to understand where others are coming from. A lot of satisfaction in life is from your ability to empathize. Doug Burgum, a Stanford GSB grad I worked for, told me, ‘You’re going to spend more time at work than with your kids.’ His point was that work should be more than transactional.”
That extends to maintaining a long-term view. Nadella referenced David Brooks’ book The Second Mountain: The Quest for a Moral Life. “He talks about the first mountain, which is what many of you GSB graduates are on, seeking professional success. The second mountain is about relating to the world and your community. For Microsoft now it’s not about our market cap but what it’s leading to. Celebrating that small business in Kenya keeps us grounded.”
Nadella closed with advice offered to him by Ballmer as outgoing CEO: “Be bold and be right. If you’re not bold, you’re not going to do much of anything. If you’re not right, you’re not going to be here.”