In a most candid of interviews to CNBC-TV18, Satya Nadella, CEO, Microsoft says growing up he would have dreamt of working in a bank and playing cricket for Hyderabad.
In the interview, he talks about the various aspects of his book 'Hit Refresh', like why he thinks the 'C' in the CEO stands for culture, the know-it-all and learn-it-all attitude, empathetic style of leadership, purpose of differentiation, the democratization of artificial intelligence (AI), encouraging competitive spirit, building long-term partnerships and many more.
According to him, whenever an organization becomes successful, it means an idea or a concept that you had has become a hit but once the new interesting idea runs out of gas, you need a new idea and that is when 'culture' will matter -- 'The culture that allows you to continuously question the status quo,".
He says, Microsoft historically has been all about creating platforms. "There is no way you can create ecosystems and platforms, if you don’t have that partnership gene at the core," he adds.
Below is the verbatim transcript of the interview.
Q: Give me a fun fact that we do not know about you so far.
A: I would say, growing up I would have dreamt of actually working in a bank and playing cricket for Hyderabad and here I am as CEO of Microsoft and it is the most unlikely place.
Q: Let me talk about the leadership lessons that you have written about in your book and I have tried to map some of them. You say that that 'C' in the CEO stands for culture. How do you ensure that culture is not just linked to who is in the corner office and you write about this in the book -- I want to ensure that it does not become a 'Satya' thing. So what does it mean to you now to bring in consistency into the way the organisation acts and thinks?
A: To me that is really at the core. When an organisation becomes successful that means the idea or the concept that you had has now become a hit. You build all this capability as well as the culture -- in some sense, reinforce the concept. You get even this virtuous cycle between the idea, the capability and culture. But the reality is at some point, whatever was that novel, interesting new idea runs out of gas, you need a new idea and that is when culture will matter; that culture allows you to continuously question the status quo.
So I went on this quest for saying, what is a mean that we can have? We need to have a cultural conversation inside the company. And that is what led me to Carol Dweck's work around mindset where the simple concept is if you have a person in school who is a know-it-all and the other one is a learn-it-all, the learn-it-all will ultimately do better.
Q: But is that not the CEO problem, knowing it all?
A: That is correct and in fact, the idea that you as a CEO have to create a culture by first admitting your own fixed mindset. At least I believe that is the key. In order to have continuous or renewed success, you really have to question status quo and it does not come from a source of knowing it all.
Q: You talk about the need to re-define leadership and I will ask you that in the contest of the fact that you have drawn from your own experiences as a husband and as a father - this empathetic style of leadership that you talk about, do you believe that you would have been able to do this if you didn't have those experiences to lean on? We have grown up with the idea of winner takes it all, the paranoid survive etc. So, when you now talk about empathetic leadership, Jack Ma talks about having the love quotient, how is it that CEOs are now seeming to embrace the feminine energy much more?
A: It is probably time but for me for example when I describe or at least I internalise, Microsoft's core business, core priority is to meet unmet, unarticulated needs of customers. There is no way we are going to be able to do that especially the unarticulated part, if we don't have a deeper sense of empathy for what is it that really customers expect from us. You are not going to be able to go to work and switch on the button called empathy and say let me now build innovative products that are well liked and are going to in fact surprise customers in good ways.
So, to me you have to be able to take your life, what life teaches you - in my case that is clearly the case which is, who I am as both a product leader or as an organisational leader is something that has been shaped by my life's experience whether it is the birth of my son or the last interview question of my Microsoft interview, all of these are moments where I feel I have learnt to be able to see more of us in them and them in us and that clearly I believe is what is needed for real innovation in any organisation.
Q: The customer has always been at the centre of an organisation strategy so an empathetic leadership style, how does that make the customer different?
A: In fact this morning I was even meeting with some of the folks who were in the frontlines at Microsoft servicing customers. One of them said to me - it is so different. What the expectations when somebody has moved their most mission critical application if you are an automaker or an insurance company to a cloud, it is no longer that they just bought a product from us. They are dependent on our technology for the core of their business. So, their expectations or how we show up, how we understand their needs and what we need to equip our people to be able to do so is so different.
When you say customer centricity of course if you are not customer centric you are not going to be able to do much, but it is the customer centricity as a continuous process not as a discrete process. That means the learn-it-all, so it is not like I sold my customer something, what is it that my customer is going to want to do with what I sold them on a continuous basis, that is the only way to build loyalty, that is the only way to build business.
Q: Which is why you decided to include customers as part of your senior leadership retreat, which I believe faced some resistance at the start?
A: It is one of these things when you take the senior most people and say let us listen to customers, their natural reaction quite frankly, even I would have had - of course I listen to customer, I mean that is what I do every day. I don't need to go to a senior retreat to listen to customers. However, the reality I wanted to at least strike there was let us have a shared experience of actually talking to customers together. It is not to say that anyone is sort of not doing their job but it is to be able to live in that shared experience that makes us stronger. So, there was some resistance but also there was lot of learning for all of us subsequently.
Q: One of the other issues that you talk about in the book is the purpose of differentiation and you talk about it in the context of the AWS, Azure strategy that you adopted today, USD 20 billion for your cloud services. How critical was that for you to say that Microsoft is about data, Microsoft is about AI, how do we incorporate those capabilities into an area that we are clearly not the leaders?
A: As informed a lot of the choices we have made, the markets we compete in and how we compete in and how do we create differentiation is to live up to our sense of purpose. I think technologies will change but the core identity -- like if you look back, Microsoft was created when Paul and Bill created the BASIC interpreter for the Altair. Very recently in fact we were talking about and marking some big milestones in quantum computing. What did we do? We launched a new language for quantum - algorithms. We put a simulator in Azure so that developers can now start learning quantum. So I felt that even in the cloud we can be the ones who can democratise AI, democratise AI infrastructure so that developers can be successful.
Q: So that to your mind is a soul of Microsoft - democratisation of technology?
A: Correct, because in some sense the soul of Microsoft is we create technology so that others can go on to create more technologies or achieve more success because of what they have been able to do with our products. We are that ultimate platform and tool creator, whether it is Minecraft or whether it is Word or Visual Basic or Visual Tools or Azure, to me they are all things that allow others to create more technology.
Q: Since you are talking about others, I want to talk to you about competition and you have an interesting perspective and take on that in the book. You say that Microsoft is all about competitive zeal, aggression, combativeness but that is not your leadership style. I am sure your leadership style is not accepting the market as is but how do you encourage a spirit of competitiveness without combativeness or aggression?
A: The best pieces of advice I have ever got from Steve Jobs and Bill Gates was to be my own person in how I lead. The way at least I look at all competition is - first, let's talk about the things that we can do in a non-zero sum way or at least not view everything as zero-sum especially in view of customers. One thing I grew up in is in our enterprise business or our commercial business and realising that it is not a homogenous world it's a heterogeneous world. In fact it is to our advantage if we play well with others, propagate open standards because then customers will adopt more of your technology.
So, I have always grown up in the Microsoft that knew how to both co-operate and compete and I wanted to bring those both back. There are some battles that are zero-sum; we compete against Amazon and AWS but at the same time we are happy to bring Cortana to Alexa and that ability to keep those two separate thoughts and yet compete and co-operate is what is going to drive ultimately more success.
Q: Let me add that third C, let me ask you about collaboration because one of the focused areas in the book is also about building partnerships and building partnerships that last and not necessarily obvious choice for partners as well. What is going to drive the strategy when it comes to collaboration, how do you decide that this is not going to be an acquisition but this is going to be a partnership, in the context of the experience that Microsoft had with Nokia for instance?
A: To me, Microsoft has historically been all about creating platforms. There is no way you can create ecosystems and platforms, if you don't have that partnership gene at the core.
When I look back, look at what I am doing even with Adobe now with Shantanu Narayen and team. It is a big partnership for both, a big bet from his part to move to the Azure cloud, bring all of his creative cloud and his experience cloud and document cloud to Microsoft and for Microsoft to be able to do the integrations and make his product successful on our platforms.
I think that is what it takes -- building of long-term trust with partners is what I think is the real currency for anybody who is in the platform business.
Q: You have raised existential questions in the book. So if I were to ask you, today what is it that will decide whether you should acquire a company or not, what are the parameters that you will look at?
A: Whenever I think about acquisitions, I always think about three things. In fact, I am pretty transparent and that is what even led to what is now a very successful integration of LinkedIn. One is, do we see the world the same, which is do we have compatibility of vision? In that case, we have Jeff Weiner and Reid Hoffman, they wanted to be able to build this professional network that truly enabled the world's professional to realise their economic opportunity. We have the professional cloud with Office 365. Bringing those two things together helped us re-enforce the mission.
The second thing is can we in fact integrate? It is not about just assimilation into Microsoft, can Microsoft be better because of the talent that is coming in. That is why I have all the CEOs of the companies that we have acquired join our executive retreat. So that we can learn. We are operating in fact LinkedIn very differently so that we can learn. So you got to have a real thesis of how is this integration going to work and lastly of course, it is going to make sense for our shareholders in terms of value creation.
It is so exciting, in the last quarter, LinkedIn has reaccelerated and to see that it is far ahead of even the financial plans that we had set in terms of it being accretive on a non-GAAP basis and to me ultimately it has got to deliver value for our shareholders but that only happens if you can integrate and of course if you have a vision that is compatible.
Q: You talk about leadership and the role of a good leader being the ability to look at external opportunities and connect that with internal capabilities as well as culture. In the context of where you see Microsoft today, and the future, do you believe that it will be driven by inorganic growth or largely through organic growth?
A: I think as a spender of USD 11 billion plus in R&D, the fundamental bet is organic growth. We will always look for inorganic opportunities that make sense for us. We are continuously acquiring talent. LinkedIn was a big one, but we bought many other companies that have in fact been part and parcel of our cloud growth. So we will always be in the market, but the foundational bet or the foundational investment whether it is the capex in our cloud or the opex in our R&D is about organic growth. It is great to see the growth that we see in mixed reality or the growth we see in our commercial cloud or gaming, which is another area of deep passion, another place where we acquired Minecraft, which is doing tremendously well for us.
Q: Let me move and talk to you about the need to redefine the way that we look at multinational corporations and you touch upon this in your book -- this need for MNCs to not operate merely by what the headquarter tells them to do. In the Microsoft context, more than 50 percent of your revenues come from outside of the US. You talk about the need to create local economic opportunities. How do you see the role of the MNC changing in the current context?
A: I think it is very important for any MNC, if we ever are to have a long-term business in any country, whether it is in India or in the United Kingdom or in the United States, it is all going to be dependent on what local opportunity and local economic surplus have we created. For example, whenever I come to India, one of my key things from my team that we look at is who are all the small businesses that are more productive because of something that we are doing? What are some of the public sector efficiencies that we can point to because of our technology?
Even today, we announced a partnership with Ola and it is awesome to see here is a world class entrepreneur building a world class business that we can now make them more competitive, not only in India, but worldwide. Those, to me, are at the centre.
If we are not able to bring technology or brings products, of course achieve our own economic success, but if that economic success is not breeding a larger surplus around us, there is nothing long-term stable because every country rightfully so, should ask, what has your participation in our economy done to create local opportunity and that is what is front and centre for Prime Minister Modi or President Trump or anyone else.
Q: Are they asking the same questions of you?
A: Very similar. They always will have specific challenges and specific opportunities that are different depending on the context of the country. But when I think about my conversations that are happening, quite frankly across all spectrums of politics and countries, it is one universal thing, especially in today's age, where digital technology is playing such an increasing role in every walk of life, in every part of our economy, in every part of the globe. Their question is how do they deal with it? How does that translate into equitable growth because that is the challenge which is, there is definitely a real need for not only productivity growth and capital to have return, but there needs to be real return for labour and there needs to be real job creation, there needs to be real economic opportunity.
Q: You talked about productivity. I will add the other two Ps that the world is concerned about and that is populism and protectionism. As the CEO of Microsoft, as an immigrant who has made a life for himself and a career for himself in the US, when you hear these conversations about visa bans, etc. how does that make you feel? I think I remember reading in your book that you let that pass while you started your career in the US, but you believe that this is going to be an issue for your children for instance that they are going to have to deal with racial slurs. How does that impact you?
A: One of the things that is going to be a real currency for any society, whether it is the United States, whether it is India, anywhere in the world is to have the people who are in your country already feel that they are able to participate in the opportunities that are getting created because I think the cohesion of a broader society only comes about when there is growth and equitable growth.
I think sometimes, there is going to be reactions, you can call it populism or what have you, when that equation of equitable growth is broken. So the real challenge is to not only have an enlightened immigration policy, make sure that society has tolerance, society welcomes people who are already there, it is not about even an immigration policy. But ultimately though, the only way to create stability in that is to create economic growth for everybody.
When I look back at the United States, at least what I have learned watching its history, it is the first country where so many people, in fact people talk about the middle class or the working class aristocracy, that is a phenomena of the United States post Second World War and I am inspired by that, and I think US has to rediscover it and the rest of the world has to discover it for the first time.
Q: Since we are talking about inclusion and equitable growth, I want to ask you about your ability to attract and retain more women in Microsoft because you argue that it is poor business sense to not have women in the workforce. Globally, this is an issue but what are you doing about it at Microsoft?
A: First and foremost, it is about making sure that the culture fosters inclusion because in some sense, we need two things to happen. One is of course, the representation needs to improve and as the representation improves, you want people to be able to do their best work, find that deeper sense of belonging in the company, which only will happen if the culture is inclusive and we have to tackle both.
In fact one of the changes we have even made so that we can put more money where our mouth is to actually change the senior leadership compensation including mine, to hit numeric goals of representation and progress. And of course, it is not sufficient, it is definitely one lever but the real change will come about when we feel that we have a culture that allows whether it is women or whether it is ethnic minorities to feel that sense of belonging and that sense that they can do their very best work.
Q: Let me end with cricket because that is what you are passionate about. In the last three years, what would you say your batting average has been and Dhoni or Virat Kohli?
A: When I think about the two of them, the last thing I want to do is pick amongst two icons.
Q: Leadership is about making choices, right?
A: I will pick both of them on my side.
Q: Batting average?
A: My batting average is zero because I do not play cricket, I watch cricket.
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