CEO Satya Nadella succinctly explained the secret of Microsoft’s turnaround: ‘No status quo’

When CEO Satya Nadella took command of Microsoft in early 2014, the company was stuck in a rut: The rise of iPhone and Android was leaving Windows in the mud, and the company was better known for hardball sales tactics than innovation.

Now, the company has found new life (and new stock highs), as Nadella has made aggressive moves to revitalize the company and reinvigorate its culture. And on the Microsoft earnings call today, Nadella succinctly shared the secret of his success, in response to an analyst question on a forthcoming reorganization of the sales division.

“No status quo in any part of Microsoft’s organisation should be counted on,” Nadella said.

He preceded this with an example. Where historically, Microsoft had measured the size of its business deals by the number of PCs and servers on which its software had been installed, now it measures by “consumption of cloud capacity, in many cases,” referring to fast-growing cloud services like the Office 365 suite and Microsoft Azure compute platform.

It was a “pretty fundamental change” to adopt that way of thinking, Nadella said, but it had to be done to make sure the company stayed focused on the right things, and attacked the right problems.

Here, Nadella got at the core of his “growth mindset” philosophy. “We need to be willing to lean in to uncertainty, take risks and move quickly when we make mistakes, recognising failure happens along the way to mastery,” Nadella wrote in a 2015 memo to Microsoft employees.

So when the analyst asked if there’s a big change to Microsoft’s sales strategy, Nadella was really saying that the company is always changing its strategy as the company identifies new opportunities and goes after them.

It’s a faster pace than you might expect from the fifth most valuable company in the world, but it goes a long way towards explaining how Nadella was able to turn things around in just a few years.

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