Satya Nadella has been CEO of Microsoft for five months, and he's made it clear he intends to change and re-focus the software behemoth as it navigates the next generation of technological change. To mark the closing of Microsoft's fiscal year, Nadella released a long, detailed memo laying out his grand vision for the future of Microsoft. He talked about the importance of mobile and the cloud, the end of Microsoft's focus on devices and services, and laid the foundation for big changes in Redmond. "I consider the job before us to be bolder and more ambitious than anything we have ever done," he said.
We had a few questions for Nadella after we read the memo, so I gave him a call to talk about what the future of Microsoft looks like under its new CEO.
Joshua Topolsky: Let's get into it, I know you have very limited time. Tell me about this new memo.
Satya Nadella: Yeah, so the context from a timing perspective is that we just finished our fiscal year ... so I just wanted to mark this and take the opportunity to galvanize our employees around what it is that is core to us, and our soul and our culture-change agenda. And obviously nowadays when you're talking to 100,000 employees, you do it in ways where it's open to everybody, where you talk to customers, partners, as well as the press.
The thing that I tried to hone in on: "What is the core contribution that we as a company can make in a 'mobile-first, cloud-first’ world?"
"I don't think of the world as enterprise and consumer. I think of it as people."
So that's the core of the memo, and when I think about productivity for me, a good canonical example for us is what we are doing with Cortana. Think about what Cortana can do for you as a salesperson, walking out of a sales meeting. It knows your calendar so it knows which company and person you met, where you were because of the geofencing, it does your "CRM" work for you as opposed to just about getting you there in terms of your mapping information. So it's about a much more broad view of what an intelligent agent that we can produce [is] that can reason over data, that's personal, organizational, and [can] improve productivity.
At the end of the day, look, any strategy gets eaten for lunch if you don't have a culture that's also changing and is innovative in itself. In fact, I kind of say we've got to innovate on the innovation process, so we've introduced a lot of new functions that are more core, like design and data science, into the core of our engineering.
We also have taken out layers, we want to make sure that the least number of decision makers are involved anytime something needs to be decided on ... and also question any dogma. This is not about, "Hey, a set of changes [at] one time," but to be able to say, "Look, we're going to be an organization that's going to learn and change, and every employee should push." And so that's really the essence of what my message was.
Everything you just ran through sounds very enterprise focused. I'm not hearing a lot about consumers there. Is there a new Microsoft focus, a different Microsoft focus — and I'm talking the end user — are you moving focus more towards enterprise and away from the consumer?
I don't think of the world as enterprise and consumer. I think of it as people. In fact, I call out the specific thing about dual-use, which is I think where we can be most unique. Look, there's always going to be Pandora on our devices. But what is it that we can do with our operating systems, with our cloud, with our software, which is different and unique? We can make OneDrive, and OneDrive for Business, which I will use to share photographs and save photographs for my business documents. We can do a fantastic job of bringing those things together in support of you, the individual who's spanning both personal life and work life. So to me, that's what we are about.
But for the pure consumer who's walking into a Best Buy and they're looking at the range of products, they're seeing Google, they're seeing Apple, they're seeing Microsoft. Look at smartphone market share for example. Is this is a place where you can win? How do you convince consumers that Microsoft is a different company and not the Microsoft that they grew up with? The Microsoft of the late ’90s or early 2000s?
The thing is, any current market share is not a marker for our future ambition. So the way I look at it is, you're pointing to the right challenge. And the solution to that challenge is to say, "First, why would you want to pick one of our devices?"
"I don't want us to be shy about where we are differentiated."
Take Surface Pro 3. I want you to say, "Look, I like this thing, because it's a tablet that can be a laptop, because I want to be able to listen to my music, I want to snap it to one side and I want to be able to do a Word document on the other side, I want to be able to use it for note-taking, use it for sketching." I want us to be able to take what we can be good at, define it, brand it, and communicate it in ways that can be appealing to the general user. But it turns out that the user is not just listening to music, not just seeing TV, but also doing things and getting stuff done, and that's where we can shine.
I don't want us to be shy about where we are differentiated, while competing in these other categories. So that's what I think we need to do with our devices. And with Windows — we have 300-plus million PCs. I agree that there are more phones, and I am not at all confused about the difference between 300 million and a billion. But 300 million is 300 million.
Is it important to convince the consumer that Microsoft is important and they need to be a part of their lives? Or are we really talking about convincing Fortune 500 companies, convincing major corporations to adopt Microsoft, to connect to these connected services and devices and that will sort of by osmosis bleed down to the consumer?
No, I fundamentally believe that it's most important to us to convince consumers. You're defining the market as "It's already done, Apple and Google have won, because they won the consumer side." And I'm going to question that. I'm going to say "No, any thinking consumer should consider Microsoft because guess what, you're not just a consumer. You're also going to go to work, you're also going to be productive and we can do a better job for you in there." And that's what I want to appeal to.
So how do you change the message? How do you change the mindset?
At the end of the day, the only way to change it is products. We've got to make progress with our tablet share, with Surface Pro 3, we'll talk about that when we talk [in our earnings call on the 22nd]. We're going to change it by producing phones — where we grow in countries where we've grown from 3 to 10 percent, celebrate that. And then have higher ambition. There are many countries, even in Western Europe, where we have over 10 percent share, and I completely recognize that if you are not growing in the US, for you we are nothing, and I'm grounded in that reality. But at the same time, [we will] keep coming at it and keep coming at it, but have a core which you really are using to differentiate what your value proposition for the user is.
"Any thinking consumer should consider Microsoft because guess what, you're not just a consumer."
If we talk about something like that smartphone market share, and obviously we have to think about tablet market share as well, do you believe that you can get to a place that is more competitive than where you are right now?
I absolutely believe that in a world where there are going to be many screen sizes, and ecosystems across all of those screen sizes, and cloud services that'll be available on all ecosystems, that's what Microsoft's future is. I want every home screen across all ecosystems to have Microsoft services. Skype is a good example: I want our own ecosystem across all device categories to have high share.
As I said, we have 300-plus million devices today, predominantly PCs, but we want to compete for the new categories, and there will be additional new categories that will be invented in the next five years. That's the worldview I have.