Satya Nadella has made Microsoft 10 times more valuable in his decade as CEO. Can he stay ahead in the AI age?

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Satya Nadella has made Microsoft 10 times more valuable in his decade as CEO. Can he stay ahead in the AI age?

By Jeremy Kahn | Fortune Magazine | June-July 2024 Issue

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Few companies have benefited as much from the generative AI boom as Microsoft. Investor fervor for the technology has helped make Nadella’s company a perennial contender for the title of the world’s most valuable corporation, with a market cap that consistently bobs somewhere in excess of $3 trillion. 

When Nadella took the reins at Microsoft in 2014, the company was floundering. Under his predecessor, Steve Ballmer, it had missed the smartphone revolution, was lagging on tablets, and was even losing market share in the PC operating system business that made it a household name. Microsoft’s shares had fallen more than 40% during Ballmer’s tenure. In 10-plus years as CEO, Nadella has reinvigorated the company, successfully steering it through two technological transformations: from PCs to the era of cloud computing, and now, to the age of AI. Nadella’s prescient and early bet on OpenAI and its technology, and the fruitful-if-sometimes-tense relationship that ensued, have given Microsoft as good a shot as any company at supremacy in this new era. The company arguably hasn’t been this powerful since it dominated the PC market in the 1990s’ “Wintel” era.  

But as Nadella begins his second decade at the helm, there’s no guarantee Microsoft will retain its lead. Regulators, hackers, and rivals each present threats serious enough to potentially undermine its industry leadership. Above all, it must reckon with its own leviathan size—and avoid becoming a victim of bureaucracy and bloat when AI’s protean nature calls for speed, agility and finesse.

Nadella’s approach to leadership reflects his acute awareness of these risks. Even when seemingly ahead of the pack on AI, he and his team are constantly listening, their corporate antennae sensitive to the tiniest pivots in users’ needs and preferences. Microsoft is continually investing in technologies and talent that might someday supplant OpenAI’s models—or even supplant generative AI altogether. In other sectors, such hypervigilance might seem like overkill, even paranoia. But as Nadella knows as well as anyone, in tech, platform shifts happen frequently and fast. Blink for a second too long and you’re chasing the future, not making it. 

It helps explain why investors love Microsoft—it looks like a no-lose bet. (Its share price has risen 11-fold under Nadella.) “Microsoft’s growth prospects are pretty straightforward,” Nadella says. “Just do a good job of what we do.” But, of course, “just doing what we do,” isn’t simple. There are a thousand ways a colossus like Microsoft can lose its way. It has before—it largely missed mobile, after all. And of the three big technological innovations Nadella famously said in 2017 would shape Microsoft’s future—AI, quantum computing, and mixed reality—the company has really only hit the jackpot with AI. 

Nadella says the idea of missing the next big technological leap keeps him up at night. “When the paradigm shifts, do you have something to contribute?” he asks. “Because there is no God-given right to exist if you don’t have anything relevant.” That in turn, he says, requires “a culture that allows you to build capability long before it is conventional wisdom that you need that, to come up with new concepts.” 

Nadella says build. But find might be more accurate. For an executive who spent nearly his entire career at Microsoft, Nadella is surprisingly willing to go outside the organization to obtain the innovation on which the company’s future depends—whether through acquisitions, partnerships, or hiring. 

This whatever-it-takes attitude makes Microsoft a formidable competitor. But it may not be enough to ensure it remains the world’s most valuable company. Staying on top requires that Microsoft continue meeting “unmet, unarticulated needs of customers.” That in turn demands that the company “stay humble, stay hungry, and exhibit a growth mindset.” The company can never coast. “I don’t take it for granted,” Nadela says. 

3 key takeaways from the article

1. Few companies have benefited as much from the generative AI boom as Microsoft. Investor fervor for the technology has helped make Nadella’s company a perennial contender for the title of the world’s most valuable corporation, with a market cap that consistently bobs somewhere in excess of $3 trillion. 
2. When Nadella took the reins at Microsoft in 2014, the company was floundering. In 10-plus years as CEO, Nadella has reinvigorated the company. Nadella’s prescient and early bet on OpenAI and its technology, and the fruitful-if-sometimes-tense relationship that ensued, have given Microsoft as good a shot as any company at supremacy in this new era. 
3. But as Nadella begins his second decade at the helm, there’s no guarantee Microsoft will retain its lead. Regulators, hackers, and rivals each present threats serious enough to potentially undermine its industry leadership. Above all, it must reckon with its own leviathan size—and avoid becoming a victim of bureaucracy and bloat when AI’s protean nature calls for speed, agility and finesse.  Nevertheless, Nadella’s approach to leadership reflects his acute awareness of these risks.

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Topics:  Technology, Competition, Strategy, Business Model. Leadership