Microsoft CEO: 'Until We Really Change Culturally, No Renewal Happens
Microsoft CEO, Satya Nadella, discusses with Walter Issacson major changes the tech giant needs to take in order to lead in the mobile market.
We're here. Turn around and look this way. Hey, thank you for being here. Welcome in Aspen. Welcomes. You have Microsoft? Everything else I saw the email you just sent out, talking about being the platform company, the productivity company of the mobile First and Cloud Forest World. That's either a brilliant statement or great collection of buzzwords that I don't understand. So let's unpack it. The productivity company. What does that mean? That means you're getting out of devices. You know, the the core conviction that I started even my job with is that the unique value that Microsoft can add in a mobile first cloud First World is around productivity and platforms. I mean, that's the core of who we are that the sensibility we have And I strongly believe that that sensibility is gonna be redefined, reimagined and changed. But it's very relevant even in this moment for Cloud First World. So and in fact, bean executing on it. I mean, if you look at one of the first things that happened in my tenure was the launch of the most ubiquitous productivity service office 365 for the iPad. One part of that day in fact, we launched even all of our end user infrastructure for all devices. So that was one of the thing that we did. We launched a bunch of our data platform infrastructure so that we can infuse into organizations the data culture. We also launched a tablet that can be a laptop, which is the surface pro three, which is all about really defining productivity for a mobile workforce. So that's really what gets me to think about productivity broadly is something that we can uniquely do in this highly changing, evolving world of mobile force. But you use the word productivity. I think, 20 times in that memo. Productivity is the word I use when I go to the office when I talk about enterprise. But as the home consumer, I don't think the word product effect. I have never used the word productivity at home ever. Does that mean you're getting out of the home consumer? I not at all. In fact, it's like that's probably one of the big irony because in some sense, productivity to meet the most secular category both in our life generally and then had worked for sure. But you know, even if you think about it that at the economy level, we should be talking about productivity. We should be talking about it at an individual level. I mean, the best way to conceptualize it is take the time we spent outside of work. Can I get more out of every moment of my life? And do I need tools and service's and devices that can help me? One of the things that you know late in life, I learned, wants to cook, and one of things that I'm often doing is whenever I see some recipe. Most of the time I'm sort of running into these things in newspapers still in print or what have you on? One of the things that I do is I just take a photograph of it. We have this tool called the Office Lens, which takes that in Oth ers. It and in fact does a beautiful job of snapping. It, recognizes all the tax and makes it searchable now that productivity not for my life, not at work. I have we have the intelligence agent called Cortana. I'm all the time setting myself reminders for what to do on G offense. Okay, when I go to the, you know, customer or when I go to home. What should I remember to make sure I actually get done that day with my kids or what have you? And so as soon as I get home, it reminds me that these are the things that you should actually do at home. These are things that are far outside of work. What any you say, a platform company. Unpack that for me. What's a platform company versus the service's and device company? The notion that everything we do has to be a platform for someone else to build on, I would say, is the core or how we built our company over the 39 years. And we need to do that and do that now even more broadly know how is office going to be a platform and give you a good example? Take the contacts in exchange for half one of the most youthful black form to me individually, I mean, without that now, I would be lost. It's available now instead of a p eyes for every application everywhere to be able to tap into So the take the identity system that allows me to now in a friction freeway log in to the 18 shaft applications I may use on a daily basis that's available as a platform off course. We have windows as a platform, which has a shell, which is extensible can dried universal windows applications. We have a very rich cloud platform for anyone to build applications, but I think off the data. Your personal data inside off the tools like office exposed at service is for developers provided as administrative tools for I t are also platforms, and that's a sensibility that you need to have when you build even applications, as you say, a mobile First World. How does that affect, say, office to me? We need to start thinking about off much more broadly than just a collection off court and court off applications. It's not about just spreadsheets or word documents or even email Cortana, the intelligent agent that we have on our phone. To me, that's the redefinition off productivity because that agent now has the ability on my behalf to get after all of my personal information, in fact, spanning both my work as well as my life. So, for example, in one of the scenarios. I think about it, Sam. A salesperson, right? The economical example of a mobile exec. I walk into a sales meeting and I'm walking out. This agent knows that who where you are because it knows how to get. After this, you go to the exchange calendar and look exactly which customers are visited. Brings up my theorem application as I'm walking out and let me fill in the pipeline information on. Then tell me Look, I need to pick up my kids at a soccer game. And by the way, take this better route. Was getting stuck in traffic that entirely off court in court, making more sense out of all my data, my needs, my tax and helping me. To me, that's the future of office. It's not just one application, but the digital information that spans all activity is what office is all about. Now, what about being cloud first explained to me as you walk around a year from now, your devices everything you're gonna use? How will that change? You make you get a cloud first Company cloud transition. I mean, Microsoft, I would say we have a lot of work to do Still, as we navigate this mobile first world in the sense that we were, 90% of the PC share were around 14% of the total device ship that we get that which is, you know, we're still 300 million units of P C and the growing in our tablets and phones. But at the same time, we're coming in from behind on that. It clouds your transition very successfully. If you look at the business, will talk. If you have our earnings in a week's time or so, we'll have more news to share. But the transition off our infrastructure business with the move to azure very successful. The transition of our office Silver business office expired, very re successful. So from that perspective, I gold with our cloud is to make sure that we, our cloud and our cloud applications are pretty much available on every device in the world. In fact, the way we want to measure ourselves is the home screen off. All devices android, IOS and Windows phone should have Mike stop cloud applications. These are office applications and in many cases, using our cloud infrastructure with azure starting with even the end user infrastructure. Well, I ever get away from having the need devices, and it will be more ubiquitous for me. I do believe that the face that we're entering or one could say we haven't is clearly the centrist city or the power, the need for coordination shifting from device to the club. It's a cloud orchestrated world. Devices are still going to be relevant and important because I had the same. At the end of the day, we'll use them. But even the definition of devices, they're gonna be large screens. They're going to be rare, a ble. They're gonna be sensors. So there's going to be ubiquitous computing. And there's gonna be this notion of ambient intelligence across experiences that panel this computing on all that'll get orchestrated by the club, the power of the cloud, the fact that all the state across all of these devices will roam on that. I'm not installing things across multiple of my devices to just show up. They'll identify me. All that's possible because of the cloud. So what are you doing and wearable? You know, we have ambitions to make sure, and we have demonstrated that when we think about Windows. We want to think about it as a pretty broad platform, from wearables to a lot of industrial io T's Internet of things scenarios to obviously the big screens, the PC, the phones and tablets. So you see make moves to make sure that we have. In fact, if there is anything that will define Windows is, I think of our cloud first for being in living in ahead Virginia's device world. It's not gonna be limited to Windows. I think that's perhaps one of the big pivotal changes in our strategy, which is we absolutely think of building service's and infrastructure in a cloud that'll be across android, Iowa and Windows. And we will differentiate our Windows family because we've created, you know, the user experience that's consistent across all of this. How one can in fact, start something, and they may be a wearable and completed on a phone, a tablet, a large screen. That's the ability to have multi device scenarios which are increasingly becoming relevant. Those things to build a friendship. A moment ago you started the seventh by sag. If I were to define what windows and then you backtracked and went up, explain to me what windows will be in three or four years. Windows for us will always be the device experience. We will, in fact, also have first body hardware capability, which we have now with the Gnocchi acquisition in particular, so that we can set pace. We can create categories like the surface one, and our hope is to bring these experiences around productivity from the small screen to the large screen and the uniqueness of Windows will be the developer experience, consistency, the user experience, consistency and the i t. Experience consistency. That's another thing that I think that from a platform perspective, we think about it, which is? We don't over index on just one constituent. We have not got it wrong many times. Uh, Paul, with that Microsoft and one of the things that I think we did well when we were at our best, what have that strong notion of platforms where we were able to bring developers I t and end users together to create the magic and that I think will always be a strength of windows. How does being fit in, especially in terms of giving you data on your customers? The more important thing for us has Bean. That being has taught us so much about what it means to be a cloud infrastructure. I mean, if you look at where azure came from, even the machine management. When you have a 1,000,000 machines, it's not like a cluster, you know it's not. If you're in the silver operating system business, you don't naturally say, Let me just put up a 1,000,000 machines and manage them. So the fact that we were in search, we were an X box live. We were in office 365 our own first body couldn't coat footprint, allowed us to learn howto build a cloud infrastructure and a crowd operating system. And that, perhaps more so than anything else, has been beings contribution. Now, if you look at tools that are part of off, we have to called power Q and A. It's basically a way for me to ask natural language questions and get results from data. All of that equity understanding part is very much something that we learned in search, but now we're applying it to broad productivity scenarios. In the enterprise, we have another the tool, Caldwell, which actually is a pretty cool discovery tool, which allows me to see, for example, what presentations are being presented to my director. Like you were working in our organization, I could just go to your profile and see all the things that you are presenting and people representing the notion of thinking about office documents not as isolated documents in some files store, but as a graph that you can reason on. Those are the kinds of things that I would say being has given us in terms of machine learning. In fact, one of the other service is we just recently launched is an azure service for machine money. Now that's being used all over the industrial Internet in its preview form for doing predictive analytics. So a lot of what we've learned in being we wanted translated into broad use. Productivity service is in office or as a infrastructure service in Azure. You know, about 20 years ago I went to Microsoft and there was a speech recognition group. It was called Wreck a nice beach because whenever you said recognize speech, it would think you said wreck a nice beach on. We're always 20 years away from ambience and and ubiquitous computing. Do you think we are in the next five or 10 years going to get to the point where we have such a natural interface? We could just chat it stunning what has happened? And it's also the unreasonable nest, I guess, of large amounts of data being available, because it's not as if the algorithm themselves have suddenly become very different than what we started with. And there are different statistical means, perhaps an approaches we have become smarter at. But it's just the sheer amount of data. I mean, here's a fascinating thing. The speech recognition software improvement that we have had because of connect is being huge because the acoustic models and the speech models the combination of the two. It's not just Daisy chaining them, but you really gotta build a deep neural net that understands that applied now to the phone applied now to the tablet makes it possible for me to make a speech much more of a modality of interface. So now I speak a lot more, especially with Cortana than I ever happened. You and I would be moving back. You wanted a keyboard on your phone. But speech has truly not your focus group. Yeah, I know. But speech, you know, we'll get can get you hooked on, which is now. You would suddenly want you start because of the recognition. And how would that change things? I think one it's more natural. So these things when I can see something and it actually, you know, recognizes that I'm looking at that object when I could speak to it. When I conjecture and moving, it just is a much more personal natural individually, I mean, but, well, I even need devices. I mean, I walk into a room, I might just have a little microphone and know everything I need and I will have device. I mean, think about it today when I walk into my living room in my X box recognizes me sometimes it's kind of a little scary in the centre and go there, and I just say hi stock. Yeah, and the thing that we're at that point where you can, in fact, how walk into a room and be recognized in our conference room. We have this device called the Perspective Pixel Device, O p p. I, which is basically a large screen windows device. I know where we're going with that is, say a constant. We have a conference and five people show up. We wanna be able to recognize all the five people we know who you are. We log you in automatically. We create a white board. You can now go in. And when you start writing it recognizes who is writing. And then when you're done, we can annotate everything and send you back. But that means you don't even need a traditional interface like a Windows interface our windows as we know if it has to change, I mean, think about what is really running on the X box. Now it is Windows. What is running on my phone of windows? But is it the windows that we booted up on our PC 10 years ago? Five years ago? No. My own thing is you know, some brands should be enduring because they have value, but every line of code should be changed every five years. So as long as we can do that, then you can renew brand. You keep talking about the experts that was made sort of by a little outside different type of group, right? What did you learn from that? And you're gonna do that more. You know, one of the things I've reflected a lot is I think there were some good comments made by Paul and others that large companies have to have a core, especially during times off inflection like this. That's one of the fundamental reasons why even wrote the memo to galvanize and focus our people team on the court off what we can do in a mobile first cloud first. Well, that doesn't mean we're gonna be definitely about productivity and platform. You could say Well, Xboxes in that far from it, I could go on and on and list of 10 things in our platforms order and are apt to be learned because of experts. But we're not in the Xbox business for just learning for productivity, a platform in the X box business because we have a group of people who are passionate about game. We have one of the most enduring brands with X box on. We want to compete in that I think large companies successful large companies which are you know, when you have $27 billion of pretax income, we can do a few more things than the core, but I think the point is you gotta have a culture to do it and not confuse it. Our restrain it. You can't take gaming studios and try and operate them like an operating systems group, so we want to be able to get that right. And that's one of the reasons why I want us to be comfortable talking, being proud of Xbox, giving it the air cover of Microsoft to go innovate but at the same time not conflated with our core. But might you have sort of little outside skunk works? Teams like that try to invent new things and disrupt things? How do you stay innovative? We have to, um, in the sense that there are two sides to your question. One is you do need to have places value, incubating things. You also need renewal in the core. When I think about our challenge today and what I would claim his ire, you core priority is the renewal off the the mainstream work. So notion that look that take what way are good at in productivity and platforms, but rethink it. That's not a side project, right that is the ready company itself that is innovating from the core is a rather new concept you have there times when you have to My last question before we go to the audience. Your poet, you love poetry. You quote poetry all the time. Might be a bit of Ada Lovelace who was a great poet. Who then how come in producer of algorithms, Why the poetry? What does that give you? You know what My first managers at Microsoft I remember on a flight trip with him. Um, I brought, you know, 15 magazines, nothing against Fortune or anyone else. And then I was going to read them all. And then the guy brings out James Joyce, and, uh, I look at him and it is, What the heck are you doing? And he said, Look, you know, this is the way to renew yourself. Um, and I have always loved literature I've always loved for a tree. And so that's how I get my inspiration. And I now bring it on, bring it on people, and so far, so good. And someday I'm sure I'll get blasted for you. Have you read any current poets of the new poetry, I must say I have not. I just go back to the one that I love, Which ones we love. I mean, T s Eliot is just my all time favorite. But in truth, the thing that I'm haunted by is not English language poetry, my Urdu poetry and, uh, in the 19th century or the poetry, There's nothing like it. In fact, I wish, you know, there's more of that. But I do love the romantics. I do love the American. We can do better than that. By the way, T s Eliot has a great line. That's about innovating from the core, which is we shall not cease from exploration. But the end of all of our exploring help Dr. Torres, replace what we started and know it for the first time. Let's turn out the lights out the lights. And yes, I thought Chris Grayling from first Round capital I worked with a lot of early stage start up tech company and Microsoft seems less and less relevant to them. Have you thought about how to how to reach out to them? Yeah. I mean, one of its kind of two sets of things as a bit of a selection bias in the perception issue, which we have to break through, and one of the things that first place when I want to break through it with the cloud and the enterprise focused because even the azure growth, unlike eight of US growth, has come Note on the back of a startup. But it has come in the back of enterprise adoption. But that said, any startup, even you, can be on AWS. Even in fact, one of the reasons why I want to construct out AP eyes and service is so that is not an all or nothing. You can just use Azure 80 and do a single sign on with after 365 That's a benefit for any one of your portfolio. Companies Removed Friction from a nightie adoption Perspective. You can use our cloud emails to do advanced predictive analytics. You could still be on any other cloud providers, so we need to get a better at being able to create those value prop and then enticing developers. But we could use a lot of help from your folks. The other sort of misconception is that we're only a dot net window shop. It's not mean. Azure in particular has got it on 15 20% or linen. Andi. So we will support pretty much every platform. You could bring any image. Um, and that's something that we gotta tell more boldly. And that's definitely something is top priority for us. Yes, I see you on the way back. Is that? Yeah, I got a great discussion. I'm being actually with life coming from the back excited technology. My question is, where do you stand up for having a little trouble? Or I'm having trouble hearing. I'm initially with home life coming from the bite excited technology. My question is on the application of cloud based big data in pharmaceuticals. As you know, this industry has started generating the significant amount of raw data, both patients and doctors, and I wondered if Microsoft is moving to this. Yeah. I mean, one of the the core challenges off applying the cloud to big data is red of the data originating. So if the data is originating in the crowd, it's so much more easier for you to be able to then operate on that cloud. And then the challenge, of course, is all about privacy and proper Providence of data. And so those are solvable problems on their certifications and so on so forth that one goes through and we're very much in there. In fact, there's a lot off research that is happening now in the cloud just because people have started with the data sets there. But when it comes to the core or you know, the farmer business or the core of drug discovery, it's a question of where is the data and can you get the data? Is that economical even for you to be able to bring the data in the cloud? And to me, that's one of the reasons why and also by the way, no one knows where the regulatory environment is gonna end up. Today's regulatory environment is not gonna be tomorrow's, especially. You take Europe and you take China and you take the world and the geopolitics into account. And so when you say that, then you have to have a public cloud, which scale, which is definitely something they're very committed to. But one of the things I do believe which different will differentiate us for all time, is our suburb is In fact, our servers are just basically edges of our cloud, and they're replicas of our cloud. So we will have private cloud and hybrid cloud support so that you have flexibility off where you want to operate on the data, because people are not going to move petabytes of data. People are going right over the petabytes of data generated will be where they are, and they will want elastic compute there. And that's what we need to be able to provide Miguel help from Fortune. Microsoft has a fantastic research organization, one of the largest in the industry. Yet much of its work goes on her out. We don't hear about it. I'm sure some things have become useful. But look at the ghoul of roads and which is very different doing these crazy Project Moon Shot, um, and that with the advanced technology group run by a former DARPA head, if there's something to be learned from the Google approach that's getting so much buzz, so much interest in the world, you know, look always good to learn from others who have done a better job of marketing themselves. The the thing that I would say you know I said it, in fact not. I mean, I think that is really There's a lot of learning there. The thing that I would say is having the industrial lab. It's just a friend, I mean myself. Research is a brand, the talent there just unparallel. It's amazing and one of the core value propositions. If it is that it's a research lab first and foremost on that, help us attract talent. That is really the contract between somebody who joins us and wants to be there. So we want to be careful off not mimicking someone else who's got a different contract, maybe a successful one. Um, so one thing, though I want us to celebrate some of these tech transfers, it's at an all time high. In fact, I was just, you know, auditing. It recently takes on the in memory technology now not in our database. Now that all came out of Mike's in our database business is like a $6 billion business growing in our fast rate. All that benefited because of some fundamental innovation in memory that came out of research. The Skype Translator project, which I'm really in love with, which is the ability for us to take three desperate technologies. In fact, speech recognition, speech sentences and machine translation complete outgrowth off what myself research is done. And now we will be able to solve one of the oldest human problems about communications between language barriers being completely taken out. But your point is well taken. I want more of that impact, whether we will do it exactly the way Google did it. Probably not just because I think we will have to invent our own off. How do we get more mainstream impact off? The innovations of Venice are It's not as if you're not benefiting today, but we can definitely do more right there, shouted out or Hi, Dave Morgan from Primal Media. It sounds like you're really looking at doing things differently. That may have been done in the past, on Microsoft and opening up culture and a lot of things. Can you imagine? Part of intimating from the core might be, rather than holding everything in tight the future, Microsoft might be spinning things out and innovation might find, I mean, whether spending our businesses spending our products, letting them be untethered from Microsoft, have a bigger impact in the market. And since this is our last question, just talk about all sorts of new ways you could innovate based on that. You know, I think Look, I think the fundamental I mean, you can go on and on about the strategy change, and we all know it's Peter, Drucker said. Cultural strategy for lunch. And unless and until we really, really change culturally, no renewal happens. So I am very much focused on it. And the first thing, for example, one of the things that I'm very excited about it Mike stuff always used to hold code base. Each team had that code base. They protected it. They managed the dependencies and so on no more. I want all of Microsoft's court to be a shared acid you can on a scenario, you know, we want to have internal, open source. We also want to stop, definitely contribute to external open. I mean, even open source in our ability to sort of contribute fundamentally to How do you do propagate more growth? Bordeaux. Those are things that are culturally very different for us, but we're well into it. It's not new, but we want to be able to embrace some of these things boldly. But it's not just in the core of what I would call, um, the attitude, but it's even the way we work and if anything, the nature of work itself. You know, if if you were a successful adult, you gotta have the ability to throw out all of that because you think about it. All of us know what a developer and Microsoft does. What a product manager Microsoft dot But guess what? Maybe its time has come for us to reinvent what they do in spite of the fact that we've been successful and those are the things that we have only going to question and change. Such in the deli, Thank you very much. Like a real pleasure, Thank you very much.