This Indian, saved Microsoft twice

The following article is from the city boundary, and the author makes business more valuable

Why is it always Microsoft that wins?

Author|Dong Wenshu

Editor|Dong Yuqing

Operation|Liu Shan

Powerful giants such as Lenovo and Microsoft, sometimes life and death are also in an instant.

A change in the decision of the person at the helm often inadvertently affects this direction. For Microsoft, the most important role is that of the current CEO, Staya Nadella.

From 2017 to 2022, for 6 consecutive years, Nadella was named the "Most Underrated CEO" by Fortune magazine. His two predecessors, Bill Gates and Steve Ballmer, are even more well-known in the press: the former is the founder of the Microsoft empire and one of the richest people in the United States, who has long topped various lists, while the latter is the strongman who ruled Microsoft for 14 years and advocates high-pressure management.

By contrast, Nadella's oft-used mantra "empathize" and his lean stature and spoken language with a slight Indian accent make him even less leaderlike.

But it was this skinny Indian who brought Microsoft back to the top.

▲（Satya Nadella）图源：CNN

When the global PC giants represented by Lenovo and Dell are facing the problems of the times, Microsoft can always turn the danger into a disaster, and even take the initiative.

Nadella saved Microsoft twice, first by successfully transforming its cloud computing business to become the world's second-largest publicly traded company by market capitalization after Apple. In the age of AI, his vision was once again validated.

With the "magic hand" of investing in OpenAI in 2019, Microsoft firmly grasped the commercialization opportunity of ChatGPT and stood firmly at the forefront of this round of industrial upgrading in 2023.

At the end of 2023, the OpenAI high-level infighting incident has become the largest farce in the global AI community since the AIGC era, and this incident was also resolved with Nadella's participation and mediation.

Also in 2023, Nadella finally took off the "hat" of "the most underrated CEO". Whether it is the stock price that has grown by nearly 60% in a year, or the explosion of OpenAI and ChatGPT, it once again illustrates the new value of Microsoft in the Nadella era.

What has Microsoft done right in these years to get rid of the curse of the times?

The one at the helm who turned the tide

In 2014, Nadella took over as CEO of Microsoft. And this year is already the 39th year of Microsoft's founding.

In his book "Refresh", Nadella mentions that the "diseases of big business" such as personnel redundancy, bureaucracy, and rigid organizational structure are the first problems he faces.

The book mentions a cartoonist who once portrayed Microsoft's organizational system as a hostile gang structure, with people pointing guns at each other. He wrote: "The problems reflected in this cartoon really bothered me. But what troubles me even more is that our own people have accepted this reality.

▲ (Microsoft organizational structure comics, photo source/cartoonist Manu)

Rigid architecture isn't the only problem Microsoft faces. From Gates to Ballmer, Microsoft's two CEOs have continued to lead with a stern iron fist, and both have a reputation for being short-tempered.

Nadella once told Fast Company magazine about his thoughts on the former CEO, saying, "Bill is not the kind of leader who walks into your office and praises you, but talks to employees about the 20 things he did wrong today." And Ballmer's strategy is similar.

Under the high-pressure leadership style, the space for independent innovation of employees has been squeezed to the point that it has almost disappeared. The stubborn "PC-based thinking" of the previous two CEOs made Microsoft miss a lot of opportunities.

For example, in 2010, Ballmer's Microsoft abandoned the Courier tablet business, which was already in the late stages of development, and also handed over the entire tablet market in disguise. In addition, he has always had a negative attitude towards mobile Internet companies such as Apple and Google, and has also openly opposed the open source community and the software Linux.

Moore, a longtime partner of Microsoft and the founder of Intel, once wrote in his book that when a strategic tipping point came, senior leaders such as the company's president "were always the last to know." Nowhere is this more evident than at Microsoft.

Later in Ballmer's tenure, Microsoft's stock price has begun to slide. Data shows that in late 2013 and early 2014, Microsoft's market capitalization fell below $300 billion, less than half of its glory days.

This continued until 2014, when Nadella took office.

Prior to becoming the group's CEO, Nadella worked at Bing (formerly known as Windows Live Search) and cloud operations.

As CEO, he quickly elevated corporate culture and business strategy to an equally important level, and began to improve the company's culture, including adopting a new performance system, removing the value ranking of employees, and urging the company's leadership to take on new technical challenges...... According to media reports, Nadella's first act after taking office was to call on the entire company to learn from the ideas in "Nonviolent Communication" in order to get rid of the old pattern of infighting.

At the business level, Nadella has embraced the mobile ecosystem and the open source community to develop Office software for devices with different systems such as Apple and iOS, while on the other hand, he has begun to increase the importance of the cloud.

In 2015, Nadella pledged to reach $20 billion in annualized revenue from the company's cloud computing business by the end of 2018. Eventually, this goal was achieved ahead of schedule in 2017. Also in the same year, Microsoft shifted its overall strategy from "mobile-first, cloud-first" to "intelligent cloud and intelligent edge computing."

During the same period, Microsoft's market capitalization also returned to its peak, exceeding $600 billion in 2017.

An important twist

It is impossible to step into the same river twice, but Nadella saved Microsoft twice. After returning to the top with cloud computing, Nadella didn't stop there, but began to look for new trends.

In Refresh, he describes his journey as predicting tech trends can be risky. It has been said that we tend to overestimate what can be achieved in the short term and underestimate what can be achieved in the long term. But we're investing in three key technologies. They are: mixed reality, artificial intelligence, and quantum computing.

Among them, AI has first become a key technology that has allowed Microsoft to break its own historical record again. Although the process has not been smooth sailing.

As early as the 90s, Microsoft began to develop AI technologies such as speech recognition. Founded in 1991, Microsoft Research even covers the three popular AI directions of natural language, speech and computer vision. However, due to the dominance of the PC business represented by products such as Windows, AI R&D has not received enough attention for a long time.

Even the reversal of perceptions took a lot of time.

For example, in 2009, when Deng Li, a researcher working in a research lab at Microsoft (who later became a speech recognition expert and a member of the Canadian Academy of Engineering), tried to apply for an NVIDIA GPU chip and a supporting server for AI training, his boss thought it was an unnecessary expense, "don't waste money."

Finding AI unnecessary and too expensive, Microsoft has also missed out on a good investment in AI.

In December 2013, Baidu, Google and Microsoft came together in a dramatic way.

Executives of the three companies, without knowing each other's identities, are remotely bidding for a company — or rather, it's more like a winner-takes-all auction. The three giants were at their computers in Beijing, California, and Washington, D.C., and emailed their offers to the acquiree — much like a telephone bid that should have happened at Sotheby's.

The acquiree is a small company with only three people, but one of the founders is Geoffrey Hinton, a Turing Award winner and a "grandmaster" who has educated AI scholars such as Yang Likun. Just earlier in 2013, Hinton and two of his students took a leap in the performance of neural networks, allowing them to recognize images of common objects such as flowers and leaves.

Therefore, it can be said that what the three major manufacturers are bidding for is actually Geoffrey's foresight and strength in AI research.

Considering that the three participants are each well-funded, this should have been a rather suspenseful auction. However, the truth is always unexpected.

When the offer reached $20 million, Microsoft chose to voluntarily withdraw, turning the next price increase game into the home of Baidu and Google. Baidu was the first bidder and the one that was sure to win. According to reports, Baidu founder Robin Li personally guided the acquisition.

However, when the offer reached $44 million, Geoffrey chose to stop despite Baidu's intention to continue to increase the price. His poor physical condition could not accept cross-border sailing, so an American company was the best option, and Google won the game.

This is like a metaphor: with top talents such as Geoffrey, Google has strengthened its AI R&D center "Google Brain", and has since continued to increase investment, and even started AI chips, launching AlphaGo in 2016, which has become recognized as the strongest AI manufacturer.

Baidu has never given up increasing investment in AI research and development, and is not far behind.

Microsoft, which considers $20 million "too expensive", has long been unable to enter the field of AI, which is regarded as the future.

In 2014, Microsoft released the intelligent chatbot "Microsoft Xiaoice" and the intelligent assistant "Cortana". However, many attempts have failed to get a positive response from the market. Eventually, Xiaoice was spun off into an independent company in 2020, and in 2021, Cortana for iOS, Android, and Harman Kardon Invoke speakers also went out of service.

Frankly, for a long time, Microsoft wasn't considered an AI company.

The landmark event that broke this situation was its investment in OpenAI in 2019. Interestingly, Ilya Sutskever, one of the founders of OpenAI, was one of the students of Jeff Hinton's trio.

Microsoft's investment of up to $13 billion in OpenAI is not so much that it is paying the price for its own mistakes, but rather that it has finally found the right way to develop its own AI after years of tortuous exploration.

微软的AI野心不仅OpenAI

At the table of the new era, OpenAI has become a trump card for Microsoft, but it is not its only hole card.

On November 15, 2023, Microsoft announced more than 100 new AI-centric products and features at its home conference, Ignite.

It can be seen that in addition to integrating GPT into almost all products and promising that "all OpenAI innovations will be provided to everyone as part of Azure AI", Microsoft has also shown its "internal skills" in the field of AI for several years.

For example, Microsoft has finally launched its own self-developed chips: the AI chip Maia 100 and the Arm-based CPU chip Cobalt 100, which will provide computing power for its Azure data centers.

At the conference, Microsoft CEO Nadella and NVIDIA CEO Jensen Huang also jointly announced that in addition to hardware cooperation, the two companies will also join forces in software to officially introduce NVIDIA's AI factory service to Microsoft cloud service Azure.

Nadella also highlighted Microsoft Fabric, the data platform that Microsoft first launched in May 2023, and said that since its launch, Fabric has made more than 100 feature updates and expanded the ecosystem with partners, and is currently used by more than 25,000 customers, including Milliman (consulting firm), Zeiss, the London Stock Exchange and Ernst & Young.

Unconsciously, Microsoft's business layout has covered the three major elements of AI, computing power, algorithms, and data.

In addition, Microsoft's investment in AI is also becoming more extensive.

On December 2, 2023, Microsoft announced that it would invest in AI infrastructure in the UK. Over the next three years, Microsoft will spend £2.5 billion ($3.2 billion) to expand its next-generation AI data center infrastructure, with more than 20,000 state-of-the-art GPUs expected to bring to the UK by 2026.

Second, Microsoft will also invest in a wide range of AI talent and education programs, as well as strong AI safety and security measures. Overall, Microsoft will use this investment to expand its data centers in London and Cardiff, with the potential to expand into the North of England.

Nadella has said in an exclusive media interview that it has experienced four major shifts: the first is the dominance of personal computers and Windows, then the rapid development of the web, mobile and cloud computing, and the fifth major shift is artificial intelligence.

In fact, what Nadella is saying is that if you can't adapt to new technological shifts, you could lose everything.

Resources:

《深度学习革命》,Cade Metz

《刷新，重新发现商业与未来》，Satya Nadella