Appoint Satya Nadella as CEO
Setting
February 2014. Steve Ballmer announced retirement in August 2013. After 6-month search:
- Microsoft's situation: Stock flat for 14 years, missed mobile, cloud trailing AWS
- Candidates considered: Internal (Nadella, Elop, Qi Lu) and external (Ford CEO Mulally)
- Board's realization: Needed transformation, not continuation
People
- Responsible: Microsoft Board, John Thompson (Lead Director)
- Approvers: Full Board, Bill Gates
- Consulted: Steve Ballmer, Executive team
- Informed: Employees, Shareholders, Industry
The Candidates
| Candidate | Background | Strengths | Concerns |
|---|---|---|---|
| Satya Nadella | Cloud & Enterprise VP | Cloud vision, technical depth, insider | Unproven as CEO, quieter style |
| Stephen Elop | Nokia CEO (ex-MSFT) | CEO experience, mobile focus | Nokia failure, "trojan horse" rumors |
| Alan Mulally | Ford CEO | Turnaround expert, operational excellence | Age (68), no tech background |
| Tony Bates | Skype President | M&A experience, external perspective | Less Microsoft tenure |
Why Nadella
The Cloud Argument
Nadella ran Cloud & Enterprise—the only division growing rapidly. He understood:
- Azure's strategic importance
- Enterprise customer relationships
- Why Windows-centric thinking was limiting
- How to compete with AWS
The Cultural Argument
Nadella's philosophy (later articulated in "Hit Refresh"):
- Growth mindset over know-it-all culture
- Customer obsession over competitor fixation
- Cross-team collaboration over stack ranking
- Long-term thinking over quarterly optimization
The Insider Advantage
After Ballmer's tenure, external CEO would face:
- Enormous learning curve
- Cultural resistance
- Technical complexity
- Legacy relationships
Nadella knew Microsoft deeply (22 years) while being "outside" the Windows/Office power centers.
The Decision Process
Board's Evolution
Initial preference: External turnaround expert (Mulally)
Why that changed:
- Mulally's age and uncertain commitment
- Nadella's impressive board presentations
- Recognition that transformation needed insider knowledge
- Gates' support for technical leader
Gates' Role
Bill Gates agreed to return as "Technology Advisor"—spending 30% of time with Nadella. This addressed concerns about Nadella's external profile and product vision.
Decision
Chosen: Satya Nadella
Announced February 4, 2014:
- Third CEO in Microsoft history
- First non-founder CEO without Ballmer/Gates sponsorship
- First CEO from cloud/enterprise rather than Windows/Office
Nadella's Day-One Priorities
- Establish vision: "Mobile-first, cloud-first" (later refined)
- Signal culture change: First email to employees—"our industry does not respect tradition"
- Organizational reset: Eliminate stack ranking, promote collaboration
- Strategic clarity: Azure, Office 365, and cross-platform as priorities
Consequences
Positive
- +Stock price: $38 → $400+ (10x in 10 years)
- +Cloud dominance: Azure became #2 cloud (challenging AWS)
- +Culture transformation: "Learn-it-all" replaced "know-it-all"
- +Strategic acquisitions: LinkedIn, GitHub, Activision
- +AI leadership: OpenAI partnership positioned Microsoft for AI era
Negative
- −Mobile abandoned: Windows Phone killed (correct decision, still a loss)
- −Consumer retreat: Xbox survived, but consumer focus diminished
- −Ballmer legacy: Narrative unfairly harsh on predecessor's contributions
The Transformation Metrics
| Metric | 2014 | 2024 |
|---|---|---|
| Revenue | $87B | $245B+ |
| Market Cap | $300B | $3T+ |
| Cloud Revenue | ~$4B | ~$100B |
| Employees | 120K | 220K+ |
| Stock Price | $38 | $400+ |
Historical Significance
The Nadella appointment is one of the most successful CEO successions in business history:
- Matched leader to moment: Cloud expertise when cloud was essential
- Culture over continuity: Willingness to break from "Microsoft way"
- Patient transformation: 10-year journey, not quick fix
- Gates' humility: Founder stepped back to let new leader lead
"Our industry does not respect tradition—it only respects innovation." — Satya Nadella, first email as CEO