Microsoft’s Satya Nadella is CNN Business’ CEO of the Year

Changing the narrative

Nadella’s background doesn’t entirely fit the Ivy League dropout archetype of Silicon Valley. Born in India, Nadella came to the US in the late 1980s to pursue a master’s in computer science at the University of Wisconsin-Milwaukee, later receiving an MBA from the University of Chicago Booth School of Business.

Nadella’s standout performance is a culmination of his work from prior years. He joined the company in 1992 as an engineer, at a time Microsoft was characterized by regulators as a monopoly.

When he was promoted to CEO nearly 10 years ago, Microsoft had developed a reputation for being slow to adapt to major trends, such as mobile. Fast forward to now and tech companies are lining up to partner with Microsoft and align with its mission to commercialize artificial intelligence for the masses.

In Nadella’s 2017 book, “Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone,” he wrote about his experience reworking everything internally, team by team and product by product, so Microsoft would be better set up for employees to collaborate with others.

He also worked to soften and revitalize Microsoft’s image. As far back as 2016, the company partnered with OpenAI — a then-emerging company with new AI tools — and allowed them to operate the technology on its Azure cloud servers in exchange for access to those tools.

But after a massive $13 billion investment in OpenAI earlier this year, following the viral launch of ChatGPT in November 2022, Microsoft rolled out AI-powered versions of its flagship products, such as Word, PowerPoint and Excel, breathing new life into otherwise dulled software. Nadella’s push to commercialize these tools quickly gave it a head start against competitors such as Google and Amazon, who were working on similar technologies, and helped ignite an arms race across the industry.

Now as more companies, from Instacart to Snapchat, add ChatGPT and other OpenAI technologies to their own services, Microsoft’s cloud business is poised for deeper growth. Microsoft has reported strong Azure growth over the last three quarters.

Nadella’s remarkable moment

While Nadella had an impressive year across the board, his leadership shined even brighter during the string of events that followed the surprising ousting of OpenAI’s Altman, the Friday afternoon before Thanksgiving week.

The timing was noteworthy too: Just four days before, Nadella joined Altman on stage at OpenAI’s first developer conference to discuss the future of artificial intelligence and their partnership together.

The executives represented one of the most dynamic and key relationships in the tech industry, not only of the year but in years: Altman had clearly emerged as the face of the generative AI movement, and Nadella was one of the most powerful tech leaders funding the development of these tools.

“You guys have built something magical,” said Nadella at the time. “It’s been fantastic for us.”

But despite his long-standing relationship with OpenAI, Nadella reportedly found out about Altman’s removal from the company “just before” OpenAI released a statement, rendering Microsoft with no control over the situation.

The company in a statement said an internal investigation found that Altman was not always truthful with the board.

Microsoft’s stock sank in response, perhaps because OpenAI was to serve as a linchpin to their plans to expand AI across its products. “It was not a good look for Microsoft,” Luria said.

Nadella swiftly picked up the phone and offered to hire Altman at Microsoft to lead a new AI research lab, along with one of the co-founders, Greg Brockman, and any of the 700 Open AI employees who wanted to leave the company.

He also spoke to some OpenAI board members — the people who initially kept him out of the loop — and was able to get them on board with a solution that would be favorable to Microsoft, according to Luria.

Altman ultimately returned to OpenAI, with a new board intact.

“He turned what looked like a bad and embarrassing situation into a way to improve Microsoft’s standing with this very important partner,” Luria added. “What we saw from Mr. Nadella is an interpersonal skill you don’t always find with CEOs, who can be visionaries and luminaries and great at product, but aren’t necessarily able to pick up a phone, talk to people and get them to see things your way.”

As Fred Havemeyer, a senior enterprise software analyst at the Macquarie financial services firm, said in a letter to investors, “Mr. Nadella may have pulled off his own coup, acquiring the most important part of OpenAI — its ambitious talent.”

By Monday morning, Microsoft was in better shape than they were a week before. Its stock reached a record that day; shares rose 2.1% to an all-time high close of $377.44, beating the previous record of $376.17.

What’s ahead

According to Stuart Carlaw, chief research officer at ABI Research, Nadella’s successful year can be largely attributed to the fact that he’s remained extremely “focused.”

“His approach to the mechanics of leadership remains people driven,” Carlaw said. “He understands that people drive outcomes, and remained true to that ethic in the way he dealt with Sam Altman and the wider OpenAI team.”

Nadella also narrows in on where he wants to spend his energy. “He hasn’t been on a scattergun spree of investment ever since he took the reins,” Carlaw said. “He has been very focused on accretive areas that take the Microsoft brand forward.”

Takeshi Numoto, Microsoft’s chief marketing officer who has been employed in various roles at the company for 25 years, said he felt an internal culture shift this year, saying the company feels “fresh” and “energizing.”

“There is a sense that we are contributing to building the next wave of computing broadly for the world, and doing so thoughtfully,” he said.

Nadella told CNN he indeed remains “focused” on empowering both people and organizations to achieve more, as it continues to make and deploy new products.

“That’s our mission at Microsoft … and what we continue to focus on as we look to 2024 and beyond,” he said. “Just imagine if 8 billion people had access to a personalized tutor, a doctor that provided them medical guidance, a mentor that gave advice for anything they needed. I believe all that’s within reach. It’s about making the impossible possible.”

The biggest challenge, however, is if Nadella can take Microsoft to the next level by making these AI-powered products profitable.

“You are only as good as your last results release,” Carlaw said. “[But] he is not the only one facing this dilemma.”