5 things Elon Musk could learn from Microsoft CEO Satya Nadella

The way Satya Nadella turned around Microsoft when he became CEO could not be more different than how Elon Musk has treated Twitter since taking over.

Satya Nadella, CEO / chief executive officer, Microsoft
Brian Smale / Microsoft (CC BY-SA 4.0)

Back in April, two days after Elon Musk announced his plan to buy Twitter, Musk had a private phone call with Microsoft CEO Satya Nadella. One might have expected Musk to ask Nadella for advice on how to turn around the flailing Twitter — after all, Nadella had engineered perhaps the most successful tech turnaround in history.

In 2014 he took the helm of a directionless Microsoft riven by discord and stagnation and whose stock price had dropped by more than half during what is generally called Microsoft’s lost decade. Today, thanks to Nadella’s guidance, Microsoft has the third-biggest market cap in the world and, as a leader in multiple cutting-edge technologies, is well-placed for the future.

Apparently, though, Musk wasn’t looking for advice. He was offering it, because afterwards Nadella texted him, “thx for the call. Will stay in touch. And will for sure follow-up on Teams feedback!”

Musk could have used Nadella’s help. Instead, after taking over Twitter, he’s done everything he can to single-handedly destroy it. If Musk had asked for advice, here are five things Nadella might have told him based on his experience saving Microsoft.

Tip No. 1: Don’t burn down the house as soon as you get the keys

When Nadella became CEO, Microsoft was at its lowest point in its history. Languishing and adrift, it was filled with bureaucracy, turf wars and backstabbing. Its stock price under former CEO Steve Ballmer had plummeted from the upper $50 per share range when he took over in 2000 to half that price when he announced in 2013 he would retire. It was still reeling from the disastrous release of Windows 8, perhaps the worst version of Windows ever created. It was sinking billions of dollars in a Windows Phone operating system few people used, and had spent $7.2 billion to buy phone maker Nokia, which didn’t move Windows Phone’s market share a single notch.

Nadella had plenty of ideas about how to save the company: Change company culture to one of collaboration rather than conflict, exit the mobile phone business, and bet Microsoft’s future on the cloud rather than on Windows.

But he didn’t ram his ideas down the people’s throats. He embarked on a listening tour to find out what others thought needed fixing and how to do so. He listened to Microsoft employees and customers, took what they said into account, and then slowly, carefully, and deliberately turned the company around.

Contrast that with Musk, who within a short time of taking over Twitter, essentially burned the company down. In the first few weeks, he fired half the staff, then threatened the remaining employees, causing a significant number of them to quit. He insulted and threatened his advertisers, who took their money elsewhere. He welcomed back the toxic conspiracy believers and white nationalists that bedeviled the company. And he personally used his Twitter megaphone to spread lies and conspiracy theories.

The result? In his first weeks and months, he damaged Twitter so severely it’s likely the company will never fully recover.

Tip No. 2: Don’t kill your cash cow

Nadella’s central dilemma when he took over Microsoft was the need to diversify. Windows, Microsoft’s cash cow, no longer ruled the world, and revenue from it was headed south, imperiling the company.

The future, he believed, was in the cloud — so he set his sights on turning Microsoft into a cloud-based company. But to do that, he needed to continue milking the cash cow, Windows, to keep the company afloat.

His plan worked. He improved Windows with each iteration and used revenue from it to build Microsoft’s cloud business. Microsoft is now behind only Amazon in cloud market share. It’s Microsoft’s largest revenue source, bringing in $20.3 billion in the most recent quarter, versus Windows and Xbox’s combined $13.3 billion. And that understates cloud revenue, because Office and most other Microsoft software have turned into primarily cloud-based offerings worth $16.5 billion revenue for the quarter. Projections are that cloud revenue will continue to climb, while Windows revenue shrinks.

Meanwhile at Twitter, Musk bet his company’s future would be in for-pay services rather than ad sales, which now account for about 90% of revenue. (It’s a debatable bet, by the way.) He then promptly did everything he could to kill Twitter’s ad business.

Advertisers worried Musk would decimate content moderation, allowing in even more hate-filled rhetoric, conspiracy theories, and racist and anti-Semitic rants than were already there. Musk promised them he wouldn’t allow Twitter to become a toxic hell-hole, writing, “Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences…! Twitter aspires to be the most respected advertising platform in the world.”

Musk lied. He all but killed content moderation and unbanned many of the hate-spewers. He followed that up by tweeting a link to a right-wing conspiracy theory that Nancy Pelosi’s husband’s was beaten in a drunken fight with a gay prostitute.

Unsurprisingly, hate speech spiked to unprecedented levels. As Imran Ahmed, the chief executive of the Center for Countering Digital Hate, told The New York Times, “Elon Musk sent up the Bat Signal to every kind of racist, misogynist and homophobe that Twitter was open for business. They have reacted accordingly.”

As a result, advertisers fled. Half of Twitter’s top 100 advertisers, accounting for almost $2 billion in ad spending on Twitter since 2020 — and more than $750 million in 2022 — abandoned the platform.  

Musk blamed the exodus on “activist groups pressuring advertisers” rather than on corporate aversion to Twitter’s toxic content. Then he warned advertisers he would “thermonuclear name & shame” them for leaving Twitter.

They haven’t returned, nor have they been shamed – in fact, they’re proud of having left. More are leaving. Twitter’s revenue is plunging, putting it in danger of bankruptcy. According to The New York Times, Twitter has to pay $1 billion a year in interest on the loans Musk incurred buying it; last year it had only $630 million in cash flow. And that was before Musk chased away advertisers.

Tip No. 3: When cutting, use a scalpel, not a meat axe

CEOs often face tough times. The way they handle them often has more to do with their ultimate success than how they dealt with things when times were good. Laying off staff affects not just the workers themselves, but the employees who remain as well as a company’s culture and working conditions. When people see layoffs handled badly, they’re less likely to stick around long term, knowing they could be next.

Nadella has had to lay off people through the years — far more than Musk at Twitter. A particularly big round came in 2017 when Microsoft culled an estimated 18,000 people, 12,500 of whom worked at Nokia. (Microsoft eventually shut down Nokia and wrote it off for $7.2 billion.)

Nadella carefully crafted a layoff plan and gave employees plenty of notice and good severance deals. The layoffs didn’t affect the core of the company; he targeted them carefully. He expended a great deal of effort and time explaining why the layoffs were necessary, so remaining employees knew where the company was going and how they fit in.

By contrast, Musk took a meat axe to Twitter, gutting entire divisions willy-nilly. There seemed to be no rhyme or reason to who was laid off and who left behind. Often, people weren’t even notified they were laid off; they found out because they were shut out of company systems. Many layoffs were done on apparent whims, when Musk fired people because they said things he didn’t want to hear. The infrastructure team was gutted, endangering Twitter’s basic functions. Content moderation was essentially killed. Many in ad sales were let go.

In all, about half of Twitter’s 7,500 people were ousted. The process was so chaotic that later Twitter begged some people to come back after the company realized it needed them. Some returned; others refused.

After that, Musk warned the remaining employees that they had to be “extremely hardcore” and give up life beyond work if they wanted to keep their jobs. More than 1,000 people quit, including valuable ad staffers who had the best relationships with advertisers. Yoel Roth, head of content moderation, left — a serious problem, because he was, in the words of The Washington Post, “the public face of the company’s efforts to reassure users and advertisers that Twitter would not descend into a ‘free-for-all.’”

The company’s CIO, chief privacy officer, and chief compliance officer also abandoned ship. That set off a warning from the US Federal Trade Commission, because Twitter has to adhere to a privacy settlement that included a $150 million fine, and the threat of more if the pact isn’t followed properly.

The result? It’s not clear Twitter has the right staff to continue functioning, much less create the new features Musk says are vital to a turnaround.

Tip No. 4: Treat your employees well

Nadella built Microsoft into a $2 trillion behemoth not on the backs of his employees, but in collaboration with them. He recognizes that attracting and keeping tech talent is perhaps the most difficult task a company faces, and the most important.

As just one example, consider what he did in May — more than doubled the maximum pay for employees and increased their stock grants. He sent out this memo explaining why he did it: “Time and time again, we see that our talent is in high demand, because of the amazing work you do to empower our customers and partners. Across the leadership team, your impact is both recognized and deeply appreciated — and for that I want to say a big thank you. That’s why we’re making long-term investments in each of you.”

He has also written and talked about the importance of empathy for employees and customers. Here’s how he explained that belief to the Harvard Business Review: “What is the most innate in all of us is that ability to be able to put ourselves in other people’s shoes and see the world the way they see it. That’s empathy. That’s at the heart of design thinking. When we say innovation is all about meeting unmet, unarticulated needs of the marketplace, it’s ultimately the unmet and articulated needs of people, and organizations that are made up of people. And you need to have deep empathy.

“So I would say the source of all innovation is what is the most humane quality that we all have, which is empathy.”

Musk, instead, has threatened and belittled his Twitter employees, ruling by fear. His best employees have either been laid off or fired. He’s already facing multiple lawsuits about the way he treats his employees, including targeting women for cuts, illegally laying off staff, and reneging on promises to allow employees to work remotely.

As for empathy, the words “empathy” and “Elon Musk” have never been used in the same sentence, unless that sentence also contains the words “lack of.”

All that will come back to bite him. He has a staff that despises him. He won’t be able to get the best and brightest to work or stay at Twitter. The people he needs most — the most innovative — are either already gone or will leave at the earliest opportunity.

Tip No. 5: Don’t slam the door on your way out

CEOs don’t last forever; eventually they leave. When Nadella goes, he’ll certainly go out with the style and grace with which he ran Microsoft. He would no doubt counsel Musk to do the same.

Would Musk listen to that advice? Of course not. He’ll go out howling and screaming and slam the door as loudly as he possibly can. That is, if there’s still a door left at Twitter to slam.

Copyright © 2022 IDG Communications, Inc.

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