Microsoft CEO Satya Nadella On The Cloud Computing Industry And The Future Of Microsoft | CNBC

I think it's been seven years or so since we first sat down that's right and I guess that was before I was CEO that's yes or your CEO it's right we go way back that's right and and you're famous now you're yeah I mean what how do I book oh I think I saw you in Better Homes and Gardens even not just that I've never seen that I can recall an executive go from who's he to know this guy knows what's going on and he's at the center of the zeitgeist quite the way I've seen you do it is it weird if you say so I mean I I don't find any difference but you know it's been it's been a fantastic ride I mean I think what's been humbling for me is I don't get confused this is all because of the platform I've been given which is it's Microsoft and the work we do it's not me but it's the opportunity I've been given that's at what point do you say and I know this isn't a turnaround this is hitting refresh and there's still work to do as you said in the book but Microsoft stock is near all-time highs in the mid 90s recently at what point can you say yeah we've we've got that part behind us turnaround or the refresher whatever you want to call it there's still more to do but yeah good job team now it's time to take the next hill I think I think that's the fundamental posture that we have to happen quite frankly any company that needs to continue to renew itself needs to have because if you think about it the what's gonna happen next and the day after is what you have to anticipate so what has happened in the past is just the past is phase one done can you kind of say hey I've been CEO for four years now and yeah we we got that part done pretty good job I mean I think you know to me it is very important to start with two things a very clear sense of purpose and identity and a clear understanding of how to express that sense of purpose and identity in a changing world so I feel like in the water over the last four and a half years we were able to do a good job of that but I tell you I only think of what are we going to do next because that sense of purpose will have to remain constant and a culture that allows us to move forward has to remain constant but there's going to be a lot of churn about rate the words going to change and we will have to change with it and in fact ahead of it speaking of a sense of purpose you said something interesting recently you said that's what I want my legacy to be that anyone who joins our company is able to connect their personal passion and use Microsoft as a platform to realize it what's your personal passion it's a great question in fact the way I got to this was nice to work for a gentleman by the name of dr. gam who is actually the governor of North Dakota now he had said this to me I was probably in my mid-thirties he says probably spend up far too much time and work for it not to have meaning and that's when I said why am i in Microsoft what is it that gives me the energy at Microsoft Bain and day after and it is mostly because of the platform it creates for me to be able to connect with what I'm passionate about take accessibility it's something that I personally am super passionate about but Microsoft's given me an amazing opportunity to be able to take that passion connected to real work and see its impact in the world and I think that's true for the hundred thousand people here it's the look local communities the countries we work in the sectors of the economy education health that broad spectrum impact that Microsoft has is the opportunity that it creates for every one of our employees but what defines me I think is curiosity love of ideas and the ability to translate that into impact some of that that you just shared about accessibility is a good segue into Bill and some of the announcements that you're making at the developer conference I was looking at what you said four years ago when we sat down here in Redmond about why Microsoft is leading with mobile and cloud and it sounds exactly right in terms of what is important in the space do the same for me if you will with artificial intelligence what are the necessary ingredients for a company to excel in AI be a mega scale player how many mega scale players are there going to be and why is it essential yeah so let me first of all the world that we are entering and in fact it's we're in the midst of this massive transformation is what I described as an intelligent cloud and an intelligent edge I mean think about it right the computing fabric is getting more distributed and more ubiquitous you have now more computing power take GPU power or in a car then perhaps even in a datacenter a few years ago you have a microcontroller with this as your sphere that we just recently announced every microcontroller out there in your fridge or in any drill or is going to have compute power every Factory is gonna have millions and millions of sensors and your neighbor at Amazon is buying intelligent doorbells that's right video cameras and faxes that's right in fact one of the announcements that build is going to be a Qualcomm camera that's capable of running an image classifier in a container so that means in the wild you can start recognizing objects or a DJI drone in fact that's going to be capable of running again the Azure edge so that it can detect any faults in an oil pipeline so computing is becoming ubiquitous and that means data is getting generated in large amounts and so once you have that then what do you do is you do a eye on it which is you reason over large amounts of data using all this compute power to give yourself in whatever happened whatever field that predictive power that analytical power that capability to automate things so do you have to be a mega scale player in either cloud infrastructure or in data to really be able to play in that then I think that in our business there is absolutely scale I mean if you think about a sure we have 50 data centers more than anybody else in terms of regions actually data center regions we also have the capability of putting Azure stack wherever you want we have the ability to even embed this things like as a sphere so yes you have to have some scale around the capability whether it's the AI capability or the cloud capability but I sort of view it as this next face is not about celebrating just the mega scale players it's who can really translate their scale into mass impact in where every business is becoming an AI business because I feel like we're in this faced fill of celebrating AI breakthrough that I do that myself too if you think about it Microsoft I'm so proud of our achievements in human parody in speech or object recognition or machine reading in comprehension these are big breakthroughs but to me what is where a define of business success is going to be our ability to translate that into a set of platforms and tools that are actually commoditized I mean this is the funny part that means it should be possible for any developer out there in any company at MUSC at AJ Bueller any of the companies we work with to be able to become an AI developer ok because I listen only we achieve that at least for Microsoft's business model and our identity just saying I have speech recognition that's world-record-breaking is no good I've got to give it to ya' me so that they can for every Chinese traveler build a machine translation device or a speech translation device that's great through and that's what we have focused on so at another developer conference back in the fall Amazon's they also were unveiling some AI related tools and a camera connected so are we going to end up with these developer tools around artificial intelligence with walled gardens in fact if you look at the Amazon and us if there's one for a common ground we have between us is that we believe in our personal digital assistants whether it's Alexa and Cortana in fact working with each other this is speaking to your wall gardens point which is I think that sometimes wall garden strategies can work for some of the time but not all of the time I think at least in our case when it comes to Azure we are building it out as an open ecosystem a distributed ecosystem the the world's needs and we'll have strong competition but and and we live in some sense there will be some scale players that will always be competing in I'm not a believer and all these winner-take-all type of dynamics I feel like you know you have to sort of compete each day to make progress I want to talk to you about data ethics because I know that's something that's going to be a theme at build as well have you considered rethinking Microsoft's business model around data I mean that there's been this idea in the industry that in exchange for free services you basically allow certain companies to follow you around digitally yes you have the opportunity to opt out using certain browsers or certain browser settings but generally speaking the trade-off is you get to use this for free we get to follow and target is there the possibility that that bargains not going to work anymore and it's a great question in fact if anything I feel at Microsoft we have done a lot to make sure that our business model is fundamentally aligned with our customers and their preference what I mean by that is we do have some ad-supported businesses but we have subscriptions whether it's for individuals or for organizations and the predominant business model at this company is all about making sure that the data and any surplus that gets created out of data like AI is to benefit the user not us so we want to be a pure software company that give through subscriptions helps every organization and every individual get more out of their data more out of their time that to me I think is going where the world is going I think people are going to put more value on their data even individual consumers are going to wake up to the fact that there's nothing free and so it's a choice it's not to say that there isn't room for someone to say yeah this is a good trade where I'm using a free service in exchange for some data but there's nothing free about it so is there a plan B for Bing for outlook.com etc that says you know what if we get to the point where tracking is something that there's a backlash against we have a plan for that absolutely I mean in fact in a lot of these things in such in particular we have taken great pains that it's only adds or a bit or driven on intent which is part of the results page we don't take that data use it elsewhere we don't have any are targeting business that is at large we have very very conscious of those choices that we've made in terms of making sure that the products that we create are all about users interest is the first and foremost on cloud you said when we sat down four years ago if you're not already spending a lot of capital on the order of four or five billion dollars each year which is grow your which is increased it doesn't go down right probably it's a little too late to enter the market you went on to say there are at least two players like that Amazon and Google in particular but we are one of the three in that category update me how does the competitive field look is it still the three would you tweak your definition of what it takes to really be it's a good quote the capital investment is one part of it and clearly I think Amazon and asks when it comes to broad cloud platform are number one and number two and and that games on and each quarter you all track us on that progress and Google's also in there and you know obviously have a lot of money and a lot of capital and are investing a ton particularly on rate I think they recently announced they're starting to show some numbers and so to me what I think is going to be important here is increasingly trust what I mean by that is just like it's not just about capital let's say amongst the three of us who is most if you think about you know talking to a CEO of an industrial company a CEO of a healthcare company a financial services company I'm sorry company yeah grocery company good example I think it's going to come down to trust trust not just in the technology the ethics around AI privacy security all that also matters trust in business model where that alignment of your interests as a customer and the interests of the provider are fully aligned I sort of say one of the currencies is what do you think what do you say and what you do are got to be in alignment now you can get between the lines here I hear stories about retailers coming to Microsoft maybe even grocery coming to Microsoft because hey Amazons in grocery now with with Whole Foods retailers are looking over their shoulder wondering massan's got a good platform but at the same time are they gonna come at the core of my business why it's not even just Amazon by the way you got to remember Amazon and Google both are fantastic at being able to wig transactions you know so it's not not you know Google is somehow more friendly to retailers they have a nice two-sided market that they can subsidize one to advantage other and also by the way the advertising business is just so funky which is it's sort of second price auction I've never seen business models where there's more demand there is higher prices so I feel like wow any customer who is essentially subsidizing their own tax increase should think through exactly how that's gonna work out in the long run so that's where I feel like long run business model trust is going to be so important how do you structure your workforce - I guess best embrace that interest in trust that the customer has is there a different approach in sales and messaging what are you telling in fact that's where you getting every part of your organization aligned starting with your sense of purpose and mission that's why I say we want to empower people in organizations all over the planet to achieve more it's got to be more than a set of words like our success is based on our customer success second is then create that business model like take subscriptions if you don't use it they will churn out that means you only get paid when they're using it in driving value consumption business models so getting fully aligned on the business model and then shaping the culture whether it's the person in the field we now have these new roles in the field called customer success that's some all about making sure that the customers are able to do what they want to do with technology to impact their business and to me that type of transformation end to end and consistency it can't be like I'm doing something here but something else somewhere else how do you compensate customer success just by you know how customers are rating you NPS is a good one Net Promoter Net Promoter scores is a good one are they consuming for example odd have they activated all the capability so we have a what we describe as leading indicators of success of our customers and in fact compensate our folks not on revenue not on margin but on those metrics interesting I think we've already established you will write about a lot of things over the past four plus years what were you wrong about I think the thing that has caught me most by surprise is how multi constituent even when I started out four years ago I thought I understood of course it's about customers it's about our employees it's about our shareholders but it's not just that it is about recognizing that in every community that we operate in and serve there is multiple constituents that all have to be in harmony with your interests you know and that is probably the place where I've learned a lot Starbucks just got a lesson in that if I'm reading you the right way somebody who's in your store you've made a certain brand promise they haven't bought anything necessarily but they can have a big impact on the perception of your brand yeah I'm on the board of Starbucks and I mean I think that Starbucks and Kevin and team responded you know to something that was a brand promise and what the expectation was very well and I feel like they've set the bar in fact of how it's not about sort of being perfect it's about being able to learn from things that happen and to be able to improve and change the culture of your organization that's what we're doing as well so what drove that home for you you said that was an area that caught you off guard I'm sorry what is that you said that was an area that caught you off guard a bit the multi constituent nature I mean it's just the ability as a CEO to be able to recognize is there a moment where you realized boy this is yeah I'll tell you in fact one of my biggest moments was we got a letter probably my first year in from the association of the blind in the united states about saying hey look you guys have to take software work you do very seriously for accessibility especially for people with visual impairment and i've always in fact champion belong before our CEO i used to be the one who internally champion our accessibility work but that's when it struck me is this is gonna be a checkbox this requires us to integrate into the mainstream and it you know the universal design needs to become something that is much more culturally ingrained in everything we do and it's been a phenomenal I mean to me some of the most exciting impact of AI whether it's gaze technology and what we can do for someone with ALS or some machine reading technology and what it can do with someone to dyslexia that's now been an awakening for us and that's when it caught me in saying that you know that particular advocacy group sending me a letter was a bit of a wake-up call for me to sort of recognize that we will only be a company that we you know wanna be if we take all constituents and but yet approach with that universality in our products I think you can expect some more letters from advocacy groups that what what do you have new around that specifically accessibility at built yeah so one of the things that we did last year was something called AI for Earth the idea is not just build technology and advances in AI but to use it to fund organizations research that are going to really turn in that case AI for things like tackling climate change or creating an early warning system for Zika or what have you and so we're now going to take that same approach for AI for accessibility so we are putting a twenty five million dollar grant which is going to be available to research institutions and other nonprofits to be able to take advantage often use AI tech to solve some of the accessibility challenges out there I think the last time I sat down with you Jeff Immelt was next to you and you were talking about ways that Azure and predicts GES platform for for industrial software are going to work together ge is announcing that they're cutting their digital unit by more than 25% this year but the industrial internet moves on are you going to do anything within Microsoft to pick up the slack for what companies like GE might cut back different partnerships in fact we just who are coming back from Hannover where the biggest industrial conference happened and it's stunning to see you know Microsoft would go to Hannover in the past you know we had an embedded business but this has now become a main show for us if you look at the number of announcements coming on with this fundamental fact that Azure along with Azure edge is becoming built-in to every modern factory I mean one of the things I even talked about in our earnings last quarter was Turner material-handling literally they're taking the material handling in a particular modern factory that they're building a digital factory using drones to fly through optimize the pallet routing and optimize the entire supply chain efficiency or Buehler in fact that's another company but in for most of the corn and the world goes through their machines and it turns out that if you really want to protect the food production of the world as it relates to corn you want to detect any toxin early on they're using computer vision at the edge to be able to in their you know machines already already and we're working with them so to me being able to sort of translate what I think of as our a I promise or a cloud and its edge into these industrial applications those are the killer apps that's what I celebrate closer to home there's this tension which big tech and the communities around big tech not just in Seattle area also seen it in in Silicon Valley in particular but in Seattle right now Seattle proper there's this proposal for ahead tax basically I think it's $500 for every worker just for big companies and to pay for homeless services my gut says this isn't really so much about homeless services as perhaps it's this tension between boy these big tech companies are raising the standard of making it more expensive gentrifying it's good for some people but not good for everybody we need them to give something back is that your view on what this is really about and what does a company like Microsoft any big-time tech company do to perhaps better that's change the narrative Luke move the debate forward I mean it's it's the right dialogue for us to have first of all because in some sense I've always believed that if just a few multinational companies are the only companies that are getting bigger and more profitable and then the rest of the economy is not showing the same vibrancy in employing people and in general inequality increases in society that's not stable that's not stable for any liberal democracy so now the tacks are good ideas at the edge I don't know whether that particular tax is a good idea because you've got to make sure basically because all taxes you know can create unintended consequences for economic growth so you've got to think it through it's a system but that said though should every community think about how to make sure that the people in the community across all parts of the economic strata are able to live there thrive there ah absolutely if there is what you call gentrification and the housing expenses are just going up that's no solution we our own employees will not want to live in a non-diverse community over time so we will have to have responsibility quite frankly in every community not just in Seattle not just in Redmond but in every country we operate in that's why I think multinational company I every time I go into any capital or any city or any community inside the United States I always ask myself how many people around Microsoft how many partners who will do the employee what are their median salaries what is the opportunity without that I don't think Microsoft continues to thrive but what what do you do differently to get a different role in Silicon Valley sitting down having this conversation with the Silicon Valley leadership group boy it's really expensive it's hard to recruit workers into Silicon Valley but housing prices there are up at least 2.5 X since then yeah I think on this particular one there are some solutions I think we should first of all collect the data that and say wow there is ways to create no you know bugs a low-cost housing and accessibility to low-cost housing in these urban centers so that we don't have just runaway costs of the housing I think some of these things whether it's runaway costs of our healthcare runaway costs of our education or runaway cost of housing these are challenges that I think have to be met and market forces should work to solve those problems there's a u.s. trade delegation in China right now trying to work some things out what's the best-case scenario out of that as far as what gets brought back all right here's my simple view I think about the next 10 years next 20 years next 30 years how many whatever your time horizon it's gonna be defined by these two countries China and the United States creating more interdependence not less that's what's going to be good for the two countries that's what's going to be good for the world so my hope is that I need I log that happens in any capital in any venue is all about sort of breaking through I think there are legitimate issues that need to be discussed but you need to come up with solutions because interdependence is probably good for economic growth and stability though the world any third rails you see I mean you say third rail what do you mean things that they shouldn't touch more push or I think that anything that sort of creates just uncertainty it's just not good whom does it serve I think that the more we recognize that it's true that globalization or free trade as it was conceived has not created equitable growth in all parts like that's the issue that I think is being debated so that means you got to go back though to the real principles of free trade and make sure that they are in fact implemented fairly I want to talk about something that we've talked about before which is gender diversity women at Microsoft about a month ago the Seattle Times did a big story on Microsoft's culture it said the culture is still male dominant there's casual sexism and change comes slowly did you think it was fair I think that you know this is an issue that is front and center for me and for my leadership team because in some sense yes change happens slowly but we have to push every day and make progress every day and that's what I have to hold myself accountable in fact and it starts with culture when I think about the amount of time I and my leadership team now spend on making sure that we have that every day inclusive culture in every meeting we are able to make sure that the people the diverse group we have gender ethnic are all able to participate so I think starts with culture and taking it as first class second it just cannot be just words it also has to be a set of metrics so for example my own compensation is and my leadership teams compensation is now tied to a set of metrics where we have to make progress year over year so I think you got to go to work on this whether it's on the culture or the metrics that really promote diversity and inclusion and it's the right thing for us to focus on let's not be satisfied with whatever we have is that a new thing on time compensation and diversity metrics I remember Brian krzanich at Intel is doing something where by job category he wants you know the target to be let's reach the available population according to the Bureau of Labor Statistics so if electrical engineers are 35% women than that's our target not 50/50 for 35% because that's that used to be called quotas and it was a dirty word how does it factor in now that we're at the place we are on diversity I think first of all we got to start by saying this is don't think of this as a coda this is in fact again necessary for business success I mean think about what a diverse team you can do in a multi constituent world I mean if you go back to the question you asked me wow what is surprise to you I sort of what surprised me is what we have as a company we have to serve many constituents and their interest their unmet unarticulated needs so every product group every sales team every marketing team will be better served by having diversity and so to me having representation reflect the world we want to serve is the best thing that we can do for our long-term business and so that's what in spa you know drives us and even they're having some metrics on progress for example take women and women representation over the last 18 months we've had a 50% increase in the number of corporate vice president's at Microsoft oh that's fantastic see is it sufficient absolutely not but is it a move in the right direction I think so what are you reading now as we as we start to wrap up I'm reading a book god I forget the the thing it's the multiple literacies of leadership it's a fascinating book which sort of speaks in some sense to this intellectual pursuit now I have around saying it's not just one stroke you can have you gotta think about the complexity the ambiguity that exists or the uncertainty that exists in the world you need to be able to then turn that into understanding and clarity and it's not you can't be excellent in just one thing even as a leader and the way you lead somebody sort of said this very beautifully to me which is for example of clarity I talked a lot about what leaders fundamentally do is about bringing clarity but it's about clarity of where you need to get to but not be too dogmatic about the means and being able to even have that distinction so a lot of lately gone back to leadership and in another book that I recently led which I loved is which is just something that I think about a lot is forged in crisis and that's a great book of some people like you know Lincoln in particular I mean and how he came through his two terms to change history has been a real imprint on me finally Satya Nadella before work what's what's your routine is there something that you do before you're in the door you're on or maybe even I mean a lot of us start work really before we get to work of course but before before you even get into that mode is there a certain preparation that you feel works for you I think my ritual is however short on time or sleep or whatever I somehow figure out or manage to get my 30 minutes of firaon every day wherever I am and that I must say is perhaps what gives me all the energy and more it keeps you trim - I hope so yeah the camera doesn't lie it does sorry thanks thank you so much John hey there thanks for checking out CNBC on YouTube be sure to subscribe to stay up-to-date on all of the day's biggest stories you can also click on any of the videos around me to watch the latest from CNBC thanks for watching

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Id: mwDVayzR258

Length: 32min 32sec (1952 seconds)

Published: Mon May 07 2018