This has been a rough year in the public eye for Big Tech, whose digital giants have been pilloried as privacy invaders, monopoly builders and even threats to democracy. Yet one of them has stood out from the pack, basking in a glow of newfound admiration: Microsoft.
Affirming that distinction, Fortune recently named Microsoft CEO Satya Nadella as its Businessperson of the Year. Fortune attributes his success to having succeeded in assembling the right team. In his ascent to the chief executive role, Nadella had several gaps in his resume, lacking significant experience in sales or finance. So he surrounded himself with complementary players. “I’m wired to be fairly confident in myself and to let others shine,” he told Fortune.
Among those executives is president Brad Smith, who runs policy and legal affairs. “Nadella credits Smith, Microsoft’s longtime general counsel and previously an outside lawyer to the company, for leading policy initiatives on areas from cybersecurity to ethics in A.I. and privacy,” writes Fortune’s Adam Lashinsky. “A roving corporate ambassador, Smith has deftly positioned Microsoft, once the scourge of Washington and Brussels, as the most thoughtful and least under attack of its Big Tech cohort.”
Microsoft’s reputational success has been matched by the financials. The company earned $39 billion in profits in fiscal 2019 on revenue of $126 billion, with revenues growing at a three-year compound annual rate of 11.%. Its stock-market capitalization, which had lagged for years, topped $1 trillion.
Fortune’s declaration was presaged earlier in May by Bloomberg Businessweek, which put Nadella on the cover with the headline: “The Miracle of Microsoft: The greatest tech company of the 1990s is back.” The company that had once drawn comparisons to the Evil Empire of Star Wars was far less of a competitive threat in the 2000s, flailing as it attempted to ride the new waves of mobile phones, search engines and social networking.
Businessweek’s sources inside and outside the company attributed the historic turnaround to a change in culture as well as strategy: “Microsoft marketers like to attribute its reemergence as a tech power to a sort of cultural rehab, involving what Nadella calls corporate ‘empathy’ and a shift of his team from a ‘fixed mindset’ to a ‘growth mindset.’ The reality of the company’s turnaround was more painful … Under Nadella, it cut funding to Windows and built an enormous cloud computing business—with about $34 billion in revenue over the past year—putting it ahead of Google and making progress in key areas against the dominant player, Amazon Web Services. ‘I don’t know of any other software company in the history of technology that fell onto hard times and has recovered so well,’ says Reed Hastings, CEO of Netflix.”
By a different set of performance dimensions, however, Microsoft came in No. 2. On the Wall Street Journal’s annual ranking of the Management Top 250, the winner for 2019 was Amazon, which unseated Apple for the No. 1 spot.
“Amazon catapulted to the top of the list this year by earning an off-the-charts ranking in innovation,” wrote the Journal. “Its score in that dimension of performance is more than double that of any other company. Amazon outpaces others in patent applications, trademark registrations and spending on research and development,” reported the Journal, which works with a team of researchers at Claremont Graduate University’s Drucker Institute using dozens of data points to rank companies on five performance dimensions: customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength.
The Journal’s rankings also rolled out a new “red flag” designation to highlight companies with particularly weak scores in one dimension of the scorecard. Facebook earned a red flag for customer satisfaction, likely attributable to the controversy over its data-privacy practices, and Walmart drew a red flag in the area of employee engagement and development. In recent years, the company has aimed to improve worker satisfaction with an array of education and development programs.