4 Examples Of Innovative Companies That Work And 1 Example That Doesn’t (Part V)

innovative companies

Read Part I here, Part II here, Part III here, and Part IV here.


Apple's culture seems to be stuck in the past. Microsoft was in a similar place under former CEO Steve Ballmer. Just like Apple, Microsoft prioritized the protection of profits from its legacy businesses over invention. It had a command-and-control culture and rigid hierarchy with little room for collaboration or sharing of innovative ideas. Vanity Fair called the Ballmer years "Microsoft's Lost Decade."

Then, in 2014, Ballmer stepped down, and Satya Nadella became the company's CEO. I have previously discussed Nadella's leadership philosophy, which he described in his book Hit Refresh: The Quest to Rediscover Microsoft's Soul and Imagine a Better Future. Microsoft's transformation under Nadella's leadership has been remarkable. It gives other leaders hope that they can transform company culture no matter where they are on their leadership journey.

Kantrowitz illustrates that leaders learn from each other, and Nadella learned from Bezos at Amazon. Nadella adopted the concept of Day One and made reinvention his top priority. He realized that before he could do anything else, he had to reimagine Microsoft's culture first. Without taking that step, he would not be able to help the organization to rediscover its inventive muscle.

Nadella got rid of the old alpha male traditional hierarchy, and, like other CEO-facilitators, used AI to reduce the amount of execution work his employees had to do. He eliminated silos to encourage collaboration, emphasized empathy, embraced the Engineer's Mindset, and prioritized the future over the past.

Nadella is an epitome of a "human" CEO. He does not have a huge ego, does not shout his opinions, avoids political infighting, and focuses on building Microsoft's future. In his first email to the employees as a CEO, he wrote, "Our industry does not respect tradition - it only respects innovation." Nadella gave Microsoft employees permission to invent and think of big ideas again. To inspire, he exposed his leadership team to startup thinking by inviting the founders of companies Microsoft acquired to the leadership retreats.

Because experimentation is one of the most effective ways to invent, Nadella expanded Microsoft Garage, its space for product experimentation. A new public website was created where Microsoft could release new experimental apps. Nadella encouraged the teams to build products with empathy and understanding of how people would use these in their lives.

Just like Pichai at Google, Nadella asked employees to infuse AI into all products developed at Microsoft. AI and machine learning also started to get used in back-office functions, such as sales and marketing. For example, an internal tool, the Daily Recommender, helped the sales reps to identify the most valuable actions to take each day and minimize the time they had to spend sifting through CRM. As the Daily Recommender reduced execution work, the sales team engaged more with the customers directly. Microsoft licensed its internal technology to other companies to help cut down execution work and become more inventive.

Just like Apple today, Microsoft under Ballmer leadership did not value feedback from the rank and file. Employees were tasked with refining core products and had no channels to share new ideas with senior leaders. To build a feedback culture, Nadella learned from Zuckerberg at Facebook and introduced Q&As, where he could listen to what employees had to say. Nadella's style is very approachable. When a former Microsoft chief experience officer talked about Nadella, she said, "In every meeting, every situation, he would be very open about what he knew and didn't know. That made it okay for other people to talk about how they felt."

Kantrowitz summarizes how Nadella reinvented Microsoft:

"He did this by running Microsoft with the Engineer's Mindset, democratizing invention in the spirit of Amazon, freeing people and ideas from hierarchy in the style of Facebook, and doing the hard work to inspire collaboration in the mode of Google. Using internal technology to cut execution work, Nadella made it possible for Microsoft to turn around before the competition kneecapped it."

Where do we go from here?

Work is one of the central places where people find meaning. If we are to make the modern workplace more meaningful, we need to recognize that most aspects of the current management style are still rooted in manufacturing. As the knowledge economy overtook the industrial economy, what people knew became more important than what they could do physically. Management style changed to some extent over the last few decades as treating employees with more kindness and respect began to replace management by fear and intimidation. Now, leadership has to change again to spark human ingenuity and continuous innovation.

Kantrowitz's research shows that leaders can incorporate several business practices to create an innovative culture. They can:

  • Assign work that is less defined
  • Give employees room to create
  • Hire more creative and proactive people
  • Incentivize employees to invent and share ideas
  • Create channels to bring new ideas to life
  • Allow all voices to be heard, and not just those that are the loudest
  • Roll out collaboration tools
  • Create a feedback culture
  • Minimize execution work

It is not enough for organizations to transform; our education system must change as well. Schools are still preparing students for execution work by "drilling memorization, repetition, and risk mitigation," says Kantrowitz. Instead, they should be teaching inventiveness. The future of work relies on independent thought, originality, initiative, and creativity. After years of being taught to conform, most students are not comfortable with thinking for themselves. Kantrowitz warns that "teaching conformity may indeed be a bigger risk than automation itself."

Artificial intelligence, machine learning, collaboration tools, and cloud computing are still in their infancy. While we need to be careful about how we develop them to avoid causing harm, these tools also have the potential to make our work more inventive and fulfilling. As we cut down execution work and do more idea work, we will experience more meaningful work and create innovative companies.

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