This is not your father’s Microsoft

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ix days after sharing Microsoft’s blowout earnings with Wall Street in July, Satya Nadella stops to listen to a few of the more than 23,500 employees taking part in a three-day hackathon the company is hosting at its headquarters in Redmond, Washington.

One team shows him digital tattoos made of gold leaf that’s embedded with sensors. Apply these wearables to your skin and, with a tap, you one day might be able to turn on the house lights or play a tune on your digital piano. Another team tells him about a feature for the company’s Seeing AI app that uses your phones’ camera as an optical character recognition device, speaking menus and other text so the visually impaired can play video games.

As he walks among tables littered with laptops, soldering irons, empty cans of Talking Rain sparkling water (a Microsoft customer) and 3-inch-high silver toy robots that read “Hackathon 2018,” a crowd of employees follows him like groupies at a music festival. “He’s taller than I thought,” one says. “Do you think he’ll let us take a photo?” asks another.

Nadella dreamed up the Microsoft Hackathon, which the company calls the “largest private hackathon in the world,” when he became CEO in February 2014. Just a few of the thousands of projects pitched over the past five years have inspired mainstream products. Most of these let’s-change-the-world ideas aren’t the kind of business tech that Microsoft makes the bulk of its money on — at least not today.

That’s just fine with Nadella, because the meetup serves another purpose: rebranding Microsoft as a modern, relevant company. When he became the third CEO of the world’s largest software company, after Bill Gates and Steve Ballmer, Nadella made changing Microsoft’s rigid, hierarchical and arrogant culture his top priority. He sort of had to. Though arguably one of the most successful technology companies in history, Microsoft’s had a string of high-profile misses in mobile, search and social networking. Additionally, the company’s toxic culture, characterized by corporate politics, infighting and backstabbing, fed an image of Microsoft as a fading legend.

Rivals Apple, Google and Facebook were seen as innovators creating shiny new opportunities with their disruptive tech. A generation grew up without ever having used a Microsoft product.

“One of the things that happens when you’re super successful is you sort of sometimes lose touch with what made you successful in the first place,” Nadella tells us when we ask what he was trying to solve with the hackathon.

“I wanted to go back to the very genesis of this company: What is that sense of purpose and drive that made us successful? What was the culture that may have been there in the very beginning or in the times when we were able to achieve that success?  How do we really capture it?” says Nadella, who joined Microsoft in 1992. It’s about “the renaissance as much as about just sort of fixing something that’s broken.”

The first order of business was jettisoning the rally-the-troops employee meetings Ballmer held each year at the local sports arena. Instead, Nadella opted for One Week, a global fest that, in addition to the hackathon, includes a science fair and an expo of upcoming products and technologies. His aim: Getting Microsoft’s 131,000 employees around the world to step away from their day jobs, think ambitiously and collaborate on projects the world might need — not just on products Microsoft thinks it can sell.

The event is “the metaphor for the one week that then informs the rest of the year in terms of really getting in touch with the core of this company around innovation — but that innovation being driven by a sense of purpose and reinforcing a culture that we aspire to,” Nadella says.

The culture fix seems to be paying off. Annual revenue crossed $100 billion in the fiscal year ended in June (the highest in its 43-year history), driven by demand for the company’s cloud computing business products. And Microsoft’s stock price has tripled since Nadella took charge. The stellar share price and financial performance speak to his success, say analysts, in changing investors’ perceptions of Microsoft as dated and in decline.

“Satya is owning the market he already had, and he’s doing a bang-up job of gaining share in a market we weren’t sure he was going to be successful at,” says Maribel Lopez, head of Lopez Research and a longtime Microsoft watcher.

Now the question that Nadella and Microsoft, founded by Gates and Paul Allen in 1975, need to answer is what this software behemoth will become next.

So we’ve been invited to get an inside look at One Week and learn from employees and executives how Microsoft has changed and why they believe Nadella’s path will lead to continued success.

Asta Roseway, a principle research designer who’s worked at Microsoft for two decades, is pretty candid in her description of life before and after Nadella took over. She said collaborative projects like her gold-leaf tattoos wouldn’t even have been discussed a few years ago. “This feels like, collectively, we’re building toward more creativity,” she says. “It’s why we’re here.”

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