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BusinessNovember 6, 2017

Inside the Microsoft machine


Jihee Junn visits Microsoft’s sprawling headquarters in Seattle to find out how the tech giant is clawing its way back to relevance.

In Cupertino, California, Apple is on the verge of completing its mothership – a glistening monolith of immaculate Norman Foster design. Its seamless curves and wall-to-wall glass ruthlessly dominate the city’s landscape: a description that could easily be referring to the iPhone itself. Further north in Mountain View – the home of the infamous Googleplex – oddly shaped furniture, motorised scooters, and multicoloured beanbags are all part and parcel of the Google work experience – fun, playful, and perfectly on-trend.

In contrast to its Silicon Valley counterparts, Microsoft’s headquarters are clearly showing their age. Not in the sense that they’re decrepit or outdated, but there’s an element of maturity rarely seen from some of the tech industry’s other heavy hitters. Far from being a spectacular symbol of power, its Redmond offices – just north of downtown Seattle – almost seem quaint, bookish, more campus-like than business-like. True to its renown for being reliably utilitarian, there are few (if any) trinkets or embellishments that don’t serve an obvious purpose. Even its buildings, named numerically from one to 127, reflect a company that puts functionality at its very core. “More adult” was one journalist’s succinct take on the offices during our company tour. “No work pods, not like Facebook or Google.”

Outside of Washington, there’s a sense that Microsoft’s best days are well and truly behind it. It’s a big reason why the company now spends huge amounts flying media from all over the world (including The Spinoff for this story) to visit its headquarters anywhere from four to six times a year. The hope, presumably, is that journalists can see and judge for themselves whether the company really has what it takes to claw itself back to mainstream relevance.

Microsoft’s Redmond Headquarters (Vetala Hawkins/Filmateria Digital for Microsoft)

For those of us who grew up in the Internet Age, it was Microsoft that really started it all: chatting on MSN, playing around on Paint, and surfing the web on Explorer served as the building blocks for a generation now glued to the internet. It dominated the industry for much of the ’90s, and its founder, Bill Gates, was long considered to be the richest, most powerful CEO in the world.

But since then, the tech world has morphed at a phenomenal rate, with the likes of Apple, Samsung, and Google all coming of age in recent years. And while the company still earns a hefty profit of more than $22 billion a year, the last decade or two has seen the once mighty tech giant struggle to keep up with the cool kids. People hated Windows Vista, its Nokia acquisition was a flop, and the Zune mp3 player is little more than an antiquated joke.

While missteps like these have certainly dented Microsoft’s reputation in the past, its failure to adapt to the smartphone market has perhaps been its most costly. In 2009, Microsoft’s share of all computing devices used to connect to the internet was 90%. Today, with the ubiquitous presence of smartphones, it’s more like 20%.

Xbox setup at Microsoft’s visitor centre (Vetala Hawkins/Filmateria Digital for Microsoft)

But through failure, Microsoft has managed to land on its feet, recalibrating its business away from its weaknesses (smartphones) to make space for its strengths (cloud computing, software, gaming, and AI).

“Once upon a time, we were the Windows and Office company,” says Tim O’Brien, GM of global communications at Microsoft. “Life was pretty simple back then. We only had a couple of businesses and the health of the company resided in those two businesses. Now we do commercial, gaming, hardware, software. It’s a complex portfolio of capabilities.”

It’s precisely this portfolio Microsoft is hoping to showcase on its campus tour; a location so large that it covers 200 hectares of land (for context, Hamilton’s Waikato stadium is roughly one hectare), employs over 40,000 people, and deploys more than a hundred shuttle buses every week to transport workers from one building to another. Only Amazon—the city’s other poster child for tech and innovation—rivals its towering stature in the Seattle region.

156 shuttles operate on campus (Vetala Hawkins/Filmateria Digital for Microsoft)

Like Amazon, who dabble in everything from groceries and retail to film and TV, Microsoft’s sprawling Redmond campus reflects the company’s vast web of business interests. In its Mixed Reality Lab, hidden away in Building 92’s basement, a demonstration of HoloLens allows us to travel to Mars with Buzz Aldrin, install a stair lift from scratch, and customise our very own Ford Car with a flick of a finger.

In its top-secret Hardware Lab—the ‘Area 51’ of the Microsoft engine—industrial 3D printers, CNC machines, and precision lasers work furiously away to create advanced prototypes of future consumer products. It’s here where they engineer the precise texture of a tablet brushing against your skin, the custom shade of red or blue on the cover of your laptop, and the exact sound the keyboard makes when your fingers move over it.

3D printing underway at The Garage. Any Microsoft employee is free to use the facilities during their off-duty time. (Vetala Hawkins/Filmateria Digital for Microsoft)

In The Garage, its space for the ‘makers, hackers, and tinkerers’ of the company, employees have the freedom to experiment with their unrealised ideas and out-of-the-box concepts. Paper, plastic, fabric, and wood are strewn across its desks, and its ‘reality room’ is stocked with VR/AR headsets of every kind, as well as a retractable green screen that folds away in the ceiling when it’s not being uded.

As a concept centred around having the freedom to fail, The Garage, in many ways, encapsulates the leadership style of its CEO Satya Nadella. Having started at Microsoft in the early ’90s, Nadella became just the company’s third-ever CEO in 2014 – an appointment which, at the time, came as somewhat of a surprise.

The ‘Reality Room’, featuring a HoloLens headset and a camera for filming. The ceiling also contains a retractable green screen that enables employees to save space without losing capability. (Vetala Hawkins/Filmateria Digital for Microsoft)

When Steve Ballmer, Microsoft’s previous CEO, announced he was retiring in 2013, there were few takers outside the company willing to shoulder the burden of the role. While profits doubled under Ballmer’s reign, the company was rife with infighting and fast heading towards irrelevance. Its stock price had stalled while Apple’s soared, and many were hoping to appoint an outsider – someone with an objective (and untainted) point-of-view. So when Nadella – a self-described “consummate insider” – was hired instead, there was naturally surprise, if not a fair bit of disappointment.

Watching Nadella speak at the 2017 GeekWire Summit in Seattle, his calm, measured, and thoughtful tone marked a stark contrast to the bullish Ballmer and even quietly cutthroat Gates. And his demeanour reflects his approach to leadership, slowly helping to transform Microsoft from a “know-it-all culture” to a “learn-it-all culture”. And while several crucial steps (such as scrapping the controversial performance review system) were initiated by Ballmer, its Nadella who’s often credited for ushering in a cultural renaissance for the 42-year-company; one that’s open, innovative, and collaborative – both internally and externally.

Satya Nadella (left) speaks at the 2017 GeekWire Summit (Jihee Junn)

One of Nadella’s first acts after becoming CEO in 2014 was putting Microsoft Office on iOS. It was a move reflective of his new mission for the company, one focused not on “lagging indicators” of success, but “leading indicators” instead.

“Whether it’s Outlook, Skype, Office, or Minecraft, we want to make sure our best work is on iOS and Android,” Nadella explained at the GeekWire Summit. “We don’t have the share to have our smartphone hardware as a real consumer choice… that’s the reality of it. The reality is we cannot compete as a third ecosystem with no share position and attract developers.”

“The question really for us is how do we meet the reality of today, and then invent our own future? The way I think of that is let’s make sure our software and applications are used on iOS and Android.”

The Surface is key to Microsoft’s future in hardware. Its largest iteration, the Surface Hub, is often used for meetings, conferences, and large-scale visualisations. (Vetala Hawkins/Filmateria Digital for Microsoft)

Ten years ago, Microsoft employees using Apple products would have amounted to some sort of blasphemy. But in 2017, it’s a perfectly natural sight. All across campus, iPhones are a near-ubiquitous presence, as are iPads, MacBooks, and various Samsung and Android devices. This is today’s reality, and Microsoft are okay with it – mostly because it seems to be working. Since 2014, Nadella has not only managed to restore Microsoft to relevance thanks to greater investment in cloud computing, software, and upcoming technologies like HoloLens, but it’s managed to generate more than $250 billion in market value and return its shares to dotcom-bubble highs. It’s an accomplishment only a handful of CEOs (Tim Cook, Jeff Bezos, Mark Zuckerberg etc.) can similarly boast about.

While Microsoft is no longer the only player at the top of the tech game, the fact that it’s managed to keep earning money, survive the smartphone disruption, and shrug off humiliations like Nokia and Zune are achievements to applaud in and of themselves. In fact, on the most recent episode of the podcast Inside the Hive, host Nick Bilton asked his guest, Scott Galloway, why Microsoft wasn’t included in his new book, titled The Four: the hidden DNA of Amazon, Apple, Facebook, and Google.

“It should be. It should be called ‘The Five’,” Galloway responded. “If I’m being intellectually honest, they should’ve been included.”

Jihee Junn travelled to Seattle courtesy of Microsoft.

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