Hit Refresh is Satya Nadella’s account of how he took over as Microsoft’s CEO in 2014 and sought to rejuvenate the company after a long period of stagnation and decline. He describes how he reinvigorated the company by rediscovering its “soul”: He articulated the company’s mission and reminded everyone of the why behind their work, transformed the corporate culture from one plagued with in-fighting to one of collaboration, and formed strategic partnerships with Microsoft’s fiercest competitors.
Throughout the book, Nadella discusses the key leadership principles that helped him “hit refresh” on Microsoft and the business practices that allowed the company to thrive once again. He connects these principles to his life experiences of growing up in India, immigrating to the US, working his way up at Microsoft, and being a father to a child with special needs. He also offers his thoughts on the future and how companies and policymakers can—and must—ensure that technology isn’t just a means for economic growth but, above all, a force for good that is grounded in empathy, augments (instead of replaces) human capabilities, and helps solve the world’s big problems. We’ve synthesized his main themes in this guide.
The theme that is the most central to Nadella’s business philosophy is empathy. Nadella defines empathy as the cornerstone of all that he does, both personally and professionally, and he believes that it’s shaped his career at Microsoft and his vision for the company.
Nadella acknowledges that empathy was something he had to develop early in his career. He says his son’s disabilities helped him become a more empathetic person. (Shortform note: Nadella’s son, Zain, was born with cerebral palsy and required extensive therapy and visits to the ICU. Zain died in 2022 at the age of 26.)
For Nadella, empathy is about understanding others’ points of view and also seeking to empower them. He believes that empathy enables Microsoft to understand its employees and customers better, helping the company to anticipate the needs of its clientele while also creating a more welcoming and dynamic environment in the workplace. (Shortform note: Nadella values empathy so much that he required Microsoft’s senior leadership to read Marshall B. Rosenberg’s Nonviolent Communication. The book is about conflict resolution based on compassion instead of life-alienating communication. This was necessary at Microsoft, where senior leaders were constantly at odds.)
Nadella asserts that empathy is rooted in direct engagement. He believes that this engagement should be the cornerstone of all of a CEO’s relationships:
1) Empathy for employees: Nadella believes that CEOs must actively seek out employee feedback and be willing to listen to their ideas and concerns with an open mind. He opened the lines of communication by bypassing some of the hierarchy and bureaucracy that made it harder for lower-level employees to be heard. (Shortform note: Such openness can lead to conflict, but hedge fund billionaire Ray Dalio believes conflict can be productive, leading to the best ideas and decisions. In Principles, he writes that you can work through disagreements and move toward cooperation by asking questions rather than making statements, focusing on what the other person is saying rather than how they’re saying it, and maintaining mutual respect.)
For example, he invited junior members of Microsoft to what had traditionally been a seniors-only annual brainstorming retreat. The fresh ideas generated and a willingness to listen led to a more productive and dynamic retreat.
2) Empathy for customers: Nadella also invited customers—schools, nonprofits, small businesses—to the annual retreat so that Microsoft’s senior researchers, engineers, sales, and other executives could understand the customers’ problems and work together to solve them. (Shortform note: Nadella’s approach is in line with the modern principles of sales, which Daniel Pink details in To Sell Is Human. Pink writes that contemporary selling strategies require building a connection—getting in sync with and adapting to people, communities, and contexts to serve their needs.)
3) Empathy for competitors: Nadella believes in engaging directly with competitors in order to learn from them or to resolve conflicts. He also writes about forging mutually beneficial strategic partnerships with them, which we’ll discuss in detail later in the guide. (Shortform note: While Microsoft had storied rivalries, particularly against Apple, Nadella brought in a different mindset, one that’s similar to what Simon Sinek describes in The Infinite Game. Sinek writes that viewing competitors as worthy rivals rather than just rivals enables you to see what they’re better at and how you can improve. This encourages you to shift your focus from defeating others to maintaining a healthy position in your industry.)
4) Empathy for partners: Empathy plays a big part in Nadella’s approach to business disputes with partners—he seeks common ground instead of trying to win or dominate others. He argues that empathy allows leaders to understand the legitimate concerns and objections others may have and to find solutions that work for both parties. For example, when Microsoft had a contract dispute with Yahoo, Microsoft listened to Yahoo’s concerns instead of making threats and demands. They found a solution that satisfied both parties—without costly litigation.
(Shortform note: Even with a good working relationship, it’s normal to have disputes with business partners. Resolve such conflicts in five steps: 1) Hear both sides, 2) re-establish common goals, 3) focus on the facts and avoid emotional outbursts, 4) have a third party mediate, and 5) work together to make a clear, step-by-step plan to reach your shared goals.)
While empathy is at the heart of Nadella’s leadership, much of Hit Refresh focuses on how he defines good leadership more generally. In this section, we’ll discuss Nadella’s key leadership principles and some of his priorities as CEO.
Aside from having empathy, Nadella gives the following tips for becoming an effective leader, regardless of your industry:
1) Put your team ahead of yourself. As a lifelong devotee of cricket, Nadella understands the importance of working together as a team. He writes that individuals—no matter how talented—can destroy a team if they’re more concerned about personal glory rather than collective success. (Shortform note: In The 5 Levels of Leadership, John Maxwell writes that such leaders make others look bad to make themselves look good, and they use their position to their advantage instead of thinking about their responsibilities to the team. This is bad for the workplace because it results in low morale and a toxic work environment.)
2) Have conviction. Nadella says that Microsoft can do a lot of good in the world through its democratizing approach to technology. To help inspire employee conviction when he became CEO, Nadella drafted a mission statement that defined the company’s beliefs and goals in a succinct and accessible way. This gave employees a sense of direction and a renewed sense of purpose.
(Shortform note: It’s important to find a common purpose as Nadella did because, according to the authors of Tribal Leadership, doing so encourages people to come together and work effectively. To find a worthy purpose, the authors recommend asking four questions: 1) What’s working well? 2) What’s not working? 3) What can we do to make the things that aren’t working work? 4) Is there anything else?)
3) Think long-term and short-term. To spot opportunities and take smart risks, a company must always consider how the decisions it makes today could affect both its own standing and the world around it over the long term. An example of this is Nadella’s approach to AI: While openly enthusiastic about AI’s potential, Nadella also stresses the importance of anticipating the disruptive effects it could have on the workforce. He argues that companies must plan ahead to avoid inflicting hardship upon workers and find ways to make AI something that can boost efficiency while also avoiding rendering human capabilities obsolete. (We discuss this in more detail under Theme #5.)
(Shortform note: One reason behind Microsoft’s decline was that it fell into the trap of short-term thinking, but this isn’t uncommon—it has become a serious problem for many American companies. To avoid the pitfalls of short-term thinking, experts recommend that companies decouple executive compensation from quarterly gains and prioritize long-term investors over short-term investors in a company.)
4) Don’t be complacent. While Microsoft played a big part in ushering in the personal computer revolution of the 1980s and 90s, it missed out on other important technological trends such as search engines (an area in which Google would dominate) and mobile phones. Nadella realized that Microsoft had grown too fixated on doing what it had always done and that the key to remaining competitive was to take risks and seek new opportunities for growth.
(Shortform note: Microsoft isn’t the first innovative company to be lulled into complacency by its success. In Business Adventures, John Brooks describes how Xerox found massive success with its first copier, but new competitors were soon eating into its market share. This reminded Xerox leaders that they had to explore other fields and led to the establishment of the Xerox Palo Alto Research Center (PARC) which developed some groundbreaking tech—including the graphical interface that led to the development of Windows. Unfortunately, Xerox executives missed out on capitalizing on PARC’s innovations. They remained hyperfocused on copiers, much like Microsoft execs relied heavily on Windows and Office.)
Nadella believes that as CEO, his first and most important job is to foster a good corporate culture.
When he took over as CEO, he believed that Microsoft had lost its soul and no longer reflected its original core values. The company had fallen behind its competitors and its employees were dissatisfied and disillusioned. Nadella sought to transform the culture into one that would lead to a positive work environment by:
1) Speaking and listening to employees. Nadella showed that he was open-minded and ready to listen by soliciting honest feedback through his surveys and meetings. (Shortform note: Nadella puts into practice what Marshall B. Rosenberg describes in Nonviolent Communication. Rosenberg’s four steps to nonviolent communication are: 1) Observe without evaluating, 2) identify and express your feelings, 3) connect the feelings to your underlying needs, and 4) make specific requests, highlighting what you do want others to do rather than what you don’t want them to do.)
2) Engaging with staff. Nadella hosted meetings in which senior managers could share more personal experiences and ideas with one another. Beyond getting to know senior managers, Nadella argues that CEOs must remember that they lead an entire company, not just senior management. Thus, a CEO must always stay in touch with the broader base of employees as best as they can, and they must seek decisions that benefit the company overall.
(Shortform note: Nadella practices one of John Maxwell’s 21 Irrefutable Laws of Leadership: Leaders connect with others. Maxwell asserts that leading is more than just giving instructions. It means becoming emotionally engaged with followers so that they’ll be moved to follow you and work hard. He adds that leaders shouldn’t expect their followers to come to them; instead, leaders should initiate contact.)
3) Clearly and succinctly defining Microsoft’s mission. Nadella writes that having a clear mission inspires others and gives them a sense of direction. To get everyone on the same page, Nadella and his team streamlined and defined the company’s mission, objectives, and culture. The key message: Microsoft’s mission is “to empower every person and every organization on the planet to achieve more.” By simplifying the message, they energized people and enabled them to see how their work fit into the company, fostering a shared purpose.
(Shortform note: Nadella writes that he received hundreds of positive responses from employees who thought the new mission was inspiring and energizing. However, it wasn’t without its critics: One writer for the Financial Times took aim at the vagueness of the mission, writing, “Achieve more of what?” She argues that Microsoft’s old mission under Bill Gates—”a computer on every desk in every home”—was much more concrete and precise.)
4) Encouraging people to learn together as well as work together. Nadella believes that team-building exercises and creating an environment in which constant learning is actively encouraged helps bind a team and encourages employee growth. It also contributes to innovation, as we’ll discuss in the next section. (Shortform note: Team-building exercises help employees build other valuable workplace skills, including better communication and interpersonal awareness, problem solving, effective planning, adaptability, and trust.)
The next key theme in Hit Refresh is the importance of continuous innovation in ensuring a company’s long-term survival. (Shortform note: Nadella references the toxic culture at Microsoft before he took over as CEO, but he doesn’t go into detail about how this stifled innovation. Reports describe the two main factors that kept the company from innovating: 1) Executives refused to see beyond the company’s tried-and-tested products, Windows and Office, and 2) the days of dotcom millionaires were over, so employees were more intent on climbing the corporate ladder—this meant more power plays, more managers, and a bloated organization where everything moved at a snail’s pace.)
To Nadella, the three key elements of innovation are:
Microsoft had become stagnant at the time Nadella stepped into the CEO role. He argues that this was due to Microsoft’s “fixed mindset”—it rested on its past successes instead of continuing to take risks and push innovative tech products. With the advent of mobile phones and iPads, its rivals started to pull ahead. (Shortform note: In The Infinite Game, Simon Sinek cites Microsoft as an example of a company that practiced “finite” thinking—a fixed mindset that leads to short-lived companies. He argues that Microsoft under Steve Ballmer was focused on how it could beat Apple and thus based its decisions on Apple’s moves. In contrast, he writes that Apple practiced “infinite” thinking—it was focused on improving customer experience.)
He helped break Microsoft out of its fixed mindset by adopting a “growth mindset,” which enabled the company to regain the initiative instead of falling behind in technological trends. Risk-taking and innovation became the order of the day, leading to new opportunities in AI and cloud computing and changing the general atmosphere at the company. (Shortform note: Having a growth mindset is just as important in your personal life as it is in a company. In Grit, Angela Duckworth writes that people who have a growth mindset believe that they can get smarter or more talented over time if they put in the work and are given the right opportunities. They’re more likely to persevere despite obstacles and failure.)
In addition, Nadella believes a growth mindset means that you learn from your mistakes. While many things had gone wrong at Microsoft in the years before Nadella took over as CEO, having the courage to confront those mistakes and find a way forward was instrumental in the company’s rejuvenation. (Shortform note: Nadella’s approach to mistakes is similar to Pixar co-founder Ed Catmull’s. In Creativity, Inc., Catmull writes that Pixar sees failure as an inevitable result of innovation. To take the stigma out of failure, he recommends taking the pressure off managers to perform perfectly and encouraging them to create an environment where employees can fail and recover.)
Aside from having a growth mindset, Nadella believes that diversity and inclusion contribute to an innovative workplace. Having diverse employees prevents homogeneous thinking, opening up the company to different values and perspectives that lead to better ideas and products.
However, Nadella isn’t without his missteps. At the Grace Hopper Celebration for women in computing in 2014, he fumbled the answer to a question about how women in tech could approach getting a pay raise. He claimed that so long as someone continues to work hard and well, they will eventually be recognized and rewarded accordingly—an assumption that was not at all in keeping with the experience of women in tech.
Nadella recognized and learned from his mistake. He pivoted to stressing that leaders should actively root out biases to create a fair environment where everyone can speak for themselves. Microsoft has since become more transparent about pay equity and increased support for diversity programs.
Women and Tech: Recognizing Common Obstacles
In spite of the advancements women have made in recent years, women still face significant barriers when pursuing careers in tech. These barriers include:
1) Sexism around women’s professional roles. Tech is still a male-dominated field, and traditional ideas around which roles and careers women “should” prefer can act as a hindrance. A lack of visibility of women in tech also means that women rarely get exposure to potential mentors, and they remain ignorant of the opportunities available.
2) Social conditioning. While men are often encouraged to be confident go-getters in the workplace, many women struggle to assert themselves when it comes to promotions, pay raises, and having their ideas heard. This means that—as Nadella himself discovered—even deserving women are frequently overlooked while working in the tech field.
3) Lack of support. Tech cultures are not always family-friendly or sensitive to the needs of women, many of whom may prefer more flexible work options and a more supportive work culture. Balancing professional and family obligations remains an issue for many.
Another barrier to innovation that Nadella wanted to address was the bureaucracy and isolation between departments. He asserts that the key to moving forward is collaboration and being open to other people’s ideas. To break down departmental silos and generate fresh ideas, the executive team introduced an annual week-long hackathon, where teams across different groups work together to solve problems creatively.
(Shortform note: If hosting a hackathon isn’t feasible, you can try other ways to build effective cross-departmental communication: 1) Streamline meetings by having a clear agenda, 2) make sure leaders from different departments stay abreast of what’s happening in the company, 3) try out different communication channels and encourage informal communication, and 4) choose managers who have a good interpersonal fit with other leaders.)
Aside from paying attention to the internal dynamics at Microsoft, Nadella also sought to improve external relationships with the company’s competitors.
Nadella notes that it’s easy to be bitter that others like Apple and Google have raced ahead in areas like mobile. However, he doesn’t believe that envy and spitefulness are good drivers for success. Instead, he adheres to a lesson about competition that he learned from his cricket days: Be respectful of your rivals, and don’t let intimidation prevent you from taking pride in what you do and performing at your best.
Thus, Nadella changed Microsoft’s approach to competition: Instead of being weighed down by envy, he tried to learn from the successes and failures of Microsoft’s rivals. Importantly, he realized that it was in the customers’ best interest for Microsoft to coexist with its rivals.
(Shortform note: Nadella leaves out details of Microsoft’s rivalries, including its most famous rivalry with Apple. This rivalry stems from the complicated relationship between Bill Gates and Steve Jobs who, at turns, worked together and criticized each other through the years. By 2015, the two companies seemed to bury the hatchet as Apple optimized Microsoft’s apps on the iPad. However, these friendly relations may be coming to an end: In 2021, Microsoft took aim at Apple for its gatekeeping of the App Store.)
To make such strategic partnerships work, Nadella writes that companies should:
1) Be open. Nadella believes respectful dialogue opens you up to exciting new opportunities for collaboration. For example, Microsoft agreed to work with Apple so that Office would run seamlessly on the iPad Pro.
2) Think of the customer. Consider how you can create additional value for your market. If you have a strong product but aren’t in the position to reach a big audience, it’s best to partner with companies whose platforms have a wider reach. For example, Microsoft works with Facebook to ensure that its applications run on Windows products.
3) Look at the long-term impact. Nadella acknowledges that it’s not always easy to work with other companies. When issues arise, he recommends remembering your long-term goals and letting them help you get through disagreements.
The Art of Competitor Collaboration
Aside from Nadella’s advice of being open, considering your customers’ needs, and having a long-term view, keep these factors in mind when collaborating with your competitors:
1) Maintain clarity of purpose. Know what you hope to get out of the collaboration, and never lose sight of what your competitor is hoping to gain from the collaboration as well. Note that your objectives will sometimes differ.
2) Set boundaries. Have a firm idea of what is and isn’t off limits to share with your competitor, and make sure your employees know what information, strategies, or resources need to remain confidential or for the company’s exclusive use.
3) Learn from your competitors. Pay close attention to opportunities for learning and growth based on what your competitors reveal about their own strengths, weaknesses, and approaches to your collaboration. You may learn valuable lessons that will help you refine your business strategies.
We’ve discussed Nadella’s approach when it comes to internal management at Microsoft as well as external relationships with competitors and partners. In this final section, we’ll discuss his thoughts on technology’s impact on the wider world.
Nadella believes that companies should be driven not just by profit but by their potential to make the world a better place for the greatest possible number of people. He reveals that one of the things that first attracted him to a career at Microsoft was the “democratizing” tech mission of Microsoft: Bill Gates had dreamed of making a PC a reality in every home. Nadella insists that technology can and should still be democratic at heart, empowering people all over the planet through its innovations.
(Shortform note: Staying true to Nadella’s philosophy of making the world a better place, Microsoft announced the creation of a $1 billion Climate Innovation Fund and a plan to be carbon negative by 2030. In an interview, Nadella stressed that a corporation’s purpose is to find “profitable solutions to the problems of the people and the planet,” arguing that profits won’t matter in the long run if it means creating more problems for the planet.)
While technology can be a force for good, Nadella emphasizes the need for tech companies to recognize the power that they hold over others, and the impact their products can have—both for better and for worse—on the wider world. In particular, Nadella addresses three key areas in which tech companies have ethical responsibilities:
1) Nurturing entrepreneurs in the developing world. Nadella argues that many political leaders in the developing world become so obsessed with attracting major Western tech companies to their countries that they neglect their homegrown talent and businesses. Ethical tech companies can nurture developing-world talent both by helping to make technology as accessible as possible, so that local entrepreneurs can have greater opportunities for pursuing their own innovations.
(Shortform note: If tech companies are at a loss as to how to partner with developing countries, they can consider working with the United Nations Technology Bank for Least Developed Countries. Established in 2018, the organization is helping the 46 least developed countries—including places like Afghanistan, Burkina Faso, and Rwanda—gain access to technology, in part by matching them with partners in the private sector. The end goal is sustainable development through local skills development and economic self-reliance.)
2) Standing up for moral values. While Nadella discusses the importance of collaboration at various points in Hit Refresh, perhaps its most surprising manifestation is the way in which Microsoft sometimes joined its rivals to form a united front against the US government. Nadella argues that companies have an ethical imperative to stand up for certain moral values, such as safeguarding freedom of information and customer privacy.
(Shortform note: While Nadella argues against government overreach, he is silent when it comes to acknowledging the serious privacy violations of tech companies in terms of advertising and the collection of consumer data. The increasing power private companies and advertisers are gaining through the mass collection of data has led to efforts by the European Union to ensure greater consumer protection through a policy known as GDPR (General Data Protection Regulation), with hefty fines imposed on companies—such as Google—found in violation of these rules.)
3) Using technology to empower, not harm. Nadella also emphasizes the need to develop AI and other automation in a way that does not disempower people or bring too much hardship or unemployment. He says that the three core principles that shape Microsoft’s approach to AI are:
(Shortform note: Nadella is optimistic that AI won’t lead to widespread unemployment, but Yuval Noah Harari argues otherwise in 21 Lessons for the 21st Century. He writes that, despite the possibility of humans and AI working together, it’s likely that there will still be a net loss in employment due to AI. He recommends that governments prepare for a “post-work society” by: 1) implementing a universal basic income, which taxes corporations and billionaires and distributes the money to the rest of the population, 2) broadening the definition of work to include unpaid “jobs” like people who take care of elderly relatives, and 3) providing free basic services—education, transportation, health care—instead of basic income.)
Hit Refresh is Satya Nadella’s account of how he took over as Microsoft’s CEO in 2014 and sought to rejuvenate the company after a long period of stagnation and decline. He describes how he reinvigorated the company by rediscovering its “soul”: He articulated the company’s mission and reminded everyone of the why behind their work, transformed the corporate culture from one plagued with in-fighting to one of collaboration, and formed strategic partnerships with Microsoft’s fiercest competitors.
Throughout the book, Nadella discusses the key leadership principles that helped him “hit refresh” on Microsoft and the business practices that allowed the company to thrive once again. He connects these principles to his life experiences of growing up in India, immigrating to the US, working his way up at Microsoft, and being a father to a child with special needs. He also offers his thoughts on the future and how companies and policymakers can—and must—ensure that technology isn’t just a means for economic growth but, above all, a force for good that is grounded in empathy, augments (instead of replaces) human capabilities, and helps solve the world’s big problems.
Satya Nadella is only the third CEO of Microsoft in the company’s 47-year history. (His predecessors are Bill Gates and Steve Ballmer.) He grew up in Hyderabad, India, where his father was a civil servant and his mother was a Sanskrit scholar. His first love was cricket, and his sole ambition in his younger years was to play the sport and then work for a bank. However, when he started studying electrical engineering at the Manipal Institute of Technology, cricket took a backseat to his love for computers.
After graduating from college, he immigrated to the US, obtained a master’s degree in computer science at the University of Wisconsin, then worked for Sun Microsystems, a Silicon Valley legend. In 1992, he got a job at Microsoft in Redmond, Washington as a Windows NT evangelist (tech-speak for someone who builds support for specific technologies). Wanting to complement his engineering background with management training, he enrolled in a part-time investment banking program at the University of Chicago, flying in every weekend to attend classes after a full week of work.
Nadella worked in various leadership roles at Microsoft before becoming the executive vice president at the helm of the company’s nascent cloud business. He was announced as the CEO of Microsoft in February 2014. Since then, Microsoft’s market capitalization has increased from around $300 billion to around $2.5 trillion (as of December 2021), and Nadella has been recognized by various award-giving bodies and publications for his leadership: In 2018, he was a Time 100 honoree; in 2019, he was Financial Times’ Person of the Year and Fortune’s Businessperson of the Year; and in 2020, he received the Padma Bhushan, the third-highest civilian award from the Indian government. In 2021, Nadella was named Microsoft’s chairman.
Nadella is married to his childhood friend, Anu. (In the book, he narrates how complicated immigration laws led him to give up his green card (and permanent status in the US) for love—in a risky move, he reapplied for a temporary skilled worker visa, which allowed him to bring Anu to the US from India without a waiting period.) They have three children; his eldest, Zain, was born with cerebral palsy and died in 2022 at the age of 26.
Connect with Nadella:
Nadella co-wrote Hit Refresh with Greg Shaw, a publisher and senior director of the Office of the CEO at Microsoft, and Jill Tracie Nichols, founder and CEO of a boutique communications agency and Nadella’s former chief of staff.
Hit Refresh was published by HarperCollins in 2017. It includes a foreword by Microsoft co-founder Bill Gates, where he explains the significance of the title: When you hit the refresh button on your browser, you don’t start from scratch; instead, you keep some of the page on your screen. He likens this to how Nadella didn’t turn Microsoft into a completely different company, but instead expanded the company’s focus beyond Windows and into exciting new territory.
In an interview, Nadella emphasizes that Hit Refresh isn’t a playbook for success, but rather a reminder of the importance of constantly hitting refresh—reevaluating, recalibrating, and innovating—for sustained success.
When Nadella took over as CEO, Microsoft was no longer the tech juggernaut it once was. The company was still profitable, but it failed to break into emerging tech like ebooks and mobile, and it was playing catch-up with its competitors. Internally, the company was plagued with conflict and bureaucracy.
In the book, Nadella references the toxic culture at Microsoft, but he doesn’t go into much detail beyond mentioning in-fighting, finger-pointing, and employee dissatisfaction and disillusionment. Reports describe how executives stifled innovation, refusing to see beyond the company’s tried-and-tested products, Windows and Office.
Apart from that, the dotcom crash led to resentment—while older employees easily earned millions during the dotcom boom, employees post-boom had to contend with cost-cutting measures like scaled-back health insurance. Realizing that the days of dotcom millionaires were over, newer employees became more intent on moving up the corporate ladder. This meant more power plays, more managers, and a bloated organization where everything moved at a snail’s pace—which can be catastrophic for a company in tech.
When Nadella stepped in, he knew that Microsoft needed a refresh. The book describes the changes he made in his first three years as CEO and is interwoven with stories about his journey from Hyderabad to Redmond. He confesses that he had some reservations about writing the book fairly early into his term, saying that there was still a lot of work to do. However, he realized that writing as a sitting CEO in the middle of a big transformation—rather than as a retired CEO with the benefit of hindsight—could help Microsoft’s employees gain a deeper understanding of the company’s mission. He also wanted to share his insights on the wider ethical, political, and economic implications of recent technological breakthroughs.
In a LinkedIn post, Nadella says that the book “isn’t a victory lap or how-to manual” but a set of “reflections, ideas, and principles on transformation,” as well as questions for those who want to improve themselves or their institutions.
Hit Refresh is similar to other books written by successful business people about their leadership principles and their approach to corporate culture. Other books in this category include:
Principles—Ray Dalio, founder of the world’s largest hedge fund, writes about how his experience of failure led to his firm’s culture of relentless truth-seeking and radical transparency.
Creativity, Inc.—Pixar co-founder Ed Catmull writes about encouraging candor and nurturing creativity and innovation in the workplace.
No Rules Rules—Netflix CEO Reed Hastings reveals the unorthodox workplace culture of “freedom and responsibility” that allowed the streaming platform to stay innovative and agile in a fast-changing industry. (Incidentally, Hastings—who was a member of the Microsoft board—was a mentor to Nadella when he was still running Microsoft’s online division.)
We’ll compare and contrast the ideas from some of these business people and other similar books with Hit Refresh in this guide.
Hit Refresh was a New York Times bestseller, peaking at #4. Every Microsoft employee was given a special annotated version of the book—though, unlike Ray Dalio’s Principles—it wasn’t required reading.
Positive reviews of the book describe it as unpretentious, stirring, and well-written, providing “surprising and welcome insights into a corporate giant” and as a “valuable blueprint for techies and others in a culture-change state of mind.” On the other hand, one writer opines that the book is a “sanitized rather than revelatory account of change at Microsoft.” Another writer laments that there isn’t much about Microsoft’s history. The Financial Times writes that Nadella’s natural restraint unfortunately keeps him from going into compelling detail—whether it’s about his experiences at work or at home.
Nadella tells his story in three broad sections: He writes about the past (his formative years in India and move to the US), the present (Microsoft’s ongoing transformation), and the future (his reflections on the implications of the development of AI). He accomplishes this through a loosely organized blend of memoir, scattered business anecdotes, and ethical, political, and philosophical musings.
In this guide, we focus on identifying the key themes of leadership and good business practices that recur throughout Hit Refresh. Since the same themes come up in multiple chapters, we have foregone a chapter-by-chapter approach in favor of one built around these core themes, allowing us to explore each of them in depth and linking them to key experiences in Nadella’s life. We have identified five main themes: empathy, leadership, innovation, competition and partnership, and ethical development. This guide looks at each of these themes in turn.
We also compare Nadella’s leadership principles with those of other well-known business people. As Nadella doesn’t go into detail about Microsoft’s history and some of its controversies, we provide some context and go more in-depth into the company’s impact and major issues.
The theme that is the most central to Nadella’s business philosophy is empathy. Nadella defines empathy as the cornerstone of all that he does, both personally and professionally, and believes that it’s shaped his career at Microsoft and his vision for the company.
Nadella acknowledges that empathy was something he had to develop early in his career. He cites his son’s disabilities as helping him to become a more empathetic person. Faced with the reality of his son’s permanent condition, he writes that he learned to put aside his own feelings in order to better understand the struggles his son faced, and, with his wife Anu’s encouragement, learned how to become a strong support for his son.
(Shortform note: Nadella’s son, Zain, was born with cerebral palsy and required extensive therapy and visits to the ICU. In 2021, Nadella and his wife donated $15 million to Seattle Children’s Hospital—which Nadella described in Hit Refresh as their family’s “second home”—in support of care and research for children with neurological conditions. Zain died in 2022 at the age of 26.)
For Nadella, empathy is about understanding others’ points of view and also seeking to help empower them. He believes that empathy enables Microsoft to understand its employees and customers better, helping the company to anticipate the needs of its clientele while also creating a more welcoming and dynamic environment in the workplace.
(Shortform note: Nadella values empathy so much that he required Microsoft’s senior leadership to read Marshall B. Rosenberg’s Nonviolent Communication. The book is about conflict resolution based on compassion instead of life-alienating communication. This was a necessary tool at Microsoft, where senior leaders were constantly at odds.)
Nadella identifies four main facets of empathy: empathy as central to leadership, empathy as rooted in direct engagement with employees and customers, empathy as understanding the barriers and obstacles others face, and empathy as the foundation of trust.
Nadella believes that empathy is central to good leadership. The enemy of empathy is detachment and isolation: If the leader always keeps to his office or only associates with his senior inner circle, he will lose touch with the other employees in the company. An isolated CEO will also lose out on chances to get to know both his customers and his competitors better.
Empathy is about understanding where others are coming from and addressing their needs, whether they’re an employee, a customer, or even a competitor or business partner you may have disagreements with from time to time. Nadella says he places empathy at the heart of every relationship he has.
(Shortform note: While research supports Nadella’s view that empathy is the most important skill leaders can have, one study suggests that empathy can have its downsides for CEOs, especially during a crisis. The study argues that being too empathetic can cloud a CEO’s judgment by making them too quick to react to perceived problems, overly apologetic even if the situation doesn’t merit it, and slower to address issues in a company’s operational structure. The two sides of the empathy issue thus suggest that moderation and context are key in order to employ empathy effectively.)
Nadella asserts that empathy is rooted in direct engagement and that it should be the cornerstone of all of a CEO’s relationships.
Nadella believes the CEO must actively seek out employee feedback and be willing to listen to their ideas and concerns with an open mind. He writes that when he took over as CEO of Microsoft in 2014, he made a public promise to employees that he would listen to others to take stock of where the company was and the problems it faced. He actively solicited employee feedback through wide-ranging surveys and meetings in which he encouraged open conversation and debate.
(Shortform note: Such openness can lead to conflict, but hedge fund billionaire Ray Dalio believes conflict can be productive, leading to the best ideas and decisions. In Principles, he writes that you can work through disagreements and move toward cooperation by asking questions rather than making statements, focusing on what the other person is saying rather than how they’re saying it, and maintaining mutual respect.)
Nadella also chose to open the lines of communication by bypassing some of the hierarchy and bureaucracy that made it harder for lower-level employees to be heard. One example of how he achieved this is when he invited junior members of Microsoft to what had traditionally been a seniors-only annual brainstorming retreat. While some senior members resisted the inclusion of the more junior members, the retreat ended up being more productive and dynamic thanks to the presence of fresh ideas and a willingness to listen to them.
(Shortform note: While Dalio similarly values the ideas and opinions of junior employees, his approach is less democratic. To him, it’s important to give more weight to the opinions of people who have proven their credibility. In Principles, he describes his firm’s principle of “believability-weighted decision-making,” which is different from weighing everyone’s opinions equally. Believable people are those who have repeatedly succeeded in the area under discussion and can logically explain their process.)
Nadella employs direct engagement with customers by going out into the world to see how Microsoft’s products are used in action. By seeking out opportunities to directly engage with how Microsoft is used by customers, Nadella learns what they need.
He invited customers—schools, nonprofits, small businesses, and so on—to the senior leadership team’s annual retreat so that Microsoft’s senior researchers, engineers, sales, and other executives could understand what the customers’ problems were and work together to solve them. He also writes about witnessing the positive effects of Microsoft’s technology in hospitals and clinics—during Zain’s stays at the hospital, Nadella noted how many of the devices in the ICU ran on Windows and were connected to the cloud. This reminded him of how Microsoft’s work could make a difference in people’s lives.
(Shortform note: Nadella’s attitude toward customers is in line with the modern principles of sales, which Daniel Pink details in To Sell Is Human. Pink writes that contemporary selling strategies require building a connection—getting in sync with and adapting to people, communities, and contexts to serve their needs. One way to do this is to use your imagination to consider the customer’s perspective. This enables you to see if you missed any of their needs by focusing on your own perspective or experience.)
Nadella also says it’s important to engage directly with competitors in order to learn from them or to resolve disputes. He writes about meeting with executives from large tech rivals such as Apple and Facebook to better understand what they were doing well that Microsoft wasn’t doing and willingly learning from them. We’ll discuss this in more detail later in the guide.
(Shortform note: While Microsoft was engaged in storied rivalries, particularly against Apple, Nadella brought in a different mindset, one that’s similar to what Simon Sinek describes in The Infinite Game. Sinek writes that viewing competitors as worthy rivals rather than just rivals enables you to see what they’re better at and how you can improve. This encourages you to shift your focus from defeating others to maintaining a healthy position in your industry.)
Nadella writes about how empathy plays a big part in his approach to business disputes with partners. He seeks common ground instead of trying to win or dominate others. He argues that empathy allows business leaders to understand the legitimate concerns or objections others may have and to find positive solutions that work for both parties.
He describes how this empathy paid off in a dispute with Yahoo, which used Microsoft’s Bing as its search partner. Yahoo wanted to breach its contract, and the situation could have easily escalated. Instead of making threats and demands, the Microsoft team practiced empathy and listened to the Yahoo team’s concerns. They worked together to find a solution that satisfied both parties—without costly litigation.
5 Steps for Resolving Conflicts in Business Partnerships
While business partnerships can bring considerable benefits to both parties, nonetheless, it’s not uncommon for partners to face occasional rough patches. These five steps can help you resolve conflicts in business partnerships and get back on track. They dovetail with Nadella’s approach to practicing empathy:
Step #1: Hear both sides. Set aside your own opinions temporarily, and listen to what your partner has to say with an open mind. Seek to understand your partner’s position even if you don’t agree with how they view the situation.
Step #2: Re-establish common goals. Disagreements are often rooted in a misunderstanding or in a misalignment of goals. Going back to the drawing board to re-establish the goals you wish to reach together will help to clarify what needs to happen.
Step #3: Focus on the facts. To avoid impulsivity, emotional outbursts, or the blame game, seek to keep the focus on the facts and not on your feelings about them. Objectively assessing the situation can help keep things productive and calm.
Step #4: Talk to a mediator. A third party can help resolve disputes by bringing a neutral voice into the discussion to moderate disputes. Hire a business coach or counselor to air your issues and seek guidance.
Step #5: Make a plan. Work with your business partner on a clear, step-by-step plan for getting back on track and reaching your shared goals. Make sure that each partner contributes to, and fully understands, the plan before getting back to business.
Nadella also posits empathy as crucial for understanding the obstacles others may face due to racial, gender, or class categories/backgrounds.
Nadella says he faced occasional abuse as an Indian immigrant when he first came to America, but that the privileged background he came from back in India helped to insulate him from taking the insults too personally. He acknowledges that, for many immigrants and people from less-privileged backgrounds, the barriers can be even harder to overcome.
Nadella says that witnessing the career sacrifices of his mother and wife opened his eyes to the struggles many women face professionally. His mother was an accomplished Sanskrit scholar, whose career struggled—and then floundered—under the pressures of trying to balance both her family and working lives. She eventually gave up working after the death of Nadella’s younger sister, just as Nadella’s wife eventually gave up her career as an architect to care for their young children.
(Shortform note: As Nadella describes, inequality within the business world takes many forms. Research indicates that the greatest divide up until the 1970s was originally along gender lines, with men and women largely confined to differing roles. But since the 1980s, gender and ethnicity have been roughly equal as factors in job segregation. The research also found that minority or marginalized members of the workforce tended to report lower levels of job satisfaction and to be more likely to leave than employees who belong to the dominant demographic in a workplace.)
Later in the guide, we’ll discuss how Nadella’s understanding of these obstacles makes him more conscious of the importance of diversity and inclusion in the workplace.
Nadella also promotes empathy as the foundation of trust, which sustains both personal and professional relationships over time.
Nadella describes how when he first took over as CEO, Microsoft’s workplace had grown toxic over many years. Employees were more interested in backstabbing one another or arguing with each other than they were in pulling together as a team to achieve common objectives. To combat this, Nadella promoted team-building exercises and encouraged seeking common ground. He also took the time to get to know his senior team members as individual people, not just as employees, by hosting a meeting in which each person was allowed to open up about themselves on a more personal level.
(Shortform note: As some writers have observed, these changes are largely because of Nadella’s personality. His predecessors, the hot-tempered Gates and the larger-than-life Ballmer, were known for ruthless business tactics that turned customers off. In contrast, Nadella is calm and subdued, replacing Microsoft’s winner-take-all approach with openness and curiosity. As a result, he was able to reform Microsoft’s image from that of a big, bad corporation to that of the “cool kid.”)
Listening to competitors and partners and empathizing with their points of view created trust, Nadella says, and this in turn led to more fruitful business partnerships and harmonious coexistence with rival companies.
Inspiring Trust at Work
Nadella’s focus on trust is in line with the view that trust is the foundation for solid leadership. Experts conceptualize trust as a triangle made up of three main points:
1) Be compassionate and interested in others. Always be patient when dealing with colleagues in the workplace. Give others your full attention during interactions to show them you’re engaged in what they have to say. People are more likely to trust and respect someone who they believe is sincere in caring about them.
2) Be clear and comprehensible in your ideas. People tend to trust those who are able to present their thoughts and reasoning in an orderly, comprehensible way.
3) Be yourself. Don’t hide behind a “work persona” at all times, making your real self a mystery to those you work with. Instead, learn how to open up to your colleagues and show a more personal side. It’s easier for others to trust you when they know who you really are.
Nadella believes that empathy has shaped his career and his vision for Microsoft and that it’s important to practice it through direct engagement.
Describe an instance when you experienced conflict with an employee, colleague, or customer.
How might it have played out differently if you had practiced empathy in the situation?
List 1-3 ways you can start practicing more empathy at work. (For example, regularly asking for upward feedback from employees.)
While empathy is at the heart of Nadella’s leadership, much of Hit Refresh focuses on how he defines good leadership more generally. In this section, we’ll discuss Nadella’s leadership principles and his priorities as CEO.
Apart from empathy, Nadella writes that there are several key principles for anyone who wishes to become an effective and inspiring leader, regardless of their industry. We’ve synthesized his main points below.
As a lifelong devotee of cricket, Nadella understands the importance of working together as a team. He writes that individuals—no matter how talented—can destroy a team if they’re more concerned about personal glory rather than collective success. Nadella himself is an example of someone who puts the team ahead of himself: In Hit Refresh, he acknowledges how different team members help him lead Microsoft.
(Shortform note: Leaders who put themselves ahead of the team can be considered positional leaders—they think they’ve “arrived” by virtue of their title and are obsessed with protecting their position. In The 5 Levels of Leadership, Maxwell writes that such leaders make others look bad to make themselves look good and use their position to their advantage instead of thinking about their responsibilities to the team. This is bad for the workplace because it results in low morale and a toxic work environment.)
He also writes about the importance of creating a “shared context” when leading a team. This means being able to get your team on board with your decisions. He relates that prior to becoming CEO, he was appointed to lead a new group and decided not to bring his old team with him. Each leader in the new group seemed to be operating autonomously, so Nadella met with each one individually and listened to what they had to say. This led to more openness and cooperation within the group.
(Shortform note: Nadella doesn’t go into detail about how to create a “shared context.” In Team of Teams, Stanley McChrystal writes that one way you can build this shared context, or shared consciousness, is by adopting a policy of extreme transparency. This means sharing information so that everyone has an accurate, real-time view of the organization. In McChrystal’s case, he implemented a daily briefing, making use of technology so that others who weren’t at headquarters in Iraq could still participate.)
Nadella insists that his loyalty to Microsoft stemmed more from a belief in the company’s mission than in his own personal ambition: He believed that Microsoft could do a lot of good in the world through its democratizing approach to technology. To help inspire employee conviction when he became CEO, Nadella drafted a mission statement that defined the company’s beliefs and goals in a succinct and accessible way. This helped to give employees a sense of direction and a renewed sense of purpose.
(Shortform note: It’s important to find a common purpose as Nadella did because, according to the authors of Tribal Leadership, doing so encourages people to come together and work effectively. To find a worthy purpose, the authors recommend asking four questions: 1) What’s working well? 2) What’s not working? 3) What can we do to make the things that aren’t working work? 4) Is there anything else?)
In order to spot opportunities and take smart risks, a company must always be considering how the decisions it makes today could affect both its own standing and the world around it over the long term. An example of this at Microsoft is Nadella’s approach to AI: While openly enthusiastic about AI’s potential, Nadella also stresses the importance of anticipating the disruptive effects it could have in the workforce. He argues that companies must plan ahead to help avoid inflicting hardship upon workers and find ways to make AI something that can boost efficiency while also avoiding making humans permanently unemployed. (We discuss this in more detail under Theme #5.)
(Shortform note: Part of the reason behind Microsoft’s decline was that it fell into the trap of short-term thinking, but this isn’t uncommon—it has become a serious problem for many American companies. To avoid the pitfalls of short-term thinking, experts recommend that companies decouple executive compensation from quarterly gains and prioritize long-term investors over short-term investors in a company.)
While Microsoft helped to pioneer the personal computer revolution in the 1980s and ’90s, it missed out on several other important technological trends, such as search engines (an area in which Google soon dominated), mobile phones, and—for a while—cloud computing. Nadella realized that Microsoft had grown too fixated on doing what it had always done, and that the key to remaining competitive as a business was to take risks and seek new opportunities for growth and product development. Armed with this realization, Nadella poured his energy into encouraging the development of Microsoft’s cloud computing and AI systems.
(Shortform note: Microsoft isn’t the first innovative company to be lulled into complacency by its success. In Business Adventures, John Brooks describes how Xerox found massive success with its first copier, but new competitors were soon eating into its market share. This reminded Xerox leaders that they had to explore other fields and led to the establishment of the Xerox Palo Alto Research Center (PARC) which developed some groundbreaking tech—including the graphical interface that led to the development of Windows. Unfortunately, Xerox executives missed out on capitalizing on PARC’s innovations. They remained hyperfocused on copiers, much like Microsoft execs relied heavily on Windows and Office.)
Nadella believes that as CEO, his first and most important job is to foster a good corporate culture. Thus, refreshing corporate culture was at the top of his priority list. (Shortform note: Nadella believes that culture is a crucial component of a corporation, but some warn that an overemphasis on culture can be damaging. In Nine Lies About Work, the authors argue that companies might force employees to shed their individuality to conform to and preserve the company culture, ignoring the unique strengths they bring to a company.)
When he took over as CEO of Microsoft in 2014, he believed that the company had lost its soul and was no longer representative of its original core values. The corporate culture had grown toxic: The company had fallen behind its competitors and its employees were dissatisfied and disillusioned—surveys revealed that they didn’t feel like Microsoft was going in the right direction. Nadella thus sought to transform the culture into one that would lead to a positive, rejuvenated work environment for all employees.
Elements of a Strong Corporate Culture
Prioritizing culture as Nadella did can lead to a more integrated and satisfied team, better overall communication, and an improved corporate image both internally and externally. If you’re looking for ways to improve your company’s culture, consider addressing the following elements:
Involvement. A strong culture is one that encourages the involvement of everyone, from the highest to the lowest ranks. Solicit employee feedback and ideas whenever possible to tap into everyone’s creativity.
Values. Make sure that conduct is consistent with the company’s stated values. Senior management should strive to set an example for lower-level employees by modeling ideal behavior.
Coherence. Foster clear interdepartmental communication and streamlined work processes to create a coherent and unified whole.
Analysis. Take frequent stock of what’s working and what isn’t to make sure your workflow is efficient and that your results are the best they can be.
Transparency. Avoid a culture of secrecy by always sharing with your employees what the company’s goals, struggles, and current approaches are.
Recognition. Ensure that employees feel appreciated by recognizing achievements and providing bonuses and incentives for those who excel in their roles.
Flexibility. Offer flexible work options whenever possible to help accommodate employee preferences and needs, such as remote working or time off for family obligations and personal engagements.
Autonomy. Empower your employees by delegating responsibilities to them and giving them autonomy to carry out their tasks. This builds trust between managers and employees to create a healthier workplace dynamic.
Nadella transformed Microsoft’s corporate culture by:
1) Speaking and listening to employees. Nadella solicited honest feedback through his surveys and meetings, and made an open show of being open-minded and ready to listen. When he witnessed an employee being aggressive or negative toward others, he stepped in and tried to steer the interaction into a more positive direction. He emphasized to employees that change was needed, from top to bottom.
(Shortform note: Nadella puts into practice what Marshall B. Rosenberg describes in Nonviolent Communication, a book that Nadella required managers at Microsoft to read. Rosenberg’s four steps to nonviolent communication are: 1) Observe without evaluating, 2) identify and express your feelings, 3) connect the feelings to your underlying needs, and 4) make specific requests, highlighting what you do want others to do rather than what you don’t want them to do.)
2) Engaging with senior managers—and beyond. Nadella hosted meetings in which senior managers could open up and share more personal experiences and ideas with one another. He also tried to build a context in which they could learn new things together, to foster a sense of momentum and bring them closer to one another as a team.
Beyond getting to know senior managers, Nadella argues that CEOs must remember that they lead an entire company, not just senior management. Thus, a CEO must always stay in touch with the broader base of employees, and they must seek decisions that benefit the company overall and not just one small part of it.
(Shortform note: Nadella practices one of John Maxwell’s 21 Irrefutable Laws of Leadership: Leaders connect with others. Maxwell asserts that leading is more than just giving instructions. It means becoming emotionally engaged with followers so that they’ll be moved to follow you and work hard. He adds that leaders shouldn’t expect their followers to come to them; instead, leaders should initiate contact.)
3) Clearly and succinctly defining Microsoft’s mission. Nadella writes that having a clear mission inspires others and gives them a sense of direction. Before Nadella took over as CEO, the company didn’t have a clear mission—the executive team struggled to explain the corporate strategy to over 100,000 people across more than 190 countries. To get everyone on the same page, Nadella and his team streamlined and defined the company’s mission, worldview, objectives, and culture. The key message: Microsoft’s mission was “to empower every person and every organization on the planet to achieve more.”
(Shortform note: Nadella writes that he received hundreds of positive responses from employees who thought the new mission was inspiring and energizing. However, it wasn’t without its critics: One writer for the Financial Times took aim at the vagueness of the mission, writing, “Achieve more of what?” She argues that Microsoft’s old mission under Bill Gates—“a computer on every desk in every home”—was much more concrete and precise.)
By simplifying the message, they inspired people and enabled them to see how their work fit into the company, fostering a shared sense of purpose.
How to Create an Effective Mission Statement
As Nadella has proven, a clear mission statement can inspire people and get them on the same page. To make your own mission statement, experts recommend that you:
1) Build upon employee and customer feedback. Launch a fact-finding mission to discover how your employees and customers view your company and what they want from you. This can help you better understand what your mission statement needs to zero in on before you begin crafting it.
2) Narrow in on your most important values and goals. Avoid wordiness and vagueness by targeting only what is essential: your most important corporate values and the main missions you have.
3) Be concise and clear. Any kind of insider jargon should be avoided in favor of clear, direct language that anyone can understand.
4) Target your ideal client. Imagine the person you’re trying to reach, and consider what they would need to know in order to understand what you stand for and what you offer, then build your statement around that.
5) Define what makes you unique. Make sure your statement openly defines what makes your company stand out from your competitors.
4) Encouraging people to learn together as well as work together. Nadella believes that team-building exercises and creating an environment in which constant learning is actively encouraged helps bind a team and encourages employee growth. It also contributes to innovation, as we’ll discuss in the next section.
Benefits of Team-Building Exercises
Microsoft has an annual hackathon (to be discussed in the next session), which requires people across different departments to work together. There are many quick and effective team-building exercises you can do to facilitate employee bonding. While team-building exercises can be a lot of fun, they also help employees build valuable workplace skills, including:
Better communication and interpersonal awareness. Team-building exercises can be a great way to break the ice for new employees and help established employees get to know one another better.
Problem solving. Exercises that require creative and/or analytical thinking can sharpen problem-solving skills, which in turn can be applied to issues that arise in day-to-day working life.
Effective planning and adaptability. Exercises and games that require strategizing and adaptability of approach can help employees with developing more methodical thinking and flexibility.
Trust and teamwork. Virtually any exercise you do will help foster trust by encouraging employees to open up to one another and work together in new ways.
With Nadella’s leadership, Microsoft’s culture changed from one of in-fighting and bureaucracy to one of collaboration and innovation.
Consider the current culture at your company (or within your team). List two to three areas that need improvement—for example, there might be a lack of alignment between departments.
Which of Nadella’s leadership principles (having empathy, putting your team first, having conviction, thinking long-term and short-term, and not being complacent) can you use to address each area for improvement?
Describe a specific, immediate action you can take that can help you hit refresh on each area for improvement. For example, to create alignment between departments, you can implement weekly check-in meetings with department heads.
The next key theme in Hit Refresh is the importance of continuous innovation in ensuring a company’s long-term survival. In this section, we discuss the three key elements of innovation: adopting a growth mindset, creating a diverse workforce, and working together.
Nadella writes that Microsoft had become stagnant at the time he became CEO. While the company led the “PC Revolution” of the ’80s and ’90s, Nadella argues that it had a “fixed mindset”—it rested on its past successes instead of continuing to take risks and push innovative tech products. With the advent of mobile phones and iPads, its rivals started to pull ahead.
(Shortform note: In The Infinite Game, Simon Sinek cites Microsoft as an example of a company that practiced “finite” thinking—essentially a fixed mindset that leads to short-lived companies. He argues that Microsoft under Steve Ballmer was focused on how it could beat Apple and thus based its decisions on Apple’s moves. In contrast, he writes that Apple practiced “infinite” thinking. It was proactive rather than reactive and focused on improving customer experience through innovation.)
Nadella argues that no company can afford to retain a fixed mindset and get too comfortable in a fast-changing environment. Instead of sticking to what it has always done well and seeking short-term gains, companies should attempt to plan ahead by anticipating the next big trends and seeking to address them. Nadella helped break Microsoft out of its fixed mindset by adopting a “growth mindset,” which enabled the company to regain the initiative instead of falling behind in technological trends. Risk-taking and innovation became the order of the day instead of playing it safe, leading to new opportunities in AI and cloud computing and changing the general atmosphere at the company.
(Shortform note: Having a growth mindset is just as important in your personal life as it is in a company. In Grit, Angela Duckworth writes that people who have a growth mindset believe that they can get smarter or more talented over time if they put in the work and are given the right opportunities. They’re more likely to persevere despite obstacles and failure. In contrast, people with a fixed mindset believe that intelligence and talent are static, and thus attribute their failures to something they believe they’ll never have.)
In addition, Nadella believes a growth mindset means that you learn from your mistakes. While many things had gone wrong at Microsoft in the years before Nadella took over as CEO, having the courage to confront those mistakes and finding a way forward was instrumental in the company’s rejuvenation.
He uses Nokia as an example: Microsoft had acquired Nokia for $7.2 billion in the hopes of bolstering its smartphone presence but ultimately decided to write it off. (Nadella notes that he voted against the acquisition, which was put into motion before he took over as CEO.) He says that letting go of so many talented people was heartbreaking but that the Nokia experience taught him many lessons. For one, he learned that they should only be in businesses where the company has a strong differentiator.
(Shortform note: Nadella’s approach to mistakes is similar to Pixar co-founder Ed Catmull’s. In Creativity, Inc., Catmull writes that Pixar embraces failure because it’s an inevitable result of innovation—if you don’t take risks, you won’t be able to come up with something original. To take the stigma out of failure, he recommends admitting your own mistakes and explaining how you moved forward. You should also take the pressure off managers to perform perfectly and encourage them to create an environment where employees can fail and recover.)
Aside from having a growth mindset, Nadella believes that diversity and inclusion contribute to an innovative workplace. Having diverse employees prevents homogeneous thinking, opening up the company to different values and perspectives that lead to better ideas and products. Nadella himself can be seen as a diversity success story: an Indian immigrant who was able to rise through the ranks of Microsoft to eventually become its CEO.
Creating a More Inclusive Workforce
Many modern businesses are increasingly aware of the problems of diversity and inclusion in the workplace, and are placing a greater emphasis on the DEI approach (Diversity, Equity, Inclusion). Diversity is about ensuring more equal representation across different ethnic, racial, and sexual orientations when hiring employees. Equity is about creating a workplace in which everyone has equal opportunities to excel. Finally, inclusion is about making sure every employee has a positive work experience, and that each employee feels capable of participating to the best of their abilities.
Trying to bring greater diversity in the workplace isn’t as easy as it seems. As research suggests, diversity training is frequently ineffective, since participants can often respond negatively to it as a seemingly coercive measure. Nevertheless, a more diverse workforce does bring many tangible benefits, such as greater profitability than more homogenous workplaces, as the mix of backgrounds and perspectives can create a more dynamic and innovative team.
While Nadella espouses diversity and inclusion, he admits that he still has his own blind spots. One headline-grabbing occurrence was his appearance at the Grace Hopper Celebration for women in computing in 2014, where he was invited to talk about increasing the visibility and involvement of women in tech industries. When asked how a woman in tech could approach getting a pay raise, Nadella claimed that so long as someone continues to work hard and well, they will eventually be recognized for their efforts and rewarded accordingly—an assumption that, as the questioner pointed out, was not at all in keeping with her own experiences and those of many other women in tech.
Nadella recognized and learned from this mistake: After the conference, he sent a company-wide email, owning up to his blunder and stressing that his answer was completely wrong. He had seen first-hand how women (like his mother and his wife) had to put careers on hold for the sake of children and reiterated that leaders should actively root out biases to create a fair environment where everyone can speak up for themselves. Since then, Microsoft has become more transparent about pay equity and channels resources into diversity programs.
Women and Tech: Recognizing Common Obstacles
In spite of the advancements women have made in recent years, women still face significant barriers when pursuing careers in tech. These barriers include:
1) Sexism around women’s professional roles. Tech is still a male-dominated field, and traditional ideas around which roles and careers women “should” prefer can act as a hindrance. A lack of visibility of women in tech also means that women rarely get exposure to potential mentors, and remain ignorant of the opportunities available.
2) Social conditioning. While men are often encouraged to be confident go-getters in the workplace, many women struggle to assert themselves when it comes to promotions, pay raises, and making their ideas heard. This means that—as Nadella himself discovered—even deserving women are frequently overlooked while working in the tech field.
3) Lack of support. Tech cultures are not always family-friendly or sensitive to the needs of women, many of whom may prefer more flexible work options and a more supportive work culture. Balancing professional and family obligations remains an issue for many.
Another barrier to innovation that Nadella wanted to address was the bureaucracy and isolation between departments that had built up over the years. He asserts that such segregation only holds a company back; the key to moving forward is collaboration and being open to other people’s ideas instead of remaining in your own bubble.
To break down departmental silos and generate fresh ideas, the executive team introduced an annual week-long hackathon, where teams across different groups—engineering, research, marketing, and so on—work together to solve problems creatively. For example, in the first year of the hackathon, one team found ways to improve learning outcomes for kids with dyslexia; this project ended up being built into some of Microsoft’s key products.
Forging Better Cross-Departmental Communication
Effective cross-departmental communication is crucial for ensuring the smooth running of any company. Here are seven ways you can build effective cross-departmental communication:
1) Communicate more. Solicit feedback and ideas from each department and staff level to consolidate the brain power at your disposal, and seek new ways of opening up the channels of communication.
2) Make your meetings more effective. Have a clear agenda for each meeting, and try to cover as much as you can per meeting to avoid having meetings too frequently.
3) Use small talk to your advantage. Encouraging informal communication and team-building exercises can help people from different departments build strong bonds with one another.
4) Employ technology designed for collaboration. Tools such as Microsoft Teams and Google’s G-Suite can help foster employee collaboration and coordinate departments more effectively when working on tasks.
5) Vary your communication methods. Toggling between different communications methods helps keep things fresh and ensures that there are multiple ways for departments to reach out to one another. Use email, phone calls, video calls, and internal messaging services.
6) Bring leadership levels together. Have regular meetings involving the leaders at each level of the organization and from different departments, so that everyone is on board with what’s happening in the company overall.
7) Choose your managers wisely. Make sure that every manager you hire is a good interpersonal fit with the other leaders, and that they come into the company with a strong sense of the importance of collaboration and open communication.
Aside from paying attention to the internal dynamics at Microsoft, Nadella also sought to improve external relationships with the company’s competitors.
Nadella admits that for a long time, Microsoft was known as quite ruthless and “monopolistic” in its approach to business.
(Shortform note: Nadella mentions Microsoft’s antitrust case, but doesn’t go into detail. In 1998, Bill Gates testified before the Senate Judiciary Committee to explain Microsoft’s dominance. The Department of Justice had filed an antitrust suit against Microsoft, alleging that the company was monopolizing the industry by forcing PC manufacturers to use Internet Explorer as their default browsers. The court ruled against Microsoft and ordered that it be broken up into two companies, but Microsoft filed an appeal and reached a settlement with the DOJ. Gates says that the antitrust case distracted Microsoft from developing its smartphone business and was one reason he stepped down as CEO in 2000.)
Nadella notes that it’s easy to be bitter that others like Apple and Google have raced ahead in areas like mobile. He also writes the press loves pitting companies against each other to fuel cutthroat competition. However, he doesn’t believe that envy and spitefulness are good drivers for success. Instead, he adheres to a lesson about competition that he learned from his cricket days: Be respectful of your rivals, and don’t let intimidation prevent you from taking pride in what you do and performing at your best.
Thus, Nadella changed Microsoft’s approach to competition: Instead of being weighed down by envy, he tried to learn from the successes and failures of Microsoft’s rivals. Importantly, he realized that it was in the customers’ best interest for Microsoft to coexist with its competitors—rather than seeing them as enemies who threatened Microsoft’s market share, they could tap into their complementary strengths so that they could all grow.
He took to heart his predecessor Ballmer’s three Cs: concepts, capabilities, and culture. Ballmer believed that concepts—or ideas—alone don’t lead to success. Instead, they must be backed by strong engineering and design skills (capabilities). This means Microsoft needs a culture that’s open enough to collaborate with other companies that have complementary concepts and capabilities to help Microsoft meet its customers’ needs. For example, instead of making customers choose between devices that could run Office or Apple devices that didn’t have access to Office, Microsoft worked with Apple so that Office could run on Apple’s operating system.
Highlights of the Microsoft-Apple Rivalry
Nadella doesn’t elaborate on Microsoft’s rivalries. The company’s most famous rivalry with Apple stems from the complicated relationship between Bill Gates and Steve Jobs:
1985: While Jobs and Gates initially collaborated on the Macintosh, things turned sour when Microsoft released Windows—Jobs accused Gates of copying his idea. Gates countered by saying they both got the idea of graphical interfaces from Xerox PARC, and no one had exclusive rights to it. This eventually led to personal attacks against each other. Jobs left Apple and started another computer company.
1996: In a documentary titled Triumph of the Nerds, Jobs claimed that Microsoft made “third-rate products.” In the same year, Apple’s then-CEO wanted to bring Jobs back, but Gates discouraged him, saying it would be a “stupid decision.”
1997: At Jobs’s first keynote address as Apple CEO, he announced a deal between Apple and Microsoft. This was met with boos from the audience, but the two companies remained somewhat amicable and collaborative in the following years.
Mid-200s: Jobs couldn’t resist saying that Microsoft was copying Apple and Google.
2007: Onstage together at a conference, Gates and Jobs only had high praises for each other.
2015: At Microsoft and Apple events, both companies demonstrated how Microsoft’s apps could run on Apple devices—a clear indication that they recognized the power of working together.
While the two companies have been working harmoniously in recent years, there are signs that their friendly relations may be coming to an end: In 2021, Microsoft criticized Apple for its gatekeeping of the App Store. The two companies are also going toe-to-toe in the emerging augmented reality market
To make such strategic partnerships work, Nadella writes that companies should:
1) Be open. Nadella believes respectful dialogue opens you up to exciting new opportunities for collaboration. For example, Microsoft agreed to work with Apple so that Office would run seamlessly on the iPad Pro. Nadella notes that there was much debate about the pros and cons of this partnership, but in the end, they could see how it would allow Microsoft to reach more customers, in keeping with the company’s mission of empowering every person and every organization to achieve more.
2) Think of the customer. Consider how you can create additional value for your market. If you have a strong product but aren’t in the position to reach a big audience, it’s best to partner with companies whose platforms have a larger reach. For example, Microsoft works with Facebook to ensure that its applications run on Windows products.
3) Look at the long-term potential or impact. Nadella acknowledges that it’s not always easy to work with other companies. When issues arise, he recommends remembering your long-term goals and letting them help you get through disagreements. He also cautions against burning bridges—it’s impossible to predict how technology and the business landscape will change, and you might need certain companies in the future.
The Art of Competitor Collaboration
Aside from Nadella’s tips of being open, considering your customers’ needs, and having a long-term view, keep these factors in mind when collaborating with your competitors:
1) Maintain clarity of purpose. Know what you hope to get out of the collaboration, and never lose sight of what your competitor is hoping to gain from the collaboration as well. Since you’re still competitors even while cooperating as partners, your objectives will still sometimes differ.
2) Set boundaries. Have a firm idea of what is and isn’t off limits to share with your competitor, and make sure your employees know what information, strategies, or resources need to remain confidential or for the company’s exclusive use.
3) Learn from your competitors. Pay close attention to opportunities for learning and growth based on what your competitors reveal about their own strengths, weaknesses, and approaches to your collaboration. You may learn valuable lessons that will help you refine your business strategies.
Aside from collaborating with competitors, Nadella also stresses that it’s important to seek partnerships abroad. He says that such partnerships bring two benefits:
1) They foster economic and technological development in other countries. Nadella notes that a country’s economic success is often heavily dependent upon how quickly and effectively they adopt new technologies into their industries. In creating local partnerships in countries throughout the world, Nadella claims that Microsoft is helping to stimulate the economies of developing nations, which in turn raises the overall standard of living and creates more employment opportunities for the citizens of each place.
2) They bring you closer to your customer base and their unique needs. Nadella warns that just as CEOs can become too isolated from the rest of a company’s employees, so too can a company as a whole become too isolated from the real-world circumstances of parts of its client base. Nadella gives the example of choosing to do the launch of Windows 10 in Kenya instead of in a more glitzy, Silicon Valley-based location. While some people found his decision puzzling, Nadella argues that the product launch allowed him to better understand Microsoft’s impact and potential for its customers in the developing world.
(Shortform note: Nadella stresses the importance of building partnerships abroad, but a former Microsoft employee claimed that the company’s practices aren’t all legitimate. In early 2022, Yasser Elabd alleged that the company spent more than $200 million a year on bribes and kickbacks in countries like Ghana, Zimbabwe, and Saudi Arabia. He added that it was going on at “all levels” and that executives were aware of it. In response, Microsoft said that they believed the allegations were many years old and that they had already been investigated.)
Forming a Beneficial Business Partnership
Building business partnerships abroad can be beneficial, as Nadella says, but consider these tips before entering into a partnership:
Look for a shared vision. Ensure that you and your business partner have similar goals and values to confirm that you’re both working toward the same thing.
Clearly define each partner’s role. Leave nothing up to chance: Openly discuss who will do what within the partnership, and set your boundaries accordingly.
Be blunt about money. Set out each party’s expectations regarding finances and how they will be managed. Outline your strategies for dealing with investment, debt, profits, and so on.
Set your legal status. Agree upon what sort of partnership both parties feel comfortable with, and figure out what steps you need to take to make it official.
Draw up an exit plan. Before entering a partnership, have a frank discussion about how either party could withdraw from the partnership if things change later on.
Hire legal counsel. Turn to a qualified lawyer to provide all the advice and documentation you may need—never take a DIY approach to such business matters.
We’ve discussed Nadella’s approach when it comes to internal management at Microsoft as well as external relationships with competitors and partners. In this final section, we’ll discuss his thoughts on technology’s impact on the wider world.
Nadella believes that companies should be driven not just by profit but by their potential to make the world a better place for the greatest possible number of people. He reveals that one of the things that first attracted him to a career at Microsoft was the “democratizing” tech mission of Microsoft: Bill Gates had dreamed of making a PC a reality in every home. Nadella insists that technology can and should still be democratic at heart, empowering people all over the planet through its innovations.
(Shortform note: Staying true to Nadella’s philosophy of making the world a better place, Microsoft announced the creation of a $1 billion Climate Innovation Fund and revealed a plan to be carbon negative by 2030. In an interview, Nadella stressed that a corporation’s purpose is to find “profitable solutions to the problems of the people and the planet,” arguing that profits won’t matter in the long run if it means creating more problems for the planet.)
Nadella points out that technology often brings a lot of good developments to people’s lives, especially in areas such as education and health care. He writes about the medical technology that helped to treat his son and the ways technology can help developing countries connect and keep pace with the wider world. As an example, he cites a group of young women in Egypt who built an app to help Syrian refugees find assistance once they arrived in Egypt.
Counterpoint: The Downsides of Over-Reliance on Technology
While technology is frequently a force for good, as Nadella emphasizes, he never addresses the darker side of technological dependency. Technology—and in particular, social media—has brought with it a host of downsides, some of which are strongly correlated to negative mental health results, especially in regard to body image and social alienation.
One study discusses the links between heavy social media use and worsening mental health outcomes, while the BBC points out that conspiracy theories can gain ground to a dangerous degree with social media users, in comparison with more traditional forms of media consumption. In fact, some medical experts even recommend undergoing a digital detox from time to time to avoid over-reliance on social media and tech, as a means of safeguarding personal mental well-being.
While technology can be a force for good, Nadella frequently emphasizes the need for tech companies to recognize the power that they hold over others, and the impact their products can have—both for better and for worse—on the world around them. In particular, Nadella addresses three key areas in which tech companies have ethical responsibilities: nurturing local entrepreneurship in the developing world, standing up for moral values, and developing new technologies in a way that empowers people instead of harming them.
Nadella argues that many political leaders in the developing world make a serious mistake: They become so obsessed with attracting major Western tech companies to their countries that they tend to overlook or deliberately neglect their homegrown talent and businesses. Ethical tech companies can nurture developing-world talent both through fostering local partnerships, and through helping to make technology as accessible as possible, so that local entrepreneurs can in turn have greater opportunities for pursuing their own innovations.
For example, Nadella writes that an e-health company in India is embracing the latest Microsoft cloud and AI technology—something many government leaders are resistant to—to provide a diagnostics service that can be accessible to hospitals in rural areas.
(Shortform note: If tech companies are at a loss as to how to partner with developing countries, they can consider working with the United Nations Technology Bank for Least Developed Countries. Established in 2018, the organization is helping the 46 least developed countries—including places like Afghanistan, Gambia, and Rwanda—gain access to technology, in part by matching them with partners in the private sector. The end goal is sustainable development through local skills development and economic self-reliance.)
While Nadella discusses the importance of collaboration at various points in Hit Refresh, perhaps its most surprising manifestation is the way in which Microsoft sometimes joined its rivals to form a united front against the US government. Nadella argues that companies have an ethical imperative to stand up for certain moral values, such as safeguarding freedom of information and customer privacy.
An example of this is when, after a 2015 terrorist attack in San Bernadino, California, the US government tried to force Apple into helping it break into a cellphone belonging to one of the terrorists. Apple refused, arguing that creating the means to break into the terrorist’s cellphone could permanently compromise security for all iPhone customers by creating a “backdoor” means of entry into iPhone data. Microsoft supported Apple’s stance, with Nadella arguing that certain values must be protected even in the face of heightened security concerns.
Counterpoint: Privacy and Advertising in Tech
While Nadella argues against government overreach at various points in Hit Refresh, he doesn’t acknowledge the serious privacy violations of tech companies in terms of advertising and the collection of consumer data. The increasing power private companies and advertisers are gaining through the mass collection of data has led to efforts by the European Union to ensure greater consumer protection through a policy known as GDPR (General Data Protection Regulation), with hefty fines imposed on companies—such as Google—found in violation of these rules. In the case of Google, the tech giant was found guilty of failing to seek adequate consent from its users for targeted advertising campaigns, and for having difficult-to-access data processing statements.
Nadella’s reluctance to address—or even acknowledge—these issues reveals his vested interest in maintaining the unchecked power of tech companies, while glossing over the ways in which government bodies are standing up for the rights of the average consumer.
Nadella is fascinated by AI, which he believes will play a huge role in people’s day-to-day lives in the future—AI can significantly reduce the time we spend on tedious tasks like paying bills, so that we can have more time for productive and creative pursuits.
However, Nadella also emphasizes the need to develop AI and other automation in a way that does not disempower people or bring too much hardship or unemployment. As AI becomes increasingly important in many workplaces, the concern is that it could render many currently human-driven roles obsolete, eliminating opportunities for the less-educated and less-specialized workers.
Nadella acknowledges these potential pitfalls, but nevertheless maintains that, with the right approach, AI can become a net benefit in the workplace and for humanity as a whole.
He lays out three core principles that shape Microsoft’s approach to AI:
1) Augmentation, not replacement. Nadella argues that AI can’t and shouldn’t lead to widespread permanent unemployment or any other form of human suffering. Instead, he stresses that AI should involve meaningful collaboration and augmentation between humans and technology, creating new employment opportunities instead of just eliminating old ones.
He gives aviation as an example of AI and humans working together—we don’t think of aviation as “artificial flight”—it’s simply flight. In the same way, we shouldn’t think of technological intelligence as artificial but rather as intelligence that is still powered by human capabilities and capacities. He adds that while AI can process larger amounts of data more quickly, it lacks human creativity and empathy. Lastly, he argues that humans will no longer have to put their lives at risk by working in jobs like mining—we can eventually rely on AI to take on dangerous tasks.
(Shortform note: Nadella is optimistic that AI won’t lead to widespread unemployment, but Yuval Noah Harari argues otherwise in 21 Lessons for the 21st Century. He writes that, despite the possibility of humans and AI working together, it’s likely that there will still be a net loss in employment due to AI. He thus recommends that governments prepare for a “post-work society” by: 1) implementing a universal basic income, which taxes corporations and billionaires and distributes the money to the rest of the population, 2) broadening the definition of work to include unpaid “jobs” like people who take care of elderly relatives, and 3) providing free basic services—education, transportation, health care—instead of basic income.)
2) Transparency in AI tech. Since AI can be quite intrusive and gather an enormous amount of sensitive personal data with ease, Nadella acknowledges the pressing need to ensure that AI technology is transparent in how it collects and uses data and that respect for consumer privacy should be an inherent part of Microsoft’s AI technology. AI must be designed for intelligent privacy, embodying sophisticated protections that secure personal and group information in ways that earn trust.
(Shortform note: Being transparent about AI is especially crucial for businesses now, as research shows that consumers are more aware of the risks associated with the use of AI. In one survey, respondents said that they would have more trust and loyalty in and purchase more products from companies that use AI more ethically.)
3) Inclusivity. Nadella says that AI technology must be sensitive to the needs of inclusion and diversity across all ethnic, racial, and gender categories. To ensure this outcome, we need to ensure that the tech industry isn’t controlled by the privileged few and that the design of these systems has the input and participation of people from various cultures.
(Shortform note: Nadella is right in saying that the tech industry needs the input and participation of a more diverse range of people. Otherwise, AI itself can learn to be biased—for example, Amazon had to abandon its recruiting engine because it was found to be biased against women. That’s because it was trained by observing patterns in resumes submitted in the tech industry, which were overwhelmingly male.)
While most of Nadella’s discussion on ethical development of technology focuses on what companies can do to empower everyone, Nadella also offers advice to political leaders for fostering tech innovation to improve society. He believes that governments can “hit refresh” and fuel growth and productivity by applying education and innovation to a country’s key economic sectors. To do this, he suggests that policymakers:
The Best Policies for Boosting Innovation
Nadella’s tips are just a few of the overwhelming policies that governments have to consider when considering how to fuel growth through innovation. To help governments determine the best course of action, experts narrowed down the best evidence-based practices for boosting innovation:
1) Give tax incentives for research and development. Research shows that such incentives increase innovation and productivity.
2) Open up trade. Research suggests that free trade has positive benefits like increasing competition and thus dividing the cost of innovation among more players.
3) Allow more skilled migrant workers into the country. Funding is useless if there’s no one to do the innovating. Research suggests that increasing the number of researchers and scientists correlates with an increase in innovation.