New Delhi, Feb 23: Microsoft CEO Satya Nadella has acknowledged that one of the company's biggest mistakes was underestimating the rise of search, a market that Google mastered and dominated.
Nadella admitted that Microsoft originally believed the web would remain decentralised and didn’t foresee that search would become the most profitable business model on the internet.
He referred to this oversight as a valuable lesson, stating: "We (Microsoft) missed what turned out to be the biggest business model on the web, because we all assumed the web is all about being distributed."
In a conversation with YouTuber Dwarkesh Patel, Nadella reflected on how Microsoft failed to recognise the significance of search, while Google accurately identified its potential and executed its strategy perfectly.
“Who would have thought that search would be the biggest winner in organising the web?” Nadella said. “We obviously didn't see it, and Google saw it and executed it super well. Understanding a technological shift is not enough; companies also need to recognise where value creation will happen."
He emphasized that adapting to changes in business models is often more difficult than keeping up with technological progress.
"These business model shifts are probably tougher than even the tech trend changes," the Microsoft CEO explained.
Nadella shared his experiences being part of several technological transformations throughout his career, including the shift from mainframes to personal computers, followed by the rise of client-server architecture.
He also reflected on the rise of the web, recalling how the launch of the Mosaic and Netscape browsers prompted Microsoft to adapt.
According to Nadella, the company adjusted well to the browser era, as it introduced a new approach to building applications.
Having joined Microsoft in 1992 after working at Sun Microsystems, Nadella has witnessed multiple waves of innovation. He holds a degree in electrical engineering from Mangalore University, a master's in computer science from the University of Wisconsin-Milwaukee, and an MBA from the University of Chicago.
