Reflecting on past tech shifts, the rise of AI, and how businesses must adapt to stay ahead, among other things, Microsoft CEO Satya Nadella recently admitted that Microsoft missed the biggest business model on the web—search engines. In the early days, many believed the internet would be decentralized, but Google identified search as the key to organising the web.
"...we missed what turned out to be the biggest business model on the web, because we all assumed the web is all about being distributed, who would have thought that search would be the biggest winner in organizing the web? And so that's where we obviously didn't see it, and Google saw it and executed super well," he can be heard telling Indian-origin podcaster Dwarkesh Patel in his latest interview podcast.
"So that's one lesson learned for me: you have to not only get the tech trend right, you also have to get where the value is going to be created with that trend. These business model shifts are probably tougher than even the tech trend changes."
Nadella, on the other hand, challenged the idea that certain industries, like AI and cloud computing, are winner-take-all. Reflecting on Microsoft Azure’s battle with Amazon AWS, he recalled how investors once doubted Microsoft’s ability to compete.
"Having competed against Oracle and IBM in client-server, I knew that the buyers will not tolerate winner-take-all. Structurally, hyperscale will never be a winner-take-all because buyers are smart," he said, explaining that enterprise buyers demand competition -- no single player can dominate the cloud or AI completely.
Corporations always want multiple suppliers, ensuring diverse players have room to grow. "Consumer markets sometimes can be winner-take-all, but anything where the buyer is a corporation, an enterprise, an IT department, they will want multiple suppliers. And so you got to be one of the multiple suppliers," said the Microsoft CEO.
Nadella predicted that AI models will not be controlled by just a few companies. Just like Windows faced competition from open-source operating systems, AI models will have open alternatives to ensure fairness and innovation.
"I think in models there is one dimension of, maybe there will be a few closed source, but there will definitely be an open source alternative, and the open-source alternative will actually make sure that the closed-source, winner-take-all is mitigated," he said.