Microsoft's CEO, Satya Nadella, Says This Major Misstep is His Biggest Regret

It's not that Microsoft killed off its smartphone effort too soon. It's that it never had a chance.

Every so often, a Microsoft executive likes to bring up the company's ill-fated mobile phone adventure. Depending on who is talking, killing off Microsoft Mobile was either the best thing the company ever did, or a major misstep.

Most recently, that executive was CEO Satya Nadella, who gave an interview to Business Insider where he was asked about a strategic decision that he regretted in hindsight. In response, Nadella brought up the company's acquisition of Nokia and subsequent exit from its smartphone efforts:

"The decision I think a lot of people talk about - and one of the most difficult decisions I made when I became CEO --was our exit of what I'll call the mobile phone as defined then. In retrospect, I think there could have been ways we could have made it work by perhaps reinventing the category of computing between PCs, tablets, and phones."

I'm sure it was a difficult decision, especially for someone who came to a CEO role that left very big shoes to fill. However, I don't think the problem was that Microsoft killed its smartphone project. I think the problem is the company never had a chance. 

The reality is that Microsoft never really got it right with mobile mostly because it underestimated the potential. More importantly, its business and focus was on the thing that made it money: Windows.

If Microsoft was going to build a smartphone it was going to with the bias that Windows on a laptop or desktop is always going to be the most important computer a person owns. Microsoft's problem is that its assumption was just wrong. 

The irony is that Microsoft might have been the one company that could have built the most useful device for a lot of people: A smartphone that you could carry with you in your pocket, but that you could also plug into a setup that lets you function as though you were working on a desktop computer.

Nadella alludes to as much when he talks about "reinventing the category of computing between PCs, tablets, and phones." That is sort of the ultimate dream of anyone who wishes they only had to carry one device with them.

Other companies have tried to do exactly this, but in most cases, their efforts aren't very good. Microsoft, on the other hand, should have been good at this, but it could not see past the thing that made all the money. It couldn't see past Windows on a desktop computer. 

It's one of the reasons Microsoft is trying so hard to establish itself in the A.I. computing world. The company is making a big bet that generative A.I. is going to be the dominant computing platform in the next five or 10 years, and it wants to own as much as it can.

"For me, the biggest opportunity we have is A.I.," Nadella said. "Just like the cloud transformed every software category, we think A.I. is one such transformational shift."

Listening to Nadella, it seems clear that the thing he regrets most isn't just the fact that he got Microsoft out of the smartphone business, it's that the company never really understood it in the first place. To be honest, killing off Microsoft Mobile was probably the right idea. It was already clear that iOS and Android had won the battle to become the smartphone platforms. 

By the time Microsoft wrote down most of the value of its Nokia acquisition, the smartphone landscape was pretty much settled. Looking back, however, it's easy to understand why Nadella and Microsoft see it as such a miss--the smartphone is the most important computing device in the world and Microsoft doesn't play much of a role, if any. That's far different from its position on desktop computers and the cloud.

The lesson is really pretty simple: The hardest thing to do is predict the future. The second hardest thing to do is imagine that there might be something in the future that is better than whatever made you successful in the first place. That's where Microsoft went wrong, and it's not hard to see why it would be one of Nadella's biggest regrets. 

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