I recently took the time to sit down and read Satya Nadella’s book, Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone.
A chapter that discusses some of Microsoft’s partnerships proved a fascinating read, especially when Satya reverted to a somewhat controversial case—that of Microsoft and Apple. To understand why these two competitors would partner, Satya brought attention to game theory, using mathematical models to explain cooperation and conflict.
An Introduction to Game Theory
This reminded me of a simulation of game theory that I’d previously been introduced to. Produced by Nicky Case, The Evolution of Trust offers a fantastic look at these models, providing valuable insight as to why two groups would ever consider partnering with each other.
In the simulation, two players face a slot machine. By feeding coins into it, they have the choice to either cooperate or not cooperate with each other. If they decide to cooperate—both inserting a coin—they each receive two in return. If one player chooses not to cooperate, or ‘cheat’—keeping the coin to themselves, while their opponent inserts theirs—they gain three coins instead. If both decide not to cooperate, they each receive nothing.
Scenario 1
- The other player inserts a coinCooperate with them, and you’ll each receive two coins: 2–2
- If you decide to cheat, you’ll receive three coins, while they’ll get nothing: 3–0
Scenario 2
- The other player doesn’t insert a coin If you put your coin into the slot, you’re set for a substantial loss 0- 3
- If you also decide to cheat, then you lose nothing: 0–0
What is the Ideal Strategy?
In the early stages of the simulation, it seems that the optimal strategy is to cheat. There’s everything to gain and nothing to lose. Where the simulation excels is in its ability to illustrate what happens beyond those initial stages, as you play several rounds with the same person. Human errors and repeated contact lead to forgiveness and cooperation, with those who always cheat eventually being overwhelmed. Trust overcomes suspicion when there are repeated interactions and the potential for win-win scenarios.
Satya Nadella understands this, “Partnering is too often seen as a zero-sum-game—Whatever is gained by one participant is lost by another.” He doesn’t see it this way at all. Instead, he imagines scenarios where two groups make an effort to create a win-win solution, playing a non-zero-sum game.
“Our industry does not respect tradition – it only respects innovation.”
— Satya Nadella, CEO, Microsoft
As soon as Satya took over as CEO of Microsoft, he had a vision for the future. He knew that to keep competing at the highest level, he had to make Microsoft thrive in a mobile first and cloud first world. By ‘mobile’ he didn’t mean the mobility of a device, but rather the mobility of applications and data across all devices.
With the cloud acting as the enabler for this mobile first world, Microsoft Office software had to be available to users everywhere, regardless of their choice of device. A quick internet search shows that Apple sold 212 million iPhones in 2016 alone, and if Microsoft were serious about putting its users first, Satya had to make sure that Office applications were optimized for all mobile users including those who had chosen Apple’s iOS platform.
Reading the background into Microsoft versus Apple makes for some incredible entertainment. Even just a few years ago, it would have been unimaginable for these two companies to publicly partner. Over the years, though, both companies have developed the maturity to become more obsessed with customer needs, thereby learning to coexist—Satya even famously pulled an iPhone out of his pocket for a demonstration at Salesforce’s annual marketing event.
In creating a strategy that would center Microsoft’s innovation around their user's needs and not simply their device, Satya ensured that a partnership with Apple would offer up a win-win scenario for both companies. Apple was able to demonstrate the power of its iOS platform while committing to show off the great things Microsoft Office could do on it.
“Helping people and their organizations achieve more is our sweet spot.”
— Satya Nadella, CEO, Microsoft
Microsoft - The Natural Partner for beqom
Microsoft partnering with Apple, one of its longest-standing competitors, is indeed a strong case, but it’s important to note that partnerships don’t have to evolve from confrontation. Smart partnerships, such as the one beqom has with Microsoft, are born out of a desire to build and sustain innovation-providing and customer-pleasing products.
Even before becoming Microsoft’s CEO, Satya had decided to prioritize Azure as the future of their server business. He always knew that the cloud technology was, “super-cool,” and wanted to commit to ensuring Azure allowed others to become capable of creating their own super-cool software.
At beqom, we embrace this commitment shown to the cloud technology. We’ve taken full advantage of Microsoft Azure to strengthen our Total Compensation Solution—to scale, perform and meet the security, compliance, and data residency requirements of our global customers.
This partnership enables us to continue to develop our unified solution, knowing that Microsoft has committed to continuing to expand our technological capability. Moving away from a traditional vendor relationship, Microsoft has focused on addressing the real-world needs of its customers—architecting for hybrid consistency, developer productivity, AI capabilities, and trusted security compliance. All of this centers around creating additional value for the customer.
“Coming up with win-win solutions are often hard, taking up a lot of effort and often being emotionally painful.”
— Satya Nadella, CEO, Microsoft
As seen in the simulation of game theory, when playing a non-zero-sum game, partnerships based on cooperation benefit everyone. Without this cooperation, partnerships like Microsoft and Apple may not have happened, with suspicion presiding before everything else. The potential for win-win solutions has allowed for the evolution of trust, benefitting not only the customers but also each partner.
