In 2014 Microsoft was rich, feared and falling behind. A new chief executive started with the culture — and the company became one of the most valuable in the world.
Easier version: read this lesson at A2/B1 level →
Ten items. Work through the four activities — say your answer out loud before you reveal it.
Three terms: recurring revenue · headcount · capex. Say the right one, then reveal.
Read each part. After it, there's a quick check (answer from memory first), then one question to discuss.
When Steve Ballmer became chief executive of Microsoft in 2000, the company dominated personal computing. Windows ran on most of the world's computers, and Office was the standard tool of office work. Over the next fourteen years, profits and revenue grew strongly. Yet the share price hardly moved for more than a decade, because investors could see what the profits hid: Microsoft was losing the new markets.
Google took internet search. Apple, and then Google's Android, took the smartphone. Microsoft's own phone software won only a small share, and its 2012 version of Windows, redesigned for touchscreens, was poorly received by many users. In 2013 it agreed to buy Nokia's phone business for around seven billion dollars — a very late, very expensive attempt to catch up.
Inside the company, many employees and former employees described a culture of internal competition. Divisions protected their own products, and a performance system of forced ranking required managers to give some people low ratings every year, whatever the team had achieved. Critics argued that it encouraged staff to compete with colleagues rather than cooperate. The system was dropped in late 2013. A few months later, in February 2014, Ballmer was replaced by Satya Nadella, an engineer who had joined Microsoft in 1992 and had been running its fast-growing cloud and server business.
1. Why did the share price stay flat even though profits were rising?
2. What features of the internal culture were criticised before 2014?
1. Investors saw that the profits came mainly from Windows and Office, while Microsoft was losing the important new markets — search and smartphones — so they did not expect strong future growth.
2. Divisions worked in silos and protected their own products, and forced ranking made employees compete against each other because some had to receive low ratings every year.
Nadella's early decisions were striking because they helped rivals' products. Within weeks, Microsoft released Office for the iPad — something the company had delayed for years, partly to protect Windows tablets. Microsoft software began appearing on Android and Apple devices. The company that had once treated the open-source operating system Linux as a threat began supporting it on its own cloud platform, Azure. The message was that Microsoft's future lay in the cloud and in services people used everywhere, not in forcing them onto Windows.
There were painful decisions too. In 2015 Microsoft wrote down most of the value of the Nokia purchase, at a cost of more than seven billion dollars, and cut around 7,800 jobs, mainly in the phone business. Meanwhile the company changed how it sold software: instead of licences bought once every few years, Office increasingly became a monthly or annual subscription, giving Microsoft more predictable, recurring revenue.
Nadella described his main project as cultural. Drawing on the psychologist Carol Dweck's research on the growth mindset, he argued that the company should value curiosity and learning over proving that it was always right. The idea was tested early: at a conference on women in computing in 2014, Nadella suggested women should trust the system rather than ask for pay rises, and later the same day publicly said he had been wrong. Microsoft then bought companies popular with the people who had long distrusted it — the game Minecraft, the professional network LinkedIn and the developer platform GitHub — and largely allowed them to keep running as they were.
1. Give two decisions from Nadella's early years that supported rival platforms.
2. How did the way Microsoft sold Office change, and why did investors like it?
1. Any two of: releasing Office on the iPad; making Microsoft software available on Android and Apple devices; supporting Linux on Azure.
2. It moved from one-off licences towards subscriptions, which provide regular, predictable recurring revenue that investors value highly.
The results were dramatic. Azure became one of the two largest cloud platforms in the world. Microsoft's market capitalisation, around 300 billion dollars when Nadella took over, passed one trillion dollars in 2019 and later three trillion. The company's reputation among software developers changed from suspicion to something much closer to respect.
Then Microsoft made its largest bet. It invested in the artificial-intelligence company OpenAI, starting in 2019 and eventually committing more than ten billion dollars, and it built AI assistants into Windows, Office and its cloud products. Its capital expenditure on data centres rose to tens of billions of dollars a year. In July 2025 its market capitalisation briefly passed four trillion dollars. The relationship with OpenAI brought its own risks: when OpenAI's board suddenly removed its chief executive in 2023, Microsoft had enormous exposure to a company it did not control.
At the same time, the company that talked about empathy and learning was cutting jobs in years of record profits — around ten thousand in 2023, and many thousands more in 2025 — as it moved money towards AI. Supporters say that is exactly what a learning company does: it moves resources to where the future is. Critics ask whether the culture story was always easier to tell while the company was growing. And some analysts argue that the turnaround owed as much to the cloud boom, and to the loyalty of business customers to Office, as to any change of mindset. The question is still open: did the culture change the company — or did the market?
1. What does the growth in market capitalisation suggest about how investors saw the company after 2014?
2. What are the two opposite ways of reading the job cuts in years of record profit?
1. That they believed Microsoft had found strong new sources of future growth — especially the cloud and later AI — in contrast to the flat share price of the previous decade.
2. Supporters see them as a learning organisation moving resources towards the future (AI); critics see a gap between the language of empathy and the reality of cutting jobs while profits are high, and question whether the culture story is only easy when business is growing.
Strategy documents, annual reports and board papers are full of nouns where speech would use verbs: not we decided but the decision, not costs fell sharply but a sharp fall in costs. This is nominalisation. It makes writing more compact, more formal and more impersonal — which is exactly why it is powerful, and exactly why it can hide who did what.
Complete the second sentence with the noun form of the word in bold. Write one word.
1. Customers adopted cloud services quickly. → The rapid of cloud services by customers changed the industry.
2. The company was reluctant to release software for rival devices. → The company's to release software for rival devices cost it years.
3. Revenue from subscriptions grew strongly. → There was strong in revenue from subscriptions.
4. Microsoft acquired GitHub in 2018. → Microsoft's of GitHub in 2018 surprised many developers.
1. adoption 2. reluctance 3. growth 4. acquisition
Notice what else changed: quickly became rapid, and strongly became strong. The adverb follows the verb into its new form.
Write the one preposition that follows each noun here.
1. The results showed a steep decline sales of phones.
2. The board confirmed its long-term commitment open-source software.
3. The new leadership placed much greater emphasis learning from mistakes.
4. Heavy investment data centres reduced short-term profits.
1. in 2. to 3. on 4. in
Learn these as chunks, not as rules: decline in, commitment to, emphasis on, investment in.
Turn a spoken update into the opening of a board paper. Complete each gap with the noun form of the word in brackets. Then read it aloud, and compare it with how you would say the same thing to a team.
“Since the change of leadership, the (decide) to release our core products on competing platforms has led to a significant (expand) of our customer base. The (abandon) of forced ranking was followed by a marked (improve) in collaboration between divisions. The (fail — plural) of the earlier phone strategy have now been recognised in the accounts, and our (commit) to the cloud remains unchanged.”
decision · expansion · abandonment · improvement · failures · commitment
Now say it to a team using verbs: “We decided to…, so more customers…, We stopped ranking people against each other, and…”. Which version sounds more honest? Which is more precise?
Take these into the Speak tab: you will need the noun-heavy version for the board and the verb version for the people in the room.
A note on the figures: market values, investments and job numbers are rounded and taken from public reporting; valuations change daily, and this is very much a live case.
All of it out loud, against the clock. A culture change is announced in nouns to the board and lived in verbs by everyone else — so you will need both.
Present this case to a board that believes its own company needs a culture change. Structure it: the profitable but falling-behind decade → silos and forced ranking → the new chief executive → supporting rival platforms → the Nokia write-down and job cuts → subscriptions and the cloud → the growth mindset → the trillion-dollar results → the AI bet → the open question.
Finish with one sentence on what your board should take from it. Use at least five key terms (cash cow, silo, cannibalise, recurring revenue, headcount, capex, forced ranking, ecosystem, open source, market capitalisation), and use at least three nominalisations.
You are a senior leader at a company-wide meeting. An employee stands up and says: “You talk about empathy and a learning culture. This year the company made record profits and cut thousands of jobs. Isn't ‘culture’ just the story you tell while the spreadsheet decides?”
Answer properly: take the question seriously, do not hide behind nouns, explain the decision in plain verbs, and say clearly what the culture should mean in a moment like this. Then do it again in ninety seconds — the compression is the exercise.
Take one change in how an organisation works — real or invented — and announce it four ways, one minute each. Notice when you reach for nouns and when you need verbs.
Prefer not to use your own organisation? Take one of these instead: