Bill Gates says that savvy strategic partnerships drove Microsoft's early success - here's what you can learn from it
- Bill Gates, co-founder of Microsoft and noted philanthropist, talked about how he successfully led Microsoft's growth on an episode of the podcast "Masters of Scale with Reid Hoffman."
- Part of Microsoft's success was its strategic partnership with IBM in its early days.
- Gates advises leaders to pick partners "that are highly visible and tough."
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One of the earliest high-impact decisions Bill Gates made was figuring out how to work with IBM.
It was 1980 and IBM wanted Microsoft to quickly provide the operating system for the 16-bit IBM PC, what would become, in Gates's estimation, a model for personal computing.
Even though the project was viewed as an experiment, Gates jumped at the opportunity.
"We put so much energy into this thing," he said on the podcast "Masters of Scale," hosted by LinkedIn founder, venture capitalist, and startup philosopher Reid Hoffman.
Capitalizing on partnership
Gates was able to move Microsoft into the next generation of personal computing because of that strategic partnership with IBM - Big Blue, an enterprise tech firm before anyone really knew to call it as such. But with the partnership, Microsoft now had an operating system that they were able to market as a separate product.
They had leverage in the dawn of home computing, one that extended beyond the machine and into the software itself that IBM's competitors were eager to buy. One recent computing historian referred to the partnership, which was formalized nearly 39 years ago to the day, as the date "IBM Signs A Deal With The Devil."
That devil, of course, was the soon-to-be-gigantic Microsoft.
Learning from one partner in particular: IBM Japan
Beyond being positioned for the latest turn in the industry, Microsoft as a company learned from IBM's strengths in sales and quality products.
IBM Japan in particular was picky about quality, Gates said. It was difficult at first to get acclimated to their standard, but Gates eventually realized that they weren't crazy, they were just disciplined- and he himself would have to learn how to do that.
"We spent two years just in total pain, where the Japanese guys were flying in, and they would sit there day and night even though they didn't even know how to fix the thing," Gates said.
Gates's first victories began in Japan, the Wall Street Journal reported in 1986, snowballing into the larger international success of Microsoft's products.
Gates's experience with IBM Japan led to the advice he told Hoffman that applies anyone who wants to scale their company fast: Pick the toughest customers and meet their needs.
Tough doesn't equal dislike, or hard to work with. It means selecting customers with high standards, who, in turn, elevate the standards of your company. You have to pick customers that are both highly visible and tough, says Gates. And he thinks this is critical to growth.
"Partnerships really are so understated in terms of their key role," he said.
Take care of partners and they'll take care of you
In the case of IBM, there were years in which Steve Ballmer would take the red-eye down to IBM's former campus in Boca Raton, Florida, spend a day there, and then fly back. Gates describes this as "the right thing to do to get things done." Ballmer's frequent flights helped the partnership between Microsoft and IBM thrive, uniquely positioning Microsoft to grow in the following decades.
More recently, Nadella has announced strategic partnerships with companies, like Novartis, Accenture, and Avanade, to build new technology.
Microsoft's history illustrates the importance of acting on changes within an industry, with the right partners, for massive scale.