“Our ability to change our culture is the leading indicator of our future success,” Microsoft CEO Satya Nadella told shareholders in 2015. When Mr Nadella was named CEO in 2014, he knew that the company had become siloed, with divisions pulling in different directions or, worse, actively competing with one another.

He later wrote: “Innovation was being replaced by bureaucracy. Teamwork was being replaced by internal politics. We were falling behind.” Changing that was an enormous undertaking but it has undoubtedly been a success.

The company’s stock price is five times higher than when Mr Nadella took charge, and Microsoft’s market capitalisation has passed a trillion dollars. Culture has changed too. JP Courtois, who leads the firm’s sales and marketing operations, says: “The culture at Microsoft has changed from ‘know-it-all’ to ‘learn-it-all’.”

Adopting a growth mindset

This turnaround is partly linked to 30 years of academic research into educational psychology. Professor Carol Dweck, of Stanford University, says that people approach learning with one of two ‘mindsets’. Someone with a fixed mindset will, when stuck, assume they have reached the limit of their abilities. A person with a growth mindset, on the other hand, will see the same problem as a challenge and an opportunity to learn more.

Mr Nadella set out to introduce a growth mindset to Microsoft. The need for a growth mindset is advertised on posters on the company campus, reiterated by managers and the start of meetings and forms part of how employees are evaluated. In place of an appraisal process that pitted employees against one another, staff are now evaluated on how much they have helped their team.

This is a shift away from the previous command-and-control model, towards a culture of learning and coaching that empowers staff. This fits with the new Microsoft mission statement: “to empower every person and every organization on the planet to achieve more.”

A culture of experimentation

Research has found that organisational mindsets set the tone for company culture, so it was important for Microsoft to consider the growth model across its whole management structure. The aim is for managers to coach staff and provide a place in which they can make mistakes, learn and grow.

That reinforces the need for a culture of experimentation. In the digital world it is easy to test variations of a website or how a digital service is provided and quickly switch to the most effective. Microsoft has done this kind of testing since before Mr Nadella’s time but, though it pre-dates him, the method of test, learn and iterate is the growth mindset in action.

The company is prioritising a growth mindset in its recruitment and has also begun to work on addressing the digital skills shortage more widely. Last year it announced a partnership with education provider General Assembly to train 15,000 people in AI-related skills by 2022. The aim is to fill roles in aerospace, manufacturing and many other sectors affected by the talent scarcity.

Providing a sense of purpose

Microsoft is a prime example of the importance of company culture in attracting and retaining talent. Creating a growth mindset requires employees to be customer obsessed. The fixed mindset says customers can’t have a better service, while a growth mindset finds ways to meet their needs. It requires diversity and inclusivity, because diverse teams have better information for good decisions.

A growth mindset cannot thrive in a siloed organisation. Employees need to feel part of a team and that they are working together, for the company and its customers. For the world, even. This may sound grandiose, but today’s employees seek a sense of purpose, as well as a job and a salary. Providing purpose is crucial.

With this kind of employee culture, staff can be trusted to make decisions for good reasons, which is why a culture of experimentation can be so powerful. Employees who are attuned to business and customer problems can be empowered to experiment with solutions.

The future business successes will be ones that adopt a growth mindset and relish the chance to experiment.