Capitalism has a well-justified reputation for heartlessness, starting with its claim—ever since Adam Smith in 1776—that pursuit of businessmen’s self-interest is the best basis for a thriving economy. This reputation was heightened by the misguided quest by big business over the last half-century to maximize shareholder value.
It is therefore striking to see a major corporation not only base its whole modus operandi on the embrace of empathy but also see that pursuit coincide with a seven-fold increase in the market capitalization of one of the largest firms in the world: the case of Microsoft led by CEO and chairman, Satya Nadella.
Nadella’s Embrace Of Empathy
Yet Nadella’s embrace of empathy was a crucial plank of his business strategy and was was announced on day one of his tenure as CEO in February 2014. Yet empathy wasn’t put forward as an isolated idea. It was an integrative element of his whole strategy of customer centricity and working backwards from the customer’s needs and figuring out how they could be met.
Nadella took a risk in making empathy the centerpiece of his culture initiative. It risked being seen as a fuzzy, feel-good emotion concerned more with personal kindness, tenderness and caring than the conduct of a corporation. Yet Nadella’s personal philosophy was to connect new ideas with empathy for other people. “Ideas excite me,” he wrote in his 2017 book, Hit Refresh. “Empathy grounds and centers me.”
A personal philosophy is one thing. A business strategy is generally seen as something to do with the hard calculation of the business numbers. Yet Nadella made empathy tcentral to Microsoft’s business strategy.
The term “empathy” has since figured prominently and consistently in Nadella’s internal and external presentations. It is mentioned 53 times in his book, Hit Refresh. Nadella argues there that without empathy, Microsoft would never succeed in understanding customer needs—particularly needs customers themselves didn’t know they had—and delivering solutions to meet those needs. The bet paid off, as Microsoft’s staff found ways to upgrade and enhance products that have had users exclaiming, “I didn’t know I could do that!”
Empathy In Business
Discussion of empathy is unusual in business discussions but not unprecedented. In the 2009 book Wired to Care, strategy consultant, Dev Patnaik, argued that the real opportunity for companies doing business in the 21st century is to create a widely held sense of empathy for customers, pointing to Nike, Harley-Davidson, and IBM as possible examples. He argued that empathetic firms would see new opportunities more quickly than competitors, adapt to change more easily, and create workplaces that offer employees a greater sense of mission in their jobs.
In the 2011 book The Empathy Factor, organizational consultant Marie Miyashiro pointed to research showing that “empathy was found to be the strongest predictor of ethical leadership behavior out of 22 competencies in its management model, and empathy was one of the three strongest predictors of senior executive effectiveness.”
A study by the Center for Creative Leadership found empathy to be positively correlated to job performance amongst employees as well.
In his book, Empathy: Why It Matters, and How to Get It. (Penguin) 2014) researcher Roman Krznaric argued empathy is “has the power both to transform our own lives and to bring about fundamental social change” and create “a revolution in human relationships”.
What is unprecedented is to carry out this revolution explicitly in practice and see it crowned with extraordinary business success.
What Is Empathy
What then is empathy? It has been defined as “the capacity to understand or feel what another person is experiencing from within their frame of reference, that is, the capacity to place oneself in another’s position.”
It involves “a person communicating an accurate recognition of the significance of another person’s ongoing intentional actions, associated emotional states, and personal characteristics in a manner that the recognized person can tolerate.”
What Empathy Isn’t
Nadella isn’t referring to empathy as touchy-feely stuff. He is talking about cognitive empathy, thinking through what another person must be feeling and thus understanding their needs might be and how their needs could be met.
That is different from compassion–an emotion people feel when others are in need, which motivates people to help them—and from sympathy—a feeling of care and understanding for someone in need. Even ethical purists recognize that empathy doesn’t need to be pursued for its own sake. Tactical (or “strategic”) empathy includes the deliberate use of perspective-taking to achieve certain desired ends.
Is Microsoft’s Empathy Genuine? Or Is It Just Good PR?
While some cynics must have wondered whether Nadella’s embrace of empathy was no more than a PR masterstroke aimed at concealing and enhancing Microsoft’s real goal of money making, it was hard to argue with Nadella’s personal embrace of empathy. His son Jain, now 25, is severely disabled. He was born weighing just three pounds, having suffered asphyxiation in utero; as a result, he is visually impaired, has limited communication and is quadriplegic. With the help of his wife, Nadella learned to empathize with his son. Rather than hide his son’s condition in the way that JFK’s family concealed the existence and status of his incapacitated sister Rosemary, Nadella made the caring of his son a key part of his public life.
While empathy as a central policy of one of the largest corporations in the world was unprecedented, it made perfect sense. Success in the digital economy is increasingly dependent of working backwards from customer needs, and then figuring out how to meet those needs. This contrasts with the industrial era approach of starting from what the firm produces or might produce and then see how that could be marketed to customers.
Empathy As A Way Of Life In The Digital Economy
Empathy at Microsoft isn’t just talk. It is a way of running—and developing—the business. “When you go in to talk to Satya,” says Brad Anderson, Corporate Vice President of Enterprise Client and Mobility at Microsoft, “you start with the customer. What’s the customer problem? What are they trying to solve? How are we making their life better? And so this concept of customer obsession and being really close to customers has been incredibly important. He focuses on usage and usage becomes the primary factor that everything we do revolves around. In the past, we used to compensate and reward the engineering teams based upon factors like, Did you ship on the date? Did ship with the features that you said you would ship. But we didn’t know if it was being used or not.”
Given that an obsession with delivering value to customers is the principal foundation of success of any firm in the digital economy, it is not unreasonable to expect that other firms will learn from Microsoft’s example in basing that obsession on genuine empathy.