Microsoft CEO Satya Nadella shared his advice to bosses on navigating AI’s tech, model, and organizational shifts

“DeepSeek, and R1 in particular, was the first model I’ve seen post some points,” Microsoft’s CEO Satya Nadella said.

Stephen Brashear via Getty Images

Satya Nadella says AI is forcing CEOs to “learn the new production function” or get left behind.
Microsoft’s CEO warns the AI era is “ripping and replacing” how companies build, sell, and operate.
He says unlearning old habits is harder, but essential, in the age of AI.

When Microsoft CEO Satya Nadella looks at the rise of artificial intelligence, he doesn’t just see a new technology wave.

He sees a complete rewiring of how companies build, sell, and organize themselves.

Speaking to TBPN at GitHub Universe on Tuesday, Nadella said business leaders must prepare for a tech shift, a business model shift, and an organizational shift all at once — a combination he described as unlike anything the industry has faced before.

“This one is interestingly enough both a tech shift, a business model shift … and three, the way you produce your artifact — your software — is changing,” Nadella said.

“The product development process is completely getting ripped and replaced.”

A new production function

For Nadella, the CEOs who succeed in the AI age will be the ones who learn the new production function — how work gets done when code and knowledge can be generated by intelligent systems rather than humans alone.

“The key is learning the new production function,” he said. “It’s kind of like rewiring yourself — unlearning is the hardest part. Learning is easy. Sometimes if you have to unlearn and learn, it’s much harder.”

Microsoft, he said, has spent decades adapting through major transformations — from the rise of the internet to the shift to cloud computing.

But AI introduces something new: the arrival of true marginal cost software, where every new unit of output — from code to design to content — can be created almost costlessly.

“This is the first time you have marginal cost software — not just like the cogs of the SaaS world, but true marginal cost,” Nadella said.

Shifting business models and mindset

Nadella compared the AI transition to Microsoft’s own painful migration from its ultra-profitable server business to cloud computing in the 2000s.

“We’ve also navigated tough business model shifts,” he said. “When you suddenly have a 98-99% gross-margin server business and you move to the cloud and you don’t even know, ‘Man, is there a margin here?’ And yet you have to make the shift and figure it out.”

He warned that companies can’t cling to old models, even if they’re still profitable.

“Given the binary nature, you’ve got to make it to the other side,” he said.

Nadella argued that mindset applies equally to the AI revolution. Companies that hesitate — waiting to see the economics settle — will find their existing margins erode faster than expected.

Unlearning as a leadership skill

Nadella’s advice to CEOs: treat organizational adaptability as a first-class capability. Learning is no longer enough; unlearning may matter more.

He pointed to younger engineers who’ve grown up coding alongside GitHub Copilot as a preview of the next generation’s norms.

“It’s the first cohort of developers who grew up with GitHub Copilot as standard issue,” he said.

In that sense, Nadella’s message was both a warning and a road map: the winners in the AI era will be those who rebuild their thinking about production, cost, and talent from the ground up.

Read the original article on Business Insider

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This huge Samsung QLED Q8F TV is down to under $1,000 at Amazon — save $300 right now

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