Microsoft CEO Satya Nadella has admitted that one of his biggest mistakes was failing to predict the dominance of search, a market that Google successfully capitalised on.

He said Microsoft had initially assumed that the web would remain decentralised, not realising that search would become its most valuable business model.

Calling it a valuable lesson, he said: “We (Microsoft) missed what turned out to be the biggest business model on the web, because we all assumed the web is all about being distributed.”

In a conversation with YouTuber Dwarkesh Patel, Mr Nadella reflected on how Microsoft miscalculated the significance of search, while Google identified its potential and executed its strategy flawlessly.

“Who would have thought that search would be the biggest winner in organising the web?” Mr Nadella said.

“We obviously didn’t see it, and Google saw it and executed it super well. Understanding a technological shift is not enough; companies also need to recognise where value creation will happen,” he said.

He noted that adapting to changes in business models is often more challenging than keeping up with technological advancements.

“These business model shifts are probably tougher than even the tech trend changes,” the Microsoft CEO stated.

Mr Nadella recalled being part of several major technological transformations during his career — with the shift from mainframes to personal computers, followed by the rise of client-server architecture.

He also discussed the emergence of the web, remembering how the launch of the Mosaic and Netscape browsers forced Microsoft to adapt.

He said the company managed to adjust well to the browser era since it introduced a new way of building applications.

Having joined Microsoft in 1992 after working at Sun Microsystems, Mr Nadella has witnessed multiple waves of innovation.

He holds a degree in electrical engineering from the Mangalore University, a master’s degree in computer science from the University of Wisconsin-Milwaukee, and an MBA from the University of Chicago.

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