How do the companies like Microsoft appoint CEOs?

A great question
Someone asked this on Quora, and I felt compelled to try and answer.

A giant in transition

I think these giant companies follow this process:

Step  1. Identify potential talent within the organisation that can be ultimately elevated to the top post (the corner room, as it's called). 
Explanation. In some cases, outsiders can be considered, but that rarely proves to be a good decision.

Step 2. See if the identified talent has stayed long enough with the company. 

Explanation. Long enough can vary from a few years to a whole lot of years, depending on the type of work the company does, to have absorbed the company's culture (dna, as they call it!) And obviously if an outsider is chosen for the top post, then this step loses meaning.

Prisoners by choice

• Steve Jobs was not an engineer, forget about being an alumnus of an MIT or IIT. He redefined everything in consumer electronics.
• Satya Nadella never went to an IIT. He passed out of the humble Manipal Institute of Technology. Did a weekend MBA. Is now the CEO of one of the most powerful firms in the world.
• Walmart's founder built its HQ in an unknown town, the founder's own. In a backward state. It is one of the largest corporations in the world.

Despite the clear presence of these shocking facts in popular media, most of us would just brush them aside as, well, asides. Or better still, will use them as quotable facts in our concocted speeches to be given as part of some lame competition in college. Never for once stopping to gulp them fully, and allowing them to affect our thinking deeply.

We - especially us urban, middle class, aspirational Indians - remain firmly wedded to the notion of the archetypal successful man or woman. We just cannot accept that anything beyond an IIM or an IIT can ever be hope inducing. We allow our lives and hopes to be destroyed by silly entrance tests (often conducted by mediocre professors with zero accountability). We accept defeat right at an age when our optimism needs to break through the concrete ceilings on top of our heads.