TRANSFORMING TO ADIGITAL BUSINESS

Microsoft

What does transforming to a digital business really mean? ##

“Our industry does not respect tradition – it only respects innovation,” Mic-rosoft CEO Satya Nadella explains. Customers are more influential than ever before. They expect speed and personalization. And they have options—lots of options. Digital technology is leveling the playing field for businesses of all sizes to disrupt their industries. It’s creating opportunities to develop products and services that were once inconceivable. Size, which was once a competitive advantage, is becoming a liability as businesses that once dominated the mar-ket are now struggling to keep up with young, nimble startups. The rise of digital is going to completely dis-rupt businesses and dra-matically change the com-petitive landscape. Today’s leaders know that to thrive, they must transform into a digital business. But what exactly does this mean?

“Our industry does not respect tradition – it only respects innovation.” -Satya Nadella, Microsoft CEO

According to Gartner, “Digital business is the creation of new busi-ness designs by blurring the digital and physical worlds. Digital busi-ness promises to usher in an unprecedented convergence of peo-ple, business, and things that disrupts existing business models.”1

Just imagine the possibilities: Smart machines that can reliably pre-dict outcomes, customer needs that can be anticipated with greater certainty, physical experiences that are greatly enriched with digital experiences, operations that become more agile and dynamic to market realities, and product innovation that can include custom-ers and partners throughout the value chain. The opportunities are endless.

DIGITAL AS A STRATEGY, NOT JUST A TACTIC

While many businesses have been leveraging digital technology for years, being a digital business isn’t just about using technology, it’s a mindset—an approach—to solving business problems. Your dig-ital strategy is your business strategy. Microsoft, we believe there are three key things an organization must do to become a digital business.

your digital strategy is your business strategy

Adopt a digital-first mindsetThe first step towards becoming a digital business is adopting a digital-first mindset. When everyone in a company embraces what is now possible through digital, the business can respond faster and deliver on the amazing, personal experiences custom-ers now expect. A shift to a digital-first mindset puts all employees at the forefront of digital innovation. While IT should be integral to the process, it is other business units—like marketing, sales, and operations—that are increasingly leading the digital trans-formation. In fact, business-funded technology was expected to account for 55 percent of total IT spend in 2014 (International Data Corporation, 2014). The more successfully a company builds a digital workplace, the more likely they are to attract the talent they need and establish a digitally-minded culture to support the transformation of their business.

Reimagine businessMore than simply digitizing analog processes, digital transfor-mation requires that businesses completely rethink their opera-tions in the modern world. This includes reimagining the custom-er journey to enhance how people experience your company across their entire lifecycle. Businesses must reassess their pro-cesses not only to improve efficiency and cost savings, but to improve time to market and to differentiate their business. This had led to many organizations to evolve their business models, redefine their industries, and take on new market opportunities.

Connect everythingConnecting people, processes, things, and data across the com-pany is the cornerstone of a digital business. It’s what enables organizations to discover unprecedented insights and deliver the experiences that delight; it’s ubiquitous collaboration. When ev-erything is connected—from R&D, operations, marketing, and sales, through to the end customer—businesses are not only more nimble and better informed, they are able to transform themselves and their relationships with customers.

THINGS

CONNECTIVITY

DATA

ANALYTICS

REIMAGINING THE DIGITAL ENTERPRISE

Redefining the customer journeyEnterprises are truly rethinking their customer journeys and the value they deliver. They are using digital technologies to reach new un-tapped audiences, to provide the right offers and services at the right time, and in some cas-es, it’s leading them to change the dynamics of their customer relationships from B2B to B2C.

Royal Caribbean redefined guest comfort by tapping into the Internet of Things for its in-novative new Oasis-class ships. By connecting existing shipboard systems with new devices, the cloud, and a central data system, Royal Caribbean is able to see powerful new in-sights into the ships operations and provide a truly orchestrated onboard experiences. Now, guest can easily find an open table for dinner, schedule a massage, or book seats for the next show. By better utilizing data and connecting new things, like handheld devic-es, Royal Caribbean can tailor their offerings, better manage staff, and deliver an even more amazing experience for their customers.

Reimagining operational and business processesCustomers are infusing digital into their oper-ational and business processes. They are able to drive efficiencies or completely design how they operate, integrate customers and data into their innovation process, and be proactive and predictive internally and externally—en-abling them to stay nimble and be competitive.

At the facility where they produce the body for the new Jeep Wranglers, KUKA Systems Group leveraged the Internet of Things to create a factory so efficient, it redefined pro-ductivity. By connecting hundreds of assem-bly line robots and more than 60,000 device points to their private cloud and back-end systems, KUKA is now able to monitor the wear of machines to keep their assembly lines up and running. With powerful insights into operations, the system can quickly adapt to build eight different Jeep bodies, all on the same assembly line, all to exact and quality control standards, without stopping produc-tion. KUKA has turned their factory into a pre-cision instrument by reimagining their opera-tions and process with the Internet of Things.

Rethinking business modelsSome enterprises are leveraging digital technologies to redefine theirbusiness models. As data becomes the new currency, enterprises are shifting from selling products to selling services. They are de-livering new digital products and complementing physical experi-ences with digital ones, and are using connected “things” and data to develop new revenue streams. These transformations are funda-mentally shifting the competitive landscape for every organization.

ThyssenKrupp’s digital transformation led them to change their busi-ness model, unlock a new revenue stream, and completely rethink their industry. By connecting the sensors and systems in each of their elevators to the cloud, ThyssenKrupp has been able to move beyond preventative maintenance to offer predictive and preemp-tive services, a service that has not been possible before in the el-evator industry, and the interoperability of Microsoft’s technologies allows ThyssenKrupp to connect their new service to multiple ele-vator makes and models—making it possible to extend their mainte-nance business to create new revenue opportunities. Azure Machine Learning feeds data into dynamic predictive models so that eleva-tors can actually anticipate which repairs they’ll need. Data about their elevators is controlled through a central, cloud-based dash-board that provides a real-time view of key performance indicators, all of which can be pushed out to technicians in the field. Using live data to define a repair before a breakdown happens has help Thys-senKrupp lower costs and raise elevator reliability to new heights.

DIGITAL TRANSFORMATION WITH THE INTERNET OF THINGS

Transforming to a digital busi-ness does not have to be over-whelming. Businesses can start small with a few changes that can make a big impact. This starts with building on the infrastructure that you already have, using your ex-isting “things” in new ways, then innovating and optimizing so that everything works better together.

For retail, this may mean lever-aging smarter POS terminals to promote analytically driven cross-sell/up-sell offers. For the health industry, this may be streamlining patient care through connected patient monitors, tablets, and sig-nage to heal more people faster. Manufacturers may use sensors on the factory floor to power in-telligent, connected operations that dynamically adapt depending on market and customer needs. What if you’re a city leader? The digital transformation is going to revolutionize the world’s cities in the coming years, including water systems; fire, police, and medi-cal; and traffic and power lines. Sensors will enable unparalleled responsiveness with real-time in-sight on populations and infra-structure. There is no single pic-ture of a digital business; in the end, it’s about transforming the things that matter most to you and your customers.

Digital technologies are already having a significant im-pact on how business is done. Companies are making fundamental changes to how they innovate, how their employees work, and how they engage with customers. They are becoming digital businesses. Here’s are some things that digital businesses are doing today.

Innovating with crowdsourcing and dataOrganizations are changing how they innovate and de-liver new products and services by integrating custom-er, employee, and business ecosystem feedback into their development process.

Adapting the business through intelligent operationsEnterprises today are becoming more agile and re-sponsive, enabling their operations and businesses to turn on a dime when necessary to quickly respond to market needs.

Working smarter with smart machines Enterprises today are becoming more agile and re-sponsive, enabling their operations and businesses to turn on a dime when necessary to quickly respond to market needs.

Staying ahead by anticipating what’s nextMachine learning and advanced analytics are enabling organizations to anticipate and predict customer needs and market changes.

Delighting customers with richer experiencesIn order to deliver engaging customer experiences, businesses today are leveraging digital technology, such as interactive displays, second screen strategies, and local offers on mobile.

Digital is changing how business is done

Digital transformation is not the future, it’s happening now in companies large and small. In a Gartner survey, half of respondents say that they expect their company to be a digital business by the end of 2016 and Gart-ner expects that number to increase to 83% by 2019.2 Remember that digital transforma-tion is not a traditional large-scale, one-off transformation. It is pivoting to a mindset of ongoing innovation, iterative updates, and continual growth. This type of change won’t happen overnight, but every journey starts with a single step.

How successfully a business adapts to digital transformation will correspond directly to its future competitiveness and ultimate survival. No business or industry will be immune to these changes. Every product and service—indeed every aspect of every business—will be affected. And the time to act is now. Busi-nesses that don’t embrace the digital revolu-

tion today risk a fate akin to those businesses that were hesitant to adopt the Internet.

Across Microsoft, we are also transforming in this digital age while keeping our roots as a productivity and platform company. While productivity can empower every person and every organization, we think about produc-tivity for people, teams, and the business processes of entire organizations as one in-terconnected digital substrate. We also think about interconnected platforms for individu-als, IT, and developers. This comprehensive view enables us to solve the more complex, nuanced, and real-world challenges in an in-creasingly digital world.

No matter where you are in your own dig-ital transformation, we would welcome the opportunity to explore how we can help you achieve your own digital vision.

It’s happening now

Improved access to production and supply chain data worldwide, reducing costly downtime and maintenance, and increasing productivity.

Enhanced patient care through near real-time, remote monitoring of vital signs and automated alerts, reducing outpa-tient visits andproviding better insight into patient data.

Increased reliability and reduced costs through rich, real-time data analytics, predictive maintenance, and rapid, remote diagnostic capabilities.

Elevated customer experience and streamlined operations through connected devices and real-time data analytics.

Achieved faster maintenance, better service, and lower costs by harnessing data from thousands of devices and system throughout the rail system.

1 Buytendijk, Frank. Digitopia: four scenarios for digital business, and what to do now. Gartner, Inc. September 3, 2014. 2 Lopez, Jorge. Agenda Overview for Digital Business, 2015. Gartner, Inc. January 5, 2015.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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