Good afternoon, please welcome General Manager Microsoft,
Grad Conn.
[MUSIC]
>> Hi I'm Grad Conn, I'm the General Manager for
Microsoft Dynamics U.S >> And
just a quick sort of preview of the rest of the afternoon.
We're gonna have Nigel talk for about an hour.
The we're gonna take about a 15 minute break and
go into industry breakouts.
Then we'll end the day with Dr Oz, which should be super fun.
So this morning, Jetson talked through some
great customer examples And James took us through some
really fantastic technology examples, some great demos.
That PowerApps demo was really compelling, wasn't it?
Like basically making programs like you make a PowerPoint doc.
I though that was something else,
it reminds me of a great quote.
Doctor General, excuse me, general, I'm thinking of Dr Oz,
General Eric Schineske >> He has this great quote,
which is "if you don't like change, you're going to like
irrelevance a lot less." You know, it's- I love that quote.
'Cause it's, 'cause people are often like "Jeez,
I don't want to change," but you know, the alternative is,
is not great.
So...
In a moment I'm gonna be joined by Nigel Finnick.
Nigel is the vice-president and principal analyst at Forrester.
He's been there for about 11 years.
Looks at digital transformation as his specialty.
So very deep on digital transformation
it's gonna take us through some really interesting examples and
cases just gives you to think about digital transformation in
a really expansive way Just before I invite him out,
though, I'm just going to run a quick video just to
introduce the Forrester perspective.
And then we'll invite Nigel out.
[MUSIC]
All right, Nigel, welcome.
>> Thank you very much.
>> I'm going to let you talk for about 45 minutes, then I'll be
coming out, and we'll do a Q&A, so think about questions as we
go through it We got a couple of mic runners in the room so
we'll be able to take questions and, sir, break a leg.
Thank you very much.
We were just having a discussion on where Break a Leg comes from.
So, an honor and a pleasure to be with you this afternoon.
The title of my session, "Digital Predator or
Digital Prey?" I've actually been using this title for
a few years now.
I keep changing the content up but the title.
Resonates.
Why?
Because partly it's designed to be provocative.
But also because innately we think it's better to be on
the predator side than the prey side, I think.
It's sort of something we kind of understand.
And when we started doing research around digital
transformation, I used to do a researcher on business strategy.
And about five or
six years ago, I started seeing some interesting things change
in the way some companies were running their businesses.
And we looked at this thing.
It was built a lot around emerging technologies,
a lot around what was kind of social media.
And we wrapped this all up into what we called digital
transformation, which at that time, when you Googled it,
there was zero results if you can believe that.
The content, what I said at the time was every company by 2020
will become one of two things, digital predator or
digital prey.
And you have to figure out whether you can help your
company become the predator Or
whether you're gonna stand by and let it come prey.
So my task today is to help your challenge your
thinking that'll lead to some of the change and
hopefully help your companies become the survivors by 2020.
Because we're getting very close to that point,
that's only two years away now.
And we've been
seeing acceleration of this change over the last few years.
The more and more companies are ging
under because they are losing customers to more advanced
companies that are innovating faster.
Everybody is talking about digital transformation. Why?
Because it's real.
Because it's something that we need to do
to change our business.
What I'm gonna help you do is understand partly the why, but
it's really how the companies are changing,
what the fundamental things are we have to change beyond
technology and some of those we touched on this morning.
So why predator or prey?
Well, partly because when you look at, say,
the robin redbreast, right?
The robin redbreast Is a predator, clearly.
We've all see the little bird outside our windows in
the morning, and we know, there goes a predator, right?
>> [LAUGH] >> From the worm's perspective,
this is a predator.
Right?
Okay, so predators don't always look like
the real predators we think they are.
Sometimes they appear in different guises.
and sometimes They're actually not what we think.
Sometimes the predator comes out of left field,
comes from where we don't see it.
And that's the challenges.
Your business is likely to have a predator
that you don't see coming.
A company that is gonna do
things in your industry differently,
that are gonna change the way you think about your business.
that'll help transform the industry.
And you will be able to react, but you will be reacting.
And the speed at which you can react will largely depend on
how well you've prepared your company to change in an event.
And what's behind all of this?
Something that's fundamentally very simple.
We all have smartphones in our pockets today, right?
All of our customers have smartphones, right?
Whether you're B to B or B to C, every person you sell to
has a smartphone, and if they don't well they soon will have.
And what happens with these smartphones?
Few years ago I could unlock a hotel room
door with my smartphone.
Anybody have that experience where they're
unlocking hotel room doors?
Now I asked this question two years ago.
Nobody in the room had done it. Okay?
So
now we see a change in experience.
Those changes in experiences slightly reset our expectations
about what's possible.
Now I can unlock a door With my phone.
I can unlock anything with my phone, potentially.
I can do things with my phone I couldn't do before,
changes expectations.
Now it may not be enough to say, I wanna go stay in that hotel,
cuz they allow me to unlock my room door.
Because frankly, the old key thing worked pretty well.
But It does change expectations slightly.
But then what happens when the experience changes yet again?
What happens when another hotel company comes along and
says, hey, you can now pick your hotel room
the same way as you can select a seat on a plane.
Any frequent travelers in the room?
A few of you right?
Okay.
Well how important is it that you're not overlooking the train
station that sits on the side of this hotel.
Pretty important.
So the fact that you can now pick your hotel room
can have an enormous impact on the value of being able to stay
in this hotel chain.
It changes the expectations about what's possible and
it may also change your behavior And
this is the dilemma that we have as companies.
And our customers whether their
expectations are changing every single day.
When was the last time you had an app download on your phone?
An app update?
This morning?
Most of you don't know, right?
Cuz it just happens I mean, I don't know.
I think my apps seem to be updating every minute,
maybe I've got too many apps, that's probably a downfall.
But here's the thing,
you put this in to a mathematical formula.
I like to have very simple mathematical formulas.
So this is a very simple formula,
experience over expectation equal to perceived value.
Now,think about this,if the experiences are constantly
changing,the resetting expectations, right?
So where do we get our experiences from?
We get our experiences all over te place.
When we shop on Amazon.
When we go to an airport and jump on a plane.
When we stay in a hotel.
Everywhere, when we buy a cup of coffee, we get a new experience.
Those experiences are changing expectations.
Now, what happens if your customer's
expectations are evolving?
But your experiences that you deliver to your customers,
stay the same.
This formula goes out of balance, and
when it goes out of balance, perceived value decreases.
Now, I know I'm asking you to do mathematics right after lunch.
This is hard, so I'll make it easy for you.
All right, let's put some numbers in here, 100 for
experience, 100 for expectations,
we could see how we perceived value of one.
What happens when the expectations changed and
the experience doesn't?
Then we see the perceived value goes down.
This is happening everyday in every business.
This is why we call it the digital dilemma because
you have to design your business to constantly evolve
that experiences that you're delivering to the customers.
Because if you don't you're guaranteeing that they will get
decreased value over time.
The problem is that,
our businesses are not a designed to costantly change,
our businesses are actually designed evolve very slowly.
Many businesses are very conservative.
We have processes in place to ensure that employees do
things the right way.
They don't change things.
They're designed to evolve slowly.
In today's business climate, the experiences have to deliver
desired outcomes in order to create value.
Experiences start to shape expectations but it's the degree
to which they deliver an outcome that the customer values,
the changes of perception of value your customers have.
So if you connect the dots here,
you see that solving the digital dilemma.
Demands this fundamental shift in how a firms delivers value
and drives revenue.
This is what we call digital transformation,
because you are fundamentally changing the business.
Transformation, think about the caterpillar into a butterfly.
A transformation, a big change.
This isn't incremental.
This isn't just adding a website to your business or
adding a new mobile app.
This is about fundamentally re-thinking how
we create value for customers.
Now, I did some research looking at high performing companies,
high performing digital companies,
what we call digital predators.
And compare them to the digital items, and
we asked executives in these companies,
what are their number one success factors?
What are they measured on?
And in digital predators, we find that the number one success
factors are two things, they both came out of the top.
Being able to create new sources of value for customers and
being able to create world class customer experiences.
That was above revenue, above profit.
Yes, revenue and profit are important.
But they understand that we have to do these things first.
Because that's what drives revenue and profit.
They aren't customer obsessed companies.
So one of the things we see in companies, is this need to
change the culture to become customer obsessed.
What does it mean to be customer obsessed?
Understanding how to create value for the customer.
How do we create value for the customer?
What we have to understand that it's not just about building
better products and services.
Yes, we still need to deliver products and services but
have value to customers.
But we have to understand that when,
the way we design our business today, we have to design
the experiences that deliver the outcomes,
which satisfy the desires of our customers.
And if you understand that,
now we have to get to, how do we measure desires?
How do we know what our customers desires are?
What are their desired outcomes?
And it's interesting and I work with a lot of marketers.
And in marketing,
we've talked about satisfying customer needs for years.
It's easy to identify customer needs.
But the challenge is needs are not the same as desires.
How many people in this room drive a Prius?
Two?
I think it's count two.
I bought one for my daughter, by the way.
This is nothing against Prius.
So Prius, great car, very economical.
Well done, good sound choice sir.
Okay.
So, why don't we all drive a Prius?
I mean, it's one of the most economical cars on the road.
It's not that expensive, right?
It gets you from A to B pretty easily.
It has room for passengers and luggage.
We don't all drive the same car,
because emotion changes our choices.
Desire affects the car we drive, right?
And so we have to understand desires that the foundation of
every buying choice a customer makes.
It's an emotional choice.
In order to be able to connect with customers and
create value, we have to connect to their emotions.
We have to understand their desired outcome.
In a B2B business, we have to understand
the desired outcome of the company and
the employees inside that company and then B2B, that very
often means we're selling to more than one customer.
Is this person buying the product or service?
And is the person using the product or service?
And then we've got to look at their customers, and
what their customers are doing.
So let me put this in context,
we kind of all understand the agribusiness.
Farming, farming's been around for centuries.
Farmers, do farmers actually want to buy products like
farm machinery, like seeds, like fertilizer, like pesticides?
They don't want to buy those things.
But that's what companies have been selling them for years.
What they want, the outcome they desire, is high yield.
High yield per acre.
Agri companies are being understanding and
starting to see the value of data to deliver the outcome that
customer values, which is high yield.
Using data to help a farm understand the soil chemistry on
their farm, to understand how close to plant seeds,
to how much to fertilize, how much to irrigate,
understanding patterns of pest as they move across the country.
To be able to predict when to lay down pesticide.
All of these things can help a farmer increase high yield and
they have value to the farmer.
So, it changes the agribusiness, something that's been around for
centuries, relatively unchanged.
As we've looked at all these different companies and
organizations and industries to understand what's going on,
we've seen four clear, distinct patterns emerge.
So we call these things the new rules of business because I like
to keep things simple.
The new rules of business really state this,
you have to do these four things together, not one and
focus on one but do all four these things together.
So, digital experience.
Digital experience is really about delivering experiences
that are easy, effective and emotional.
When you look all the disruptive technologies,
the all the disruptive businesses.
They typically do a couple of things really, really well.
They give customers back,
the most valuable thing that you can give them, which is?
>> Time.
>> Time.
There's always somebody who gets it.
Time, right? It's the most
precious thing in the world.
We can never get more of it.
If you can give customers back time.
You're creating value almost immediately for them.
Somebody much wiser than me once said,
if you can figure out a way to give people time,
you'll print money.
Give them back time, but also make it easy, right?
Make it easy and enjoyable.
And that's really about what's at the heart of creating great
digital experiences.
You look at a company like Yorkshire Bank in the UK.
Yorkshire Bank, traditional retailer bank.
They understood that they had a very old kind of way of going
to market.
The traditional Come into our branch, apply for loans,
very traditional way of looking at things.
In order to think about their business differently,
they set up, essentially, a competitive bank.
They reinvested in the retail banking experience
to create a new online banking experience,
to build a bank around the customer and
what the particular things those customers wanted to do.
To simplify the transactions, to give customers back more time,
to build consistent experiences, but they
did it all on top their existing backend systems, because they
didn't have the money to go change their backend systems.
So they focused on creating great digital experiences.
Now one of the challenges in the financial services industry is
how do we change all those back-end systems,
cuz ultimately, they're probably gonna need to be changed.
Which gets you to digital operations,
which is the second rule.
Focus operations on the things customers value.
Now, we talk a lot about creating operational efficiency.
And there's enormous energy going into how to apply digital
into our operations in order to be able to extract value
to reduce cost.
Well we've been doing that for 30 years.
We can still do that and extract cost out of the business.
But when we do it in a way that also focuses on creating value
for customers, it changes the focus of how we do it.
Because we want to understand that we need to
create agility in the business.
The operations have to be designed to change very quickly.
Go back to the digital dilemma,
their expectations are constantly evolving.
So our experiences have to constantly evolve.
If we have to design our business to constantly change,
now we have to design our operations differently.
We'd have to design operations not just for efficiency.
We have to design operations for the speed at which they can
change and react to market changes.
So, we may need to invest in architecture that is actually
designed to support rapid change in the business, right?
So the way we look at operations is very different.
GE's been on this journey for a number of years.
They're in the news a lot this year, quite interestingly.
I was just at their event in San Francisco last week,
the Minds and Machines event.
GE's transformation's been going on now for five years, and
really sort of accelerated two or three years ago.
They've been doing these five steps to change their business,
and they started at looking at how do we change
our operational capabilities?
How do we understand how to use the technology to improve
the way we operate, and then how do we take that to customers and
help them do it?
Now interestingly,
this highlights another dilemma that's going on,
which is if you're a public company,
you only have a certain amount of time to be able to do this.
Now Jeff Immelt took billions of dollars of cost out of GE and
did not return it to shareholders.
He put it into investing and building up GE digital because
he knew that was the right thing to do for GE in the long term.
Ultimately, he didn't have the runway to be able to do that and
see it play out.
As you may know, he was asked to step down this year.
Whether that's the right strategy for GE,
will play out in the next two or three years, we'll see.
But fundamentally, what GE's being doing is saying,
we need to reinvent our business.
We need to change how we operate and create value for
customers in different ways.
And that shows how hard it is to do it in a big business
across the world and how much money it costs.
So, we see when we look at different industries
on how they are investing and
changing on what they called digital transformation.
We can see that we're still spending a lot of money on
the things that tend to touch customers, customer experiences
and relatively little on the operations of the business.
There's a lot of opportunity to still improve the operations
to create agility and service to customers, to change the way we
think about the business and to change how we operate.
A lot of investment is still focused around IT process.
If you look on this, you see supply chain stands out to me as
one that's enormously opportunistic for change.
And we're just starting to scratch the surface there.
In manufacturing, we're just starting to scratch the surface
on what's possible in changing manufacturing using technology.
And that gets me to the third rule which is
building out the digital ecosystem.
So you see companies looking at how to change their ecosystem,
how to partner with other companies.
So, for example, in retail,
retailers traditionally have figured out, okay, we need to
buy things, sell them in store, and we'll put them online,
we'll build a website, we'll create a mobile app.
But now we see retailers actually partnering with
companies like Amazon,
to help them sell through the Amazon channel.
So Amazon becomes an extension of their retail property.
Right, so they understanding that you don't have to do
everything yourself, you can partner with other companies.
You can partner with companies like Microsoft to help
build on the cloud.
So there's companies you partner with to help you do what you
need to do to create value for customers.
On the supply chain side, improving the way companies
modify their supply chain to react to changes in
the supply chain and be able to move much faster.
So they're part of the business ecosystem that creates value.
If you take a boring industry like energy production,
there's a lot of change going on in energy production.
But I highlight this example here,
not because it's a cool website.
Yes, they've got the ability to go pick a plan on a website,
that's great.
But these two energy plans on the left,
they have a Nest thermostat built in with them.
Now you may notice there's a higher rate per kilowatt hour.
But why do they have nest thermostat built in to them?
They have a Nest thermostat built in to
them because it allows this company to create value for
their customers in new ways.
So instead of just saying we'll just deliver you energy when
you want it.
They're now able to say we'll work with Nest, to partner with
them, to make sure that we manage your energy so
that you don't need to put as much demand on the grid.
And we can return the energy saved to you in a rebate called
rush-hour rewards.
So what happens in a typical environment?
When you get a heat wave,
you see a graph something like one on the upper right there.
Which basically is, all the air conditioners turn on at
once because the room's got too hot, and they all try and
cool it down to a temperature.
And this puts enormous load on the grid and
energy providers have to produce what's called peak energy.
Peak energy's very expensive for them to produce,
it's above their normal load.
If you can smooth out that demand by cycling the AC units
on and off, which you can do because Nest is able to do that.
You don't notice a difference in the room.
The room ambient temperature remains the same, but
the demand is spread out on the system.
You produce less peak energy and you're able to produce
much better value for the entire ecosystem.
And you create value for customers in new ways.
Interest, I don't if you knows it was in the news last week I
think it was, Germany now has so much energy produced from wind.
There was a period last week the price of energy,
price of electricity was negative.
They were paying people to take energy off the grid.
Why?
Because the converse is true,
peak energy is very expensive to produce.
Shutting power down is very expensive to do as well, right?
So it's actually more efficient for the energy companies
to pay people to take energy than it was for
winding down the power production.
Because there was so much wind energy being produced, right?
Crazy world we live in.
So you've got digital experience, digital operations,
digital ecosystems, the ability to create value
through the ecosystem, and you have innovation to be able to
innovate at the intersection of experiences and operations.
This is where all the real value can be unlocked,
this intersection between customer experiences and
customer operations.
And so when you think about it, this intersection between
the customer and how the customer is touching our company
today and all the operations that sit behind it, there is so
much opportunity to create innovation.
We estimate that about 20% of the spend is on the customer
ecosystem and the 80% of the potential to unlock is actually
on the operational side of the business.
And yet when you think about digital transformation and
how many people look at it,
they focus almost entirely on the digital experience.
But there's so much to unlock in the operations.
And you have to be able to innovate inside this digital
ecosystem.
So when you think about the digital ecosystem,
it's not just the ecosystem of your business.
But every customer you have, has their own ecosystem.
If you sign to a company, that company has a digital ecosystem.
How many of us have exactly the same apps on our phone?
None of us, right.
We all have different apps, why?
Because we all choose the apps that have value to us.
And if you're like me,
you have way more apps than you use, right.
So all the apps you use are on that front screen, all right.
And all the other ones, like the other 400 are somewhere behind
and you go find them occasionally.
That's your ecosystem of value, right.
You selected your own digital ecosystem,
the things that create value for you.
They help you get to an outcome.
You only use an app when it helps you get to an outcome.
There are many great apps on your phone, you look at and
go, that's cool, but you don't use it, why?
Cuz it doesn't help you get to an outcome you value.
A cool app can be great.
You can have a great experience.
But if it doesn't deliver an outcome that you value,
nobody's gonna use it, right?
You have to focus on the outcome of the customer's value.
So when you're thinking about your customers and
the outcomes they value.
You have to think about the desired outcomes,
you have to think about their digital ecosystem.
One of the things that you
need to do in market research when you're looking at customers
is find out what their digital ecosystem looks like.
What are the apps they use?
Why do they use them?
How do they use them?
Because they all help them get to an outcome they value.
If we wanna understand the outcomes they value,
we have to understand how they get there.
Cuz therein lies the potential for us to unlock value for them.
To unlock that ability to help them get to that outcome
in a new way.
Think of the farmer.
There's a great line in sales training.
I always remember when I went to various forms of sales
training with my career.
And at one point new sales people sometimes get asked
to sell something.
And there's this whole thing about, you're bringing yourself
a person and it's okay well here's an electric drill.
Sell me this drill.
And the new sales people will come on and
they'll talk all about the features and
benefits of the drill.
How, it's got variable speed and
the chuck's easy to use and all this.
Pretty good.
And then experienced sales person will come on and they'll
talk about what a beautiful hole this drill allows you to get.
How smooth the edges are.
How it goes to just the right depth.
Why?
Because you're not buying the drill because you wanna
own the drill.
You're buying the drill because you want the hole, right?
You have to think about what is the hole your customers want.
What's the outcome they want, right.
Whenever we buy products,
it's not because we wanna own the product,
it's because we want the outcome.
Some of us buy a car, not because we want the most fuel
economy, but because we're just passionate about autocross and
that's what we do every weekend.
Okay, so now you know my hobby.
But, I couldn't drive a Prius at autocross.
It's a great car. I bought one for my daughter.
But it's not a great autocross car.
It just doesn't quite have the same performance.
I'm sorry.
So you have to think about the outcome the customer wants.
And you have to incubate these emerging technologies.
So you have an example here of Lowe's using HoloLens to do
kitchen design.
Well, why do this, because it's not at a point where it can
be scaled across all stores yet?
Well they do this because if they start now and understand
how to use the technology, how to create volume,
work with customers to co-design, co-develop.
They have now got the ability
to accelerate that when the technology's ready.
When the technology is ready for
them to be able to scale that out across multiple stores, and
create value for customers in new ways, they have that DNA.
They have the understanding about how to scale it.
So we have to understand how to build that DNA in our companies.
To experiment, to create that culture of innovation.
And so this focus on rapid experimentation becomes
really critical.
So this is an example of Capital One is The Garage.
Capital One recognized that they had built it to create value for
customers around car insurance and
car loans to help their design team understand and
get in the mind of the customer, they built the garage.
For their design team to work in that environment, to
constantly think about what is the outcome my customer wants?
And to be able to bring customers in and co-design,
co-develop.
And it works, the products that came out of this drove
revenue well above beyond what they'd previously experienced.
So there are lots of things we can learn by looking
at existing companies.
So I wanna give you six strategies to create
an innovative culture because innovation is at the heart
of being able to drive revenue in the future.
We have to think about
changing the culture of our organizations.
To be highly innovative, highly creative.
So number one we've touched on,
embrace holistic experiences that transcend touchpoints.
Now when you think about this,
it's not about just improving one experience.
It's about an understanding the entire customer journey.
Think about it from the customer's perspective,
the outcome they wanna get to,
when is it they know that they wanna get to that outcome and
all the things they do to get to the outcome.
And it's probably well beyond the experience they have with
your company.
There are other companies they get involved with before and
after or alongside.
And you have to understand their entire experience.
Your customers are now empowered, as you know.
And they expect personalized experiences tailored
to their moment of need.
In other words, when I'm at the gate in an airport
to board a plane, I expect, when I pull out my phone,
that it will load up my mobile ticket.
And I don't have to go find the app and
find out where the ticket is.
It knows where I am.
It knows what flight I'm going on and
it knows it's boarding time.
This isn't rocket science guys, give me my boarding pass, right?
This is kinda how you have to think,
you have to get in the mind of the customer.
Create the experience in the moment of need.
In order to be able to do this, we have to understand all
the touch points on the customer journey.
And we have to look at all the underlying components that sit
behind it.
We can't just focus on the touchpoint
because very often what will happen, and
we've all seen this, you develop a new digital experience and
then you find out the experience is great, but
something seems lacking behind it.
If you go off the typical path, the customers might go on.
You suddenly find that everything else seems
to fall apart.
Anybody have that experience where you're doing fine then you
do something that's out of the ordinary.
And now all of a sudden the company's like,
your experience just goes, nosedives.
There's nothing there to support it.
You have to look at all of the things in the backend to
make sure the experience sustains itself.
And you have to understand that we create these dynamic
experiences, right.
So if you think about the car example, I apologize I'm a bit
of a car nut so I have a lot of car examples in my talk.
So think about through this outcome,
the desire to easily move from place to place.
And these are maybe a collection of apps that you have
that will help you get to this outcome, right?
So some of you may have some of these apps,
some of you may have other apps.
But you have some apps that will help you get to the outcome
you value.
You have to understand what's going on with your customers.
What is their ecosystem and
build their ecosystem around the desired outcome.
And you have to remember,
as you build the personas around desired outcomes,
if you think about it, this is an cones, not on a race track.
It's around cones.
Stay safe.
[LAUGH] But think about it, the desires evolve, right?
You think about as you get older,
I put some broad categories on here,
as you get older your desires evolve, right, they change.
I can see some of you are chuckling at sort of the as you
get older.
Those of you who've gone past the crisis stage and
pass the grandchildren to freedom.
They will understand as I am saying here.
[LAUGH] So you have to understand where the customer is
in their lifecycle right?
And not just the customer lifecycle as you classically
think about it.
But where are they on their life journey right?
And the people inside those B to B companies we're selling to,
those are people.
Where are they on their life journey?
What's important to them?
How are they being measured?
What does success look like for them?
What's the outcome they most value?
And to get there, we have to become insights driven.
We've heard a lot about using data insights today.
You have to become insight driven.
So we have to learn how to use technology better
to create insights that help us create value.
So let me give you an example of the perfect healthcare app.
Right, so the little pill on the left here is a digital pill.
Hopefully, you've all seen this before.
Cuz this pill's been out for years.
I've been talking about this for years.
But in case you haven't, this pill, so
the little dot on top of the pill is a chip.
It's smaller than the size of a grain of sand.
Now, why would you put a chip on a pill?
Well, when you swallow this pill,
the acid in your stomach acts like battery acid.
Powers the chip.
And it sends the signal to the patch that you're wearing on
the outside.
And it records when you've taken the pill.
Now, why would you do that?
Well, medication is only effective when it's taken.
Some medication you may be appalled to learn, tens of
thousands of dollars per pill and so if you're an insurance
company, you wanna make sure the patient is taking the pill if
they're paying for it because you want them to get better.
And if you're a doctor because you want your patient to get
better, you want to make sure the patient is taking the pill.
There is huge value and actually being able to insure that
patients taking the pill when they should.
Because it helps them get to the outcome which is getting better.
Right, okay, you're with me so far.
So, come with me on this journey.
You can take a pill that sends data onto the outside, right?
How far are we away from being able to swallow a pill
that gives you a complete body chemistry breakdown?
That sends all that data to your app.
The ultimate healthcare app.
Remember when I said this is the ultimate healthcare app?
It's called Days Left To Live.
>> [LAUGH] >> You pull the app out,
it tells you how many days you have left to live.
>> [LAUGH] >> Why is this the ultimate
healthcare app?
Okay, so you go out on town and
you have a few drinks with your buddies.
You eat too much pizza and you wake up the next day and
you pull out your app.
And your days left to live has gone, ugh.
Okay, I'm going to go to the gym.
Right, so I go work out at the gym.
I go for a run everyday.
I'm diligent about it.
And a month later my days left to live has not only gone back
to where it was, it's gone passed it.
What have I done?
I've created a feedback loop.
I've created a feedback loop to change the one thing that we can
do that has more impact on our health than anything else,
any medication or anything else.
The one thing that will have more impact on our health than
anything else is what we do to our bodies, right?
And if we provide the health data to tell us what we're
doing to our bodies, we can change the dynamic.
The simple fact is days after live I call it the ultimate
healthcare because it's a feedback loop, and
it's the one thing that we most value.
Think about it, time.
Most valuable thing you can have.
The ultimate representation of time is how many days we
have left to live.
All right.
And if we can give ourselves more time back,
that has huge value.
Now, I've done this speech a number of times and
you can imagine, and
I sat with healthcare professionals afterward.
And more than one of them has come to me and
said we've gotta build that.
[LAUGH] So somebody somewhere will think about how to do this.
But you do this through analytics, right?
You gather the data to gain insights
to help somebody make better decisions.
And that's what the ultimate health care app would be.
Would help us all make better decisions.
And you could scale right?
With artificial intelligence, you can scale.
We saw earlier a little clip of Rolls Royce.
Rolls Royce has been doing this for years, putting sensors into
engines, and pulling data off those engines.
And actually using that data to do predictive analytics
to figure out this engine is behaving differently this flight
then it did the last flight.
And something's wrong, what's wrong,
let's figure how to change that and so
we need to preposition pass at the airport so that we can get
the engine change service and back up into the air.
Changes the aircraft industry because airlines don't really
want to own the engine what they want
is hours of proportion cuz they don't get paid when the aircraft
is sitting on the ground.
Well, they get paid by the hours flying.
And really, airlines are quite happy to pay for
hours in use as opposed to owning the engine.
So, learn how to scale experiences,
create insights through AI and machine learning.
Number 3, is invest in business agility.
So I talked about the need to constantly change and
evolve our business.
Agility is much more than just our business.
It's about thinking about how we connect
to other companies differently as well.
So we have this shift from from this sort of thinking about
a linear value chain.
The linear value chain's evolving to much more of a sort
of nimble API enabled ecosystem where we're able to connect to
other companies that can help create value for a particular
set of customers and quickly change to the right supplier,
the right company, the right partner to create value for
a particular set of customers.
This ability to dynamically change the ecosystem
according to what's going on in the market is much more
significant than thinking about it as a linear value chain to
think about that ecosystem interconnects to create value.
And today's customer experience really demands its adaptable
infrastructure.
We have to understand that the experience we have
connects to all these things that sit beneath it.
And some of those things are not going to be inside our company.
They're gonna be delivered by partners, by ecosystem partners,
by other companies that are helping to create value toward
that outcome.
Think about the next example, the energy companies
partnering with NIST to create an outcome for
the customer, not just doing it on their own.
But to be able to do all these things,
we need to be able to invest, right?
We can't just plow a whole bunch of money into the company and
not be able to get that money from somewhere else.
In order to trait the agility,
we have to look at where we can stop doing something.
And part of that is looking at the what differentiates
the company and what doesn't?
Evey businesses in here has a set of capabilities that allow
you to bring values to your customer.
What we have to understand is what are those capabilities that
really differentiate the company in the mind of the customer?
Why do they buy from us and not somebody else?
Those are your strategic differentiating capabilities.
Focus on those.
Now, the good news and the bad news is that 90% of the other
capabilities you have, they're generic.
You share those in common with every other company in
the industry.
Company customers are not buying from me because of those
capabilities.
And you have the opportunity to radically simplify them.
And when you simplify them,
you can remove cost from the business in many ways.
One, because you can simplify the process and
create more agile processes.
Two, because you can actually change the technology
that sits underneath those capabilities.
To apply standard off the shelf software which isn't customized.
How many of you have customized off the shelf software?
Only two of you.
How many of you have software that's developed in house?
One of you.
Okay so all the rest of you are running completely vanilla
software, no changes.
I don't believe you.
[LAUGH] I've seen this happen.
So let's say you have a staff turnover of 10%.
Any sizeable organization,
you have maybe 100 managers you bring in to the company a year.
Maybe it's 1,000, maybe it's 10,000,
depending on how big your company it is.
Every single one of those managers that you hire,
did they come into your company thinking, well,
I was hired because everything's going okay,
I've just gotta leave it all as is, not touch anything,
don't change a thing, I'll just keep things going.
Or do they come in because they think, I've been hired for
my skills and talent,
you've hired me because you want me to come in and change things.
So I'm gonna set about changing things and making them better.
I think it's the latter.
And what happens when they start to change things?
Well let's change the process, change the people or
the technology.
Well, if they change the people, those people have got their
own ideas about what to change when they come in, right?
And then you're left with changing the process
and the technology.
And all those process and technology changes, where do
they all end up? In IT, and
they're asked to go change the software,
tweak it, change the process. And all of those changes ripple
through the entire organization. And
what you end up with is this massive complexity of
technology architecture that is very slow to change,
very expensive to change. And then everybody in
the company complains that IT's so slow, so expensive.
I can't figure it out why.
You have to look at what's going on inside of the organization to
understand why.
So simplify, and thereby create agility, and
take cost out of the business.
Redesign the organization from silo to connected.
So when you think about organization design,
we have these sort of siloed organizations.
What we're seeing in many of the more progressive,
more digitally savvy organizations is this shift from
siloed to much more of this cluster approach, right?
To take a cluster of skills and have them tackle a persona, or
a particular customer journey, or
a particular customer outcome, and work toward that.
When you do this, though,
you've got to think about how we measure employees.
Because part of what we're doing
is changing the culture to become more innovative.
The metrics that we use signal
to employees what's important to us.
So I did this study.
We asked sort of executives across companies,
what were their KPIs?
And on this chart,
the dark gray at the top is the business unit leaders.
The next one down is marketing, marketing leaders.
And then the next one down is technology leaders.
And so you have this variation.
To help understand what the variation looks like,
I drew a line between the top of each of these.
Now if you just remove the data and just sort of see this for
what it is, really this is like a noise chart.
In most organizations what you want is this nice,
smooth line between the business units, the marketing teams, and
the technology teams.
Everybody would be focused on the same kind of thing.
In most organizations what you have is a chart that looks like
a noise graphic that's like, my God,
look at all this noise that's in the organization.
Because now we're asking people to work in these same teams and
we're measuring them on completely different things.
And guess what, when they sit in the team and
try to figure out what the solution is,
if we're measuring them on different things,
they're gonna come to different conclusions, right?
And therein create friction inside the organization.
If you wanna move friction out of the organization and
create agility, you have to smooth out the metrics.
You have to have everybody working in the same direction.
Which gets me to the last one which is fueling this
customer-led innovation.
Being able to incubate emerging technologies,
like the example I showed you with Lowes.
Understanding how to use these emerging technologies,
test and learn.
And focus on sort of rapid experimentation,
this is an example of Rebecca Minkoff in New York,
building a digital dressing room.
Right, understanding how to use a technology
to create a better experience.
The last rule I want to leave you with,
is one I call avoiding the pit of doom.
The reason why I say avoiding the pit of doom is when i
started you in this presentation,
I used to have this analogy to the Lord of the Rings.
And when Gollum falls into the crater at the end, so
that's the pit of doom.
So how do you avoid that?
And really it's about delivering outcomes.
Now this is a cautionary tale because,
Remember I had this example of opening the hotel room door?
So the first time I did this a few years ago, I went out for
dinner with some clients.
And I got back to the hotel room.
It was kind of late.
And I needed to use the bathroom.
I thought okay, well, I'll just go in the hotel room, as you do.
And so I get to my hotel room, take out my phone,
press the button, and nothing happens.
Wow, damn.
Now, you've all been here, right?
I'm sure you all understand the discomfort I was
in at this point.
So I get out my hotel room key, I don't have one on me.
I get out my plastic key, cuz I got
a plastic key when I checked in.
And I try that in the door.
It doesn't work.
Now I'm starting to really feel uncomfortable.
So I take care of things, I go down to the lobby.
I find the restroom, take care of that.
And I go to the reception.
And I say, my key's not working.
So they said to me, they look at me and
went, are you on the hotel Wi-Fi?
No.
Well, it only works if you're on the hotel Wi-Fi.
So now we have a great experience that is only capable
of working if it's predicated on being connected to the hotel
Wi-Fi.
And did we design the hotel Wi-Fi to automatically connect
to the phone when you come back to the hotel?
No we did not, cuz nobody told us in the operations side that
we had to do that.
And why isn't my plastic key working?
Well, because it's policy.
If you have the digital key, we disable your plastic key for
security reasons.
>> [LAUGH] >> Did anybody ask me if I
wanted my plastic key disabled?
No, but it seemed like a good idea at the time, I'm sure.
So we have to think about the operational side of
the business and
is it in tune with the digital experience we're creating?
This is why at some point I think about the operations
side of the business.
The ecosystem that we create delivers the outcomes.
So we have to focus on the four rules of business and
these six guidelines to build strategies that create value
that help deliver the outcomes that customers value.
When you do this, right, so think about these six things,
you can develop your digital DNA to design the experiences that
deliver the outcomes that satisfy your customer's desires.
Thank you.
>> [APPLAUSE] >> That was fabulous.
>> We're gonna take some questions.
>> We are, I've never had a presentation where someone
talked about Gollum before.
>> [LAUGH] That's what you got from this?
[CROSSTALK] >> I got the pit of
doom and Gollum.
>> [LAUGH] >> Anyway,
we have two mic runners, Brenda and Laurie.
Brenda, Brenda's here.
And Laurie's here.
Does anyone have a question for Nigel, cuz I do.
Nigel told me and
gave me a long list of questions he didn't like to be asked.
So I have those ready to go.
Okay, in the front here, Brenda.
>> From Hal Estate, all right.
>> Go ahead, sir.
>> Yes, so, I'm in the healthcare segment,
in medical devices.
I'm curious, I experienced and I'm in a Fortune 500
corporation and, highly matrixed, multiple divisions.
And we have the challenge of connecting all those dots and
trying to get people out of their silos.
So, what do you believe is the major disruptive change
that is going to enable the silos to come down in the next
five to ten years beyond trying to push digital and
have people be more aware that this can happen?
Because things do move slowly.
And as you said, or to paraphrase, you have spaghetti
code, so to speak, where resources and efforts gets put
in the wrong places and has that long stream, down stream impact.
>> Right, so great question.
So I'm trying to put this in the right context, so
the challenge in a large organization,
you obviously have these big silos and
how do you move without the burning platform?
It's kind of what you're saying, if there's no burning platform.
Clearly, if there's a burning platform,
you get people's attention.
Where you don't have the burning platform,
it's slightly harder and we see a number of efforts that
go to what we describe as digital bolt on.
So you add these digital capabilities to the existing
business to prove the potential for change.
To then accelerate the understanding
inside the leadership, cuz it's really down to the leadership.
You can never get the transformation we're talking
about without the CEO.
The CEO is the most important factor
in driving transformation, as you at Microsoft know, right?
So unless the CEO understands, A, the potential for change and
B, how to create that ambition to get to where you need to,
empower the employees to make the change,
you won't accelerate fast enough.
So if you don't have a CEO that's there yet,
there are some things you can do like create these bolt on
projects that demonstrate the capability.
Some companies will try to take their executive team on what's
called a digital safari.
Where they will take the executive team to
Silicone Valley and they will go around lots of startups and
show what's going on to show them potential and
hopefully scare them a little bit, right, in terms of saying,
okay, we need to change.
But you have to have the awareness to change.
And then, dealing with a spaghetti code
in a regulated industry, it's much harder, obviously.
But dealing with that code is something that is the technology
that we've talked about for
years, it will have to get paid back at some point.
Some companies are learning to try and forget how to do that by
extracting savings out of the business and re-doing it.
Other companies are still scratching their heads thinking
we don't know what to do with that, we'll just build all these
APIs and just keep all of that stuff there and not touch it.
And that would work for awhile, don't know how long, but
it will work for awhile.
I don't know if that answers your question.
>> There's a whole issue in our culture and culture change,
especially coming from the top.
Someone once asked me, they were in a company, they knew they
needed to change, the CEO didn't believe in change.
They asked what recommendation I had for them.
I said, go to a different company.
>> [LAUGH] >> [LAUGH] It's often my advice,
too.
>> [LAUGH] Yeah, any other questions?
Yes.
Laurie if you can zip down, someone in the front.
Thank you.
>> Hi, I work for a wholesaler of novelties, party supplies,
and balloons.
And most of our customers are either entertainers, clowns,
twisters or decorators who are delivering these experiences to
their customers.
And you mentioned earlier how B2B companies have to
balance between multiple different experiences.
So how would you recommend balancing the considerations
of what experiences we're delivering to our customers?
And how to help them deliver better experiences.
>> I would always focus on their customers,
because you want stuff removed from their consumer, right?
So, what are your customers trying to deliver in terms
of an outcome?
As they can deliver that outcome equates mainly for
their customers, they can be more successful.
So how can we help our customers deliver that outcome better,
to create a better outcome for that customers?
When you can create value for your customers by helping them
deliver the value to their customers, you help them grow.
When you help them grow, they stay all clear.
So, understand the outcome they try to create,
understand how to help them get to that outcome.
And that will help you accelerate your growth.
Does that make sense?
>> I love that question.
Often people say their customers are clowns, and
in your case your customers are actually clowns.
>> [LAUGH]. >> It's so awesome [LAUGH].
To a certain extent what job are they hiring your products to do
right, which is to deliver joy.
All right, so how else can you help them deliver joy?
I think it would be an interesting way to
investigate that and find out more.
Another question for Nigel?
Okay, let me ask you a question just while we're waiting.
Someone else may have a thought while we're talking.
The thing that fascinates me the most about this whole category
is that if you go into a company and
you talk about digital transformation,
everyone has a different definition.
>> Yes. >> Right?.
So I know you work with a lot of different companies so you've
got a very broad portfolio across many industries.
How do you coach that up?
How do you talk about trying to get at least a common definition
of what DT means inside a company.
Can you share an experience with that?
>> Well, so, funnily enough,
I will get hired by somebody in the company to come in and say,
can you give our executive branch what is our transmission.
>> Perfect. >> Right, so, and
we do our sessions, not so much this,
with the executive team to help ground set, to level set.
What are we talking about here?
And used to be five years ago, okay,
digital transformation isn't social media.
Five years ago, wow, social media, no it's not social media.
>> We got an app, right?
We got an app.
>> It was like we got an app or what science is like.
And once you can show people sort of pulling
back the curtain to see the bigger picture, right?
So what's behind the curtain.
The Wizard of Oz, right?
It's understanding that there's a lot more
going on which is why I loved the demonstrations this morning.
Because a lot of sessions the I go into,
you hear all the right words- >> Right.
>> But you don't see people doing it.
>> Right. >> Right?
>> Right.
>> And what I loved about
this morning was, you see what's going on behind the curtain.
This is an example of what we're doing with customers.
And they love companies that can do that,
that show here's what we're doing with customers.
Because that's what the executive team needs to see.
When I talk about going on a digital safari, they're taking
the executives to show them here's what's possible.
One of the questions that I get asked a lot is what
are the other companies in my industry doing?
And my answer's that's the wrong question, right?
Because you have to understand,
what are companies in other industries doing?
>> Right.
>> And how can I apply what they're doing to my industry?
Cuz that's how you're gonna make some breakthrough innovation.
Not by copying whoever's in front of you.
But by understanding the outcome the customer's trying to get to.
How can I learn from another industry to deliver the outcome
a different way, because there in we can create value in
a new way for customers, we create value in new ways,
new sources of value, we drive revenue.
>> Right, because if you're a traditional thermostat company,
would you have really woken up in the morning and think,
I'm gonna be competing with Google one day.
That.
>> Right.
>> The next product.
>> Right, right, right.
>> Just wouldn't be the way you'd think about it.
That's very interesting.
>> But if you think about
what's the outcome the homeowner wants to get to?
>> Yeah. >> And so, well,
the outcome the homeowner wants to get to, well,
is it to own a thermostat? No.
>> Comfortable temperatures.
>> Comfortable home, right?
>> Right. >> Maybe a comfortable safe
environment to raise a family.
>> Right.
>> That opens up a whole host of opportunities.
>> Right, right. >> RIght?
In terms of how we can help customers get there.
>> The thing I found shocking with that Otis Presentation was,
there was a comment he made near the end that some of
the elevators they're servicing today are a hundred,
that just blew my mind.
I just.
>> I'm working on my gut,
I'm getting to an elevator that's a hundred years old.
>> I want an app that tells me which of those
elevators is 100 years old.
All right, any other questions?
We got time for one more.
Buckeye State again, here.
Go ahead, sir.
>> Sure, so putting a financial side to this.
What is reality today for let's say a company at moderate buy
in to all in buy in, on the time it takes to do
this and before you see an ROI and what do anticipate five and
ten years from now, that curve is gonna look like?
>> That's a really good question.
So, it does depend on the size of the company.
Let's say it's a $10 billion company,
several thousand employees, for start,
they're doing projects towards to get to the outcome, right?
So you got a vision of where you're gonna get to.
You have to be able to create capabilities
along the way to get to that.
Each of those has to be able to create a return,
not necessarily a positive ROI, but a return you can see
potential down the road in order to be able to get there.
The how long it takes?
Forever.
>> [LAUGH] >> This is a journey,
it's not a destination, right?
So we're changing our business to constantly change.
You had in the slides this morning,
this is a transmission's a journey.
A lot of people still look at this like this is a project.
This is not a project.
>> Right.
>> This is a journey in terms of changing the way we operate,
changing our business, you never get there.
You have to change how you fund investments.
So you see changes in way people invest and instead of
investing in projects, they're now investing in outcomes, and
continuously investing in changing toward that outcome.
So we have project management in IT, instead of project
management, because we're changing the governance model.
We're changing the way you budget in a business.
And the strategy is changing as well.
The strategy has been changing for
years, moving from annual strategies or
three year strategic plans to a quarterly review.
>> Yeah, we're in a quarterly rhythm inside Microsoft
now, yeah.
And Justin talked about the fourth industrial revolution,
and we're at the beginning of an industrial revolution.
When do you finish, we're gonna multi year, multi generational.
>> Well, think about the first industrial revolution, right?
You tend of think of it what just happened over night?
It was 80 years.
>> Yes, absolutely.
>> Some people say it's longer than that.
If you were just in that first part of that industrial
revolution, you'd be sitting there saying, okay,
well, what's the answer?
Well, actually,
you don't know because we haven't played it out yet.
>> Right.
>> In ten years time we'll look back on where we are at today
and think that was like my God,
they had no idea what they were doing, right?
That's part of the challenge is that we're just at the start of
this journey and it's going to go on for awhile and
the thing is its accelerating so fast, right?
We've all seen the exponential curves, right?
The speed of change of technology.
But, we just better get used to change.
Because today, the speed of change is slow,
relative to what it's going to be in two years time.
>> Well, humans feed off each other.
And as it's easier for us to communicate,
we are feeding off each other more and
things are just continuing to speed up.
So speaking of speeding up, we are out of time,
and this was awesome.
I had a great session.
Thanks to Nigel.
Let's give him a round of applause.
>> Thank you, thank you very much, thanks.
>> [APPLAUSE] >> Hold on a second,
and I must say one of the things that I always enjoy about these
presentations, and just as a presenter inside baseball thing
is we get to wear a makeup and so and
I wanted to say you look lovely.
>> [LAUGH] >> And.
>> Well I've never had anybody say that on stage before.
>> [CROSSTALK] Anyway everyone there's a quick break now.
And at 2:30 going to industry session.
So thank you very much.
Thanks for the time.
>> Thank you.
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