10 learnings from 1,000+ digital transformations: #1 Every company is a software company

Microsoft has been on a fascinating journey as we’ve begun to build out “Microsoft Digital” over the last 22 months. During this time, our own digital transformation has taught us valuable lessons. In addition, we’ve had the chance to partner with over 1,000 companies who are looking to re-invent themselves for the modern, digital age.

Since part of the journey is about sharing experiences, this post is the first in a series. I will be sharing our Top 10 learnings on the transformational journey to becoming a digital business – from customers and industry voices to examples of technology that Microsoft has developed to solve some of the trickiest challenges. Some of these may be obvious; some may be counter-intuitive and surprise you. I hope all of them spark discussion and lead to further learnings as we chart the future of your organization's own digital transformation.

Learning #1: Every company will be a software company

You may have heard this before. Perhaps it’s on its way to being conventional wisdom? A few years ago, our CEO Satya Nadella made a statement at the 2015 Convergence Conference, putting a stake in the ground and declaring that technology is not an adjunct. It’s not a bolt-on. It is written into the very DNA of companies that will be successful in the impending Fourth Industrial Revolution.

“Every company is a software company. You have to start thinking and operating like a digital company. It’s no longer just about procuring one solution and deploying one. It’s not about one simple software solution. It’s really you yourself thinking of your own future as a digital company.” – Satya Nadella CEO, Microsoft

There is a lot here to unpack. What does it mean that every company is a software company? It means that technology will be at the core of business models. It means that you should not be building technology around your existing business. Rather, it’s an invitation to reimagine disruptive new business models made possible by emerging technologies. For some, like Stanford University’s Haim Mendelson, the actual value of an organization accumulates not in the form of cash, but “in terms of clicks,” and swipes and taps – the actual data that is created.

This is a fundamentally different and disruptive way of thinking about the enterprise. One which reduces the effectiveness of fast follower strategies; which offers an unfair share of the market to companies which innovate. Disruption favors seizing the initiative, which is why according to a recent Harvard Business Review survey, 84 percent of respondents said their industry has either passed the inflection point of disruption or will pass it by 2020.

Organization leaders are rightly concerned that even if their businesses might not be replaced by technology, they will almost certainly be replaced by those who use it best. 

The world’s largest companies are making digital bets

With countries and companies re-imagining citizen services and business models based on the possibilities of digital technology, it is imperative to understand the competitive risks and opportunities this provides. For instance, according to the Economist, 38% of CEOs in Germany see technology as a primary driver of business model innovation – and 56% see it as an important enabler. And according to Forrester Research, C-level executives must connect isolated pockets of digital business units in their organizations to the core of their products, strategy and business models.

When a 125-year storied company like General Electric (GE) talks about the future of their enterprise on concepts like ‘digital twins’ using their Predix Platform, you know major change is underway. GE is creating a parallel digital model of assets, systems and processes in manufacturing to analyze and change their go-to-market strategies without even having to test them physically. This digital twin enables GE to use a software representation of a physical asset, like an engine for instance, allowing them to understand how a gas turbine created at an Indianapolis, IN plant might interact with a compressor using blades in a different location. 

The implications are stunning. The ‘digital twin’ allows the company to track and generate insight on how that asset should be designed, built, and operated. It provides analysis for predictive maintenance; and gives customer service teams a leg up on assessing how that asset could be quickly repaired. Of course, all the individual points of data and insights can also be monetized to drive additional business opportunities. 

In another example, Kroger, the largest superarket chain in the US and third largest retailer in the world, is using Microsoft technology to digitize the supermarket and shopping experience using a system called EDGE. Kroger uses a combination of Microsoft Azure, Office 365, and Windows 10 to create a unique shopping experience for their customers.

Creating a digital “dream” for companies 

So where do you start? New digital technologies or reimagining new businesses and models? The proverbial chicken or the egg? It does indeed start with having a digital dream – since finding the right problem to solve or opportunity to disrupt is often much harder than solving a hard problem – if Travis Kalanick had just tried to create a more efficient taxi system, he would not have come up with Uber. And the waves of transformation do not stop, they are fueled by the rapid advances in technology. According to MIT’s Peter Hinssen, digital disruptions will occur like wave fronts across industries, disrupting one after another like an “oncoming hurricane”. 

Like a pebble on the beach, every customer and every industry is different, and every journey of transformation is unique. We are thankful to have partnered with many of our customers on their digital journeys. It starts with walking in their shoes - thoroughly understanding them, their priorities, their dreams, their anxieties. We start with meaningful conversations focused around what the company is trying to achieve over the next few years – and where they want to go. We walk with customers through our digital book of dreams and workshop innovative ideas in envisioning sessions. We become partners in their strategy – and together – ideate the art of the possible. Enabled on a foundation which blends decades of creating cutting edge technology, platforms and solutions; a new muscle of digital advisory services and a robust ecosystem of partners.

It all starts with creating that digital dream and starting to fill in the details. That’s where I’ll pick up (stay tuned!) in my next blog about Learning #2.

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For more information

• Microsoft Digital Transformation
• Kroger rolling out new technology – Business Insider