Microsoft Business Forward 2017 | Digital Predator or Prey?
Good. Afternoon. Please welcome general. Manager Microsoft, grad, Khan. Hi. I'm a grad, Khan I'm the general manager for, Microsoft, Dynamics. Us, and just. A quick sort. Of preview of the rest of the afternoon we're, gonna have Nigel talk for about an hour then. We're gonna take about a 15-minute break and go into industry breakouts, and then we'll end the day with, dr. oz which, would be super, fun. So, this, morning Judson talked through, some great, customer, examples and James, took us through some really, fantastic technology. Examples, some great demos that, power apps demo, was. Really. Compelling wasn't it you, know like basically, making programs, like you make a PowerPoint, deck I thought that was something, else it reminds me of a great quote dr., general, C, general. I think dr. Oz General, Eric Shinseki I has this great quote which is if you don't like change you're. Gonna like irrelevance, a lot less you. Know I love, that quote because it's because, people are often like geez I don't really want to change but, you know the alternative, is is, not great so, in. A moment I'm gonna be joined by Nigel, fennec. Nigel. Is the vice, president and principal, analyst. At Forrester has been there for about 11 years, looks. At digital transformation. As his specialty, so it's very deep on the. Digital transformation, it's. Gonna take us through some really interesting examples, in cases and just get you to think about digital transformation in, a really expansive, way just. Before I invite him out though I'm just gonna run a quick video just. Introduce the Forrester, perspective, and then, we'll alone wait Nigel. All. Right Nigel, welcome thank. You very much I'm gonna let you talk, for about 45 minutes and. I'll be coming out we'll do a Q&A so think about questions as we go through it we got a couple of mic, runners in the rooms will be able to take questions and, sir break a leg thanks, so much. We. Just have any discussion about web break a leg comes wrong so. On 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 and the title resonates. Why. Because, well well. Partly it's designed. To be provocative, but. Also because. You know innately we think it's better to be on the predator side than the price ID I think it's sort of something we. Kind of understand, the. Nice, when we started doing research around digital, transformation, I used to do a researcher, on business strategy and about. 5 or 6 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, around a lot of around emerging, technologies, a lot around what, was what was kind of social media and we. Wrap this all up into into, what we call 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 that every, company by 2020. Will. Become one of these 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 going to stand by and let it be come prey so. My, my, task, today is to help, you challenge. Your thinking that'll, lead to some of the change and. Hopefully. Help, your companies, become, decision. Survivors, by, 2020, because, we're getting very close to that point it's only two years away now and and. We've been seeing the acceleration, of this change of the last few years that, more and more companies are going. Under, because they're losing customers, to more advanced companies that are innovating, faster, everybody's. 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 be, partly, because when, you look at say the robin redbreast, right the robin redbreast is a predator. Clearly, yes we've all seen little bird outside our windows in the morning and we know there goes our predator all. Right from. The worms perspective.
This Is a predator, all. 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 printer 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 going to do things in your industry differently. That. Are going to change the way you think about your business, that. Are helping, transform, the industry and you. Will be able to react. But. You will be reacting, and the, the speed at which you can react will largely depend on how well you've prepared your company to, change and innovate, and. What's. Behind all of this. Something. That's fundamentally, very simple we. All have smart phones in our pockets today right all of our customers have smart phones whether you're b2b or b2c every. Person you sell to has, a smart phone if. They don't they very soon will have and, what, happens with these smart phones a few. Years ago I could unlock, a hotel room door with my smart phone right. Anybody anybody, had that experience whether you're unlocked a hotel room door okay 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 to my phone I couldn't do before changes. Expectations, now. It may not be enough to say I want to go stay in that hotel because, they allow me to unlock my room door because, frankly you know the old key thing worked pretty well but. It, does change your 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 right. 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 our. Customers, whether you're b2b or b2c 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 for most, of you don't know right because it just happens I mean, I I. Don't know I I think mine apps are like my UPS seemed to be updating every minute maybe, I've got too many apps so it's probably a a downpour. But, here's the thing you put this into a mathematical, formula. I like to have very simple mathematical, formulas so, this is a very simple formula experience. Over expectation, equals perceived value, now. Think. About this if. The. Experiences. Are constantly, changing. They're. Resetting expectations. Right, so where, do we get our experiences, from we get our experiences, all over the place when. We shop on Amazon when. We go to an airport and we 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 customers. 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 but, see value decreases. Now. I know I'm, asking you to do mathematics right. To lunch this. Is hard so, I'll make it easy for you right let's.
Put Some numbers in here 104. Experience, 104, expectations, we could see you have a perceived value of 1 what happens when the expectations, change in the experience doesn't, then. We see the, perceived, value goes down. This. Is happening every day in every business this is why we call us added digital dilemma because. You, have to design your business to. Constantly. Evolve. The, experiences. That you're delivering to your customers. Because. If you don't you're. Guaranteeing, they will get decreased value over time. The. Problem is that our businesses are not designed to constantly change, and, our businesses are actually designed to 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. Perceives the changes. The perception of value your customers have. So. If you connect the dots here you can see that solving the digital dilemma. Demands. This fundamental. Shift in how a firm delivers value and drives revenue this. Is what we, call digital, transformation. Because. You're 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. Rethinking, 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 compared. Them to to, the digital laggards 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 on 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. Are 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, well we have to understand, that it's not just about building better products, and services, yes. We still need to deliver products, and services that. Have value to customers, but, we have to understand, that when with 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 Challenges needs are not the same as desires. How. Many people in this room drive a Prius. -. I think, it's count - I bought one for my daughter by the way I'm not this is nothing against pris, so. Prius. Great car very economical well, done good sound, choice sir ok, so. It's. Why. Don't we all Drive a Prius I mean. It's 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. Their motion chooses it changes. Our choices it desire. Affects. The car we drive, right. And so. We, have to understand, desires at the foundation, of every, buying choice of Castro 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 there's. A person buying the product or service and there's a person using, the product or service and then we've got a 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 has 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. Agra, companies, have been understanding. And starting, to see the value of data to. Deliver the outcome, the customer values which, is high yield using, data to help a farmer 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 pesticides, both pests as they move across a company country to, be able to predict when to lay down pesticide. All. Of these things can help the 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 of these different companies, and organization. Industries, to, understand, what's going on we've seen four clear, distinct patterns emerge. So. We call these things the the new rules of business because I like to keep things simple the. New rules of business really. Say state this you. Have to be able to do these four things together not one and it not one and focus on one but do all four of these things together so, digital. Experience digital, experience is really about delivering experiences, that are easy effective, and. Emotional. When. You look at all the disruptive, technologies, they're all the disruptive, businesses, they, typically do a couple of things really really well the. Give customers back the most valuable, thing that you can give them which. Is. Time. There's. Always somebody 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 and. That's really about what's at the heart of creating great digital experiences, you. Look at a company like Yorkshire Bank in in the UK Yorkshire Bank a, traditional. Retail bank, they. Understood that they had a very old, kind, of way of going to market the traditional, coming. To our branch apply. For loans, very. Traditional way of looking at things in, order to think about their business differently they set up a section, 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 of their existing back-end systems, because they didn't have the money to go change their back-end 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 because ultimately they're. Probably gonna need to be changed. Which. Gets you to digital operations which is the second rule focus. The operations, on the things customers, value now. We talked a lot about creating, operational. Efficiency, and there's. A group 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 an extract cost out of the business. But. When we do it in a way that also focused, on creating, value for customers it changes. The. Focus of how. We do it because. We want to understand, that we need a credibility, 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. 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. Has been on this journey for a number of years and then the news a lot this year quite interestingly I was just at their event in San Francisco last week the minds of machines event G, ease transformations. Been going on for five years, and. And really sort of accelerated. Two or three years ago but. They've been doing this these five steps to change their business and they started, 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 ml took. Billions, of dollars of cost out of GE and, did not return to shareholders he. Put it into investing, and building up GE digital because he knew that was the right thing to do for G as 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 G's been doing is saying we need to reinvent our business we. Need to change how we operated correct value for customers in different ways and, it. 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 when we look at different, industries, and how they're, investing, in changing, and what, they call 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, service of customers to change the way we think about the business and to change to how we operate a lot. Of investment. Is still fun focused. Around IT process. If. You look on this you see you know supply chain stands out to me is one that's enormous. Ly opportunistic. For change and we're. Just starting in touch the touch scratch, the surface there in, manufacturing. We just started 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 do we try to partner, with other companies so. For. Example, in. Retail. Retail. Is traditionally figured, out okay we need a you know buy things sell, them in store and 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 it's, understanding. That there's you don't have to do everything yourself then. You can partner, with other companies, you. Can partner with companies like Microsoft. To help build on the, cloud right. So there's companies, you partner with to, help you do, what, you need to do to create value for customers. Supply. Ons on the, supply, chain side improving, the way companies. Modify. Their supply chain to, react to changes in the end in the supply, chain and be able to move much faster so. The they're part of the business ecosystem the creates value. If. You take a boring, industry like energy production there's a lot of change going on in energy production when, I highlight this example here because, not.
Because It's a cool website yes. They've got the ability to go pick a plan on our, website that's that's great but. These two these two plans on the left is electronic energy, plans on the Left they, have a nest thermostat built in with them now you may notice it's a higher rate, per hour kilowatt. Hour but. Why do they have a nest thermostat built into them. They. Have a nest thermostat built into 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 safe to you in a rebate, call, rush hour rewards. So. What happens in a typical environment, when, you get a heatwave you see a graph something like the one on the upper right there which, basically is all the air conditioners, turned on at once and they all try and cool because, they're the rooms 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 the difference in the room the the room, ambient temperature rains the same but, the demand is spread out on the on the system you produce less peak energy and you able to produce much. Better, value for the entire ecosystem, and you. Create, value for customers in new ways. Interesting. I don't even notice in that was in the music last, week I think it was Germany. Now has, so. Much energy produced from wind, that. There was a period last week they were 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 was actually more. Efficient for the energy companies to pay people to take energy than, it was for degreasing for, winding down the power production because, there was so much wind energy being produced, right. Crazy, world we live in. So. So. You've got digital, experience digital operations digital, ecosystems, the. Ability to create value through the ecosystem. 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 and. So when, you think about it the 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 80%, of the of the potential, to unlock is actually in the operational, side of the business and yet, when you think about digital transformation how many people look at it they focus. Almost entirely, on the digital experience. But. There's so much to unlock in the operations, 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're selling to a company that company has a big 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 our value to us and. If. You like me you have way more apps than you use right so all the apps you use are on that front screen right. Then all the other ones like their other 400, or 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 all that's cool but, you don't use it why. Because it doesn't help you get to an outcome you value a cool. App can be great it 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 the, customers 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 you need to do in market research when, you're looking at customers, is find. Out what their digital ecosystem, like what.
Are The apps they use why, did they use them, how. Do they use them because, they all help them get to an outcome they value if we want to understand, the outcomes they value we have to understand how they get there because, 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 there's, a great. Line. In sales training I always remember when I went through various. Forms of sales training over my career and, at. One point that. You know new salespeople sometimes get asked to sell something and there's. This whole thing about you. Bring a new salesperson it's okay well here's an electric drill sell. Me this drill and. You. Know the new salespeople come and they'll talk all about the features and benefits of the drill how, you know it's got variable speed and the Chuck's easy to use and all, of this. Pretty. Good and then. The experienced sales person I can on and. They'll talk about what, a beautiful hole let's, drill allows you to 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 want to own the bit 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 want to 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. It but I couldn't drive a Prius at all across it's, a great card I say 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, that your customer wants and. You have to incubate incubate, these emerging technologies so you have an example here of Lowe's using hololens to, do, kitchen. Design. Well. Why. Why do this because it's not at a point where it could be scaled across all stores yet. Well. They do this because if they'd if they start now and understand how do you technology, how to create value and work with customers to co.design co-develop. There. Have now got the ability to. Accelerate. That when, the technology is 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. And. So this focus on rapid experimentation becomes. Really critical so. This. Is an example of Capital. One's the garage, Capital. One recognized, that they had bility. 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 eco-design co-develop, and it. Works the. Products that came out of this drove. Revenue. Well. Above beyond what they previously. Experienced. So. There are lots of things we can learn by looking at existing companies so I want to 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. Been an understanding, the entire customer, journey. Think. About it from the customers, perspective. The. Outcome, they want to get to when. Is it they know that they want to 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 that get involved with before and after or alongside. And, you have to understand the 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 like, it knows where I am it knows what flight I'm going on and it knows its morning time this, isn't rocket science guys, give, me my boarding pass right. This. Is kind of how you have to think you have to get in the mind of the customer create, the experience in the moment of need and not 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 touch point because. Very often what will happen and we've all seen this you. Get you develop a new digital experience, and, then. You find out. That. The, experience, is great but, something seems, lacking behind it right. If you go off that off, the typical path, the. Customers, might go on you suddenly find that everything else seems to fall apart. Anybody. Had that experience where, you sort of you're doing fine then you do something that's out of the ordinary and. Now all of a sudden the, companies like your, experience just goes nope. Nosedives, right there's. Nothing there to support it, you. Have to look at all the things in the back end to make sure that experience sustains itself and, you have to understand, that we create these dynamic, experiences, right so I 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 care might talk so, think, about the sort of 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 it 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 autocross car by the way so general, of course you do all across round cones, not. On a racetrack it's around current space safe.
But. Uh you, think about it this so the desires of all, right. Look, 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 your chuckling it sort of the as, you get older those. Of you who've gone past the the. Crisis station, in turn past the grandchildren station, to freedom will understand what I am saying, here. So. You have to understand where the customer is in their life cycle right not just the customer life cycle as you classically. Think about it but, where are they on their life journey right, and. In. The people inside those b2b companies were selling to those are people and. Where are they on their life journey what's important to them how, are they being measured what a success, looks like for, them what's, the outcome they most value and to. Get there we, have to become in size driven we've, heard a lot about using, insights and data insights today you, have to become insights 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 because I mean this, pills been out for years I've been talking about this for years but it but. In case you haven't this. Pill so the little dot on the top of the pill is a chip. It's. Smaller, than the size of 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 a 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 want to make sure the patient's taking the pill if, you'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's taking the pill there is huge value and, actually, been able, to ensure that the patient's taking the pill when they should. Because. It helps them get to the outcome which is getting better right. Okay. You with me so far so come. With me on this journey, you. Can take a pill that sends sends, data out onto the outside right how. Far are we away from being able to swallow a pill that gives, you a complete, body's body chemistry breakdown. That. Sends all that data to your app. The. Ultimate health care app remember I said the ultimate health care app it's, called. Days. Left, to live.
You. Pull the app out it tells you how many days you have left to live. Why. Is this the ultimate health care out. Okay. So you go out on town on the town and you have a few drinks with your buddies you eat too much pizza you, wake up the next day and you pull out your app and, your days left to live is gone oh. Okay. I'm. Gonna go to the gym nice I go work out of the gym I go for a run every day I'm diligent about it and a month later my days like live has not only gone back to where it was but it's gone past it what. Have they done I created. A feedback, loop I couldn't. A feedback loop to change the one thing that we can do that is it has more impact on our health that anything. Else any medication, or anything else the one thing that will have more impact on our health and 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. Left to live I call it the ultimate health care out because it's a feedback loop and it's. The one thing that we most, value. Think. About a time most. Valuable thing you can have the. Ultimate representative. Representation. Of time is how many days we have left to live right. And if, we can give ourselves more time back, there. Has huge value. Now. I've done this speech number of times as you can imagine and I sat with with health care professionals, afterwards, and, more, than one has come to me said we've got to build that so. Somebody. Somewhere somewhere will think thing about how to do this but. You do that analytics, right you gather, the data to, gain insights. To. Help somebody make better decisions. Right. And that's what the ultimate healthcare app would be days left to live would help somebody help us all make better decisions. And. You. Could scale right with with artificial intelligence you can scale. We. Saw earlier little clip of rolls-royce rolls-royce have 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 than it did the last flight and something's. Wrong what's wrong let's figure out how to change that and so we need a pre position parts at, the airport so, that we can get that that engine changed 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 propulsion because they don't get paid when the aircraft, sitting on the ground they, get paid by the hours flying and really. Airlines are quite happy to pay for hours in use, as, opposed. To hours, as. Opposed to owning the engine, so. Learn, how to scale experiences, create, insights through. AI machine, learning number. Three is invest, in business agility.
So. I talked about the need to constantly change in and, evolve, a. Majority. Is is much. More than just our business is about thinking about how we connect, to, other companies differently, as well. So. We have this shift of valley. From this sort of thinking about the linear value, chain the. Linear, value chain is evolving to, much more verse of a nimble API enabled, ecosystem, where. We're able to. Connect. To other companies that can, help create value for 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 how the how, that ecosystem interconnects. To create value and. Today's. Customer, experience really demands this. Of all. 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. Going to be delivered by partners, by, ecosystem, partners by, other companies, that are helping to create value toward that outcome, think about the nest example, the. Energy companies provided, by the partnering with nest to create an outcome for the customer, not. Just doing it on their own, but. To be able to do all of these things we. Need to be able to invest right and we can't and just plow, a whole bunch of money into the company and, not. Be able to get that money from somewhere else in order to create the agility we. Have to look at where can we stop doing some things and. Part. Of that is looking at what. Differentiates, the company and what doesn't. Every. Business that's in here has a set, of capabilities that allow you to bring value to the customer. What. We have to understand is what are those capabilities, that really differentiate the company in the mind of the customer why. Did he 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 the 90 percent of the other capabilities you have. They're. Generic you share those income with every other company in the industry company. Customers not buying from you because of those capabilities and you. Have the opportunity to radically, simplify, them and. When. You simplify them you can remove costs from that from the business in many ways one, because you can simplify the process and takes you 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 I. Only. Told you how. Many of you have. Software. That's developed in-house. One. Of you okay. So all the rest of you running completely vanilla software no, changes. I don't. Believe you. I've. Seen this happen so, you. Have a let's say you have a staff turnover of ten ten percent right. Any sizable, organization. You, have maybe. A hundred managers, you bring into the company a year maybe it's a thousand maybe it's ten thousand twenty how big your company is every. Single one of those managers are you hire did. They come into your company, thinking, I was, hired because everything's, going okay, I've just got to leave it all is as is not touch anything don't, change your thing now. Just keep things going or. Do they come in because you know they think oh 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 are making them better I. Think. It's the ladder and. What. Happens when they start to change things over well let's change the process, change. The people all 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 we're 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 but, is very slow to change very. Expensive, to change and then. Everyone in the company complaints, with. IT so slow so expensive. I don't. I can't figure it out why. You. Have to look at that, look at what's going on inside the organization you understand why so. Simplify, and, thereby. Create agility and take cost out of the business. Redesign. The organization, from siloed to connected, so when. You think about organization. Design we have these sort of silo siloed, organizations, what we're seeing in many of the the. More progressive more, digitally, savvy organizations, is this shift from siloed, to much more of this cluster approach right to to, take a, cluster, of skills.
And Have, them tackle a persona, or particular, customer journey or a particular customer outcome, and 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 be more innovative, the. Metrics, that we use signal. To employees what's important, to us. So. I did this study we're looking at we asked sort of executives, across companies, what, were their KPIs, and on. This chart that the the dark grey at the top is the business unit leaders the. Next one down is marketing. Marketing. Leaders and 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 as 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, 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 oh my, god look at all this noises in the organization, because, now we're asking people our work in these same teams and we're. Measuring them on completely different things, and. Guess what when. They sit in the team and trying to figure out what the solution is if we're measuring them on different things they're going to come to different conclusions. Right. And they're, in create friction inside the organization, if you want to move friction, out of the organization and credibility, 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, right being able to incubate emerging technologies like the example I showed you with the lows understanding. How to use these emerging technologies, test, and learn and focus, on sort of rapid experimentation, is an example Rebecca Minkoff in in New York building, a digital dressing, room right, understanding. How to use the technology to create a better experience. The. Last rule I want to leave you with is what I call a voiding the pivot pit of doom the reason why I say avoiding the pit of doom is when I started doing this presentation I used to have this analogy to the role of rings and, you know when Gollum falls into the the crater, at the end so it's a pit of doom so, you know how do you avoid that well. And really it's about delivering outcomes now. This is a cautionary, tale because. Remember. I said that you know you had this example of opening the hotel room door so.
The First time I did this four years ago I went. Out for dinner with some clients. And, I got back to hotel room it's, kind of late and I. Needed. To use the bathroom okay. Well I'll, just go the hotel room as you do so I get it gets my hotel room check out my phone. Press, the button and nothing. Happens. Wow. 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 and I'll come what on me I get out my plastic key because I got a plastic key when I check 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 my keys not working and. I said they so, they said to me they look at me like wow. Are. You on the hotel Wi-Fi. No. Or. Only works on the hotel Wi-Fi. So. Now we have a great experience. That. Is only capable of working if it's. Predicated on the connect to the hotel Wi-Fi and did, we design the hotel Wi-Fi to automatically, connect to the phone when it comes back to the hotel when you come back the hotel no, we did not because. Nobody told us in the operations side that we had to do that and and. Why is it my plastic key working ah. Well because it's policy if you have the, digital key we, disable your plastic key for security reasons. Did. Anybody ask me if I want to make master 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 it's so important think about the operations, side of the business the. Ecosystem, that we create delivers, the outcomes, so. We have to focus on these six rules, these six see sort of the four rules of business and these six guidelines, to build strategies, to create value that helped 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. Customers, desires. Thank. You. That. Was fabulous. We're, gonna take some questions we are I've never had a presentation, where someone talked about Gollum before. That's. What you got from this. Anyway. We have two mic runners Brenda, and Lauri Brenda. Brenda's. Here and Lori's here does. Anyone have a question. For. Nigel cuz, I do Nigel. Told me gave me a long list of questions he didn't like to be asked so, I have those ready. To go I, came. In the friend here Brenda. Ohio. State all. Right, go. Ahead sir yes, so. I'm in the health care segment, in medical, devices. I'm. Curious, I experience. In you, know I'm in a fortune, 500, corporation. And. Highly. Matrix, multiple, divisions and, we. Have, the. Challenge, of you know 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 effort, gets put in the wrong places, and. Has that long stream downstream, impact so. Great. Question so. Right. Context so the the challenge in in a large, organization, is you obviously have these big silos, and, how. Do you move without the burning platform that's a lot of its 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 very harder and we see we. See a number of efforts that go to what. We described 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 because it's really down to the leadership you, you can never get the transformation, we're talking about without.
The CEO. The. CEO, is, the. Most, important, factor and driving, transformation as you. At Microsoft know right so, unless. The CEO understands. A the. Potential for change and B, how. To create that vision to get to wainy to get to 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's some things that you can do like creating, these bolt-on projects, that, demonstrate the, capability. Some. Companies will try and take their executive team on in what's called a digital Safari, where. They'll take the executive team to Silicon Valley and they'll, go and 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 the spaghetti code you know in, a regulated, industry it's, much harder obviously. But. Dealing with that code is something that is you, know the technology debt we've talked about for years it. Will have to get paid back at some point and some companies are learning, to try and figure out how to do that by extracting. Savings. Out of the business and redoing. It what other companies are still scratching their head thinking we don't want to do with that we'll just we'll build all these api's and just keep all that stuff there. And not touch it and, that. Will work for a while don't know how long but what for awhile I thought. That answers your question. The. Whole issue around culture, and culture change especially coming from the top someone, once asked me they, are 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. It's, often my advice too okay, any.
Other Questions yes. Laurie, if you can zip down so 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. You know clowns twisters, or, decorators. Who are delivering, these experiences. To their customers, and. You mentioned earlier how b2b, companies. Have to balance between. Multiple. 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, right so because you're one step removed from their consumer, right so what, are what are your customers, trying to deliver in terms of an outcome, so. The out as they can differ that outcome that creates value 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 their customers, when. You can create value for your customers by helping them to have a value to their customers you help them grow when. You help them grow they stay loyal to you so. Understand. The outcome they're trying to create understand. How do you help them get to that outcome and that'll, help you accelerate growth. Yeah. I love. That question so. Often people say their customers are clowns in your case. To. Stay on what job are they hiring your, products to do right which is to deliver joy right, so how else can you help them deliver joy I think, 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, but the thing that's 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 and I know you work with a lot of different companies you know you've got a very broad portfolio across many industries how. Do you coach. That up you know how do you talk about trying, to get at least a common definition of what DT means inside a company and give, me sharing experience with me on that well so funnily. Enough a lot of times I will get hired by they by somebody, in the company to come in and say can you give our executive team something about digital transformation perfect, right started and we do a session it's not dissimilar to this with the executive team to help ground set to level set what do we what are we talking about here and it, and it, used, to be five years ago will be sirki digital transformation isn't social media because. Five years ago it was all about our social media no it's not social well get an app we're gonna happen. App, right you're a good website, and. And once, you can show people the. Sort. Of the it's really like pulling back the curtain scene the bigger picture right sort of what's. Behind what's, behind the curtain of The Wizard of Oz right it's it's, understanding. That there's a lot more going, on which I love the demonstrations, this morning hmm because a lot of sessions, I go to you.
See Like you hear all the right words right you don't see, people doing it right right right and what I loved about this morning was you could see, like. What was going on behind the curtain like this is an example of what what we're doing with customers and I 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 digital Safari they're. Taking the, executives, to show them here's. What's possible, I mean, one of the questions I get asked a lot is what. Are other companies in my industry doing, and. My answer is that's the wrong question. Right. Because you. You have to understand what a companies in in, other industries, doing right and how can I apply what they're doing to my industry because, that's how you're going to make some breakthrough innovation, not, by copying, whoever's in front of you but, by understanding the. Outcome that culture is trying to get to how, can I learn from another industry, to deliver that outcome a different way because. Therein we can create value in a new way for customers and when 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, you know the, nest product I mean just wing me the way you think about it that's brilliant if you think about the you know what's the outcome the home on the ones to get yeah it's a well the outcome the homeowner wants to get to well is it to have own a thermostat, now comfortable, temperatures comfortable, home right maybe a comfortable safe environment, to raise a family that, opens up a whole host of opportunities right, right in terms of how we can help customers get there I think I found shocking with that Otis presentation, was there's a comment he made near. The end that some of the elevators they're servicing today, are a, hundred. Just. A little my mind right it still working oh my god I'm getting elevated on. Alright, any other questions we have time for one more this. 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, into, all, in, buying on the. Time it takes to, do this and, before. You see an ROI and, what do you anticipate five, and ten years from now that. Curve is going to look like. It. Does depend on the size of the company let's say let's, say it's a ten billion dollar company, several. Thousand employees. First. Start they're doing projects, tours to get to the outcome right so you've got a vision of where you're going to 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 a return, mostly. A positive, ROI but a return that you can see the potential down the road in, order to be able to get there the. How long it takes forever. Hmm. This. Is a journey it's not a destination right, so, we're changing our business to constantly, change you. Had it in the slice this morning this, is a transformation. As 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 the, way people invest. In instead of investing in projects, they're, now investing, in outcomes. And and continuously, investing, in changing toward, that outcome so we have product, management in IT instead, of, management, because, we're changing the governance model we're. Changing the way you budget, in a business and and. In a strategy changing as well strategy, has been changing for years moving, from annual strategies, or three-year, strategic plans, to. A quarterly, review and chair we're in the quarterly rhythm inside Microsoft now yeah it Justin talked about the fourth Industrial, Revolution and, you, were at the beginning of an Industrial Revolution when. Do you finish. Your. We're, gonna multi-year. Revolution. Right you tend to think of it oh what just happened overnight it.
Was Like 80 years yes, absolutely, some people say as 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 like, well, actually you don't know because we haven't played it out yet right, in ten years time we look back on we're out today and think oh that was like oh my, god they had no idea what they were doing no, no. 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 a while it's the thing is it's accelerating, so fast right, we've all seen the the exponential. Curves right, the the speed of change of Technology. The. The we, just better get used to change because. Because today, 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're feeding off each other more and things are just continuing to speed up so, Stevens. Speeding up we are out of time and, this. Was awesome a great, session thanks thanks to, Nigel let's give them a round of applause. Looks. Like and. I, must say one of the things I always enjoy about these presentations, and just, as kind of a presenter, inside, baseball thing but we get to wear a makeup and so, and I wanted to say you look lovely. Anyway. Everyone, there's a quick break now and at 2:30 going to industry sessions so thank you very much thanks for the time thank you.