Culture that embraces experimentation key to digital transformation: Microsoft

Australian companies that embrace experimentation, strategic risk taking, and constant learning experience better outcomes from their digital transformation programs, a new Microsoft study has found.

Microsoft recently conducted interviews with 30 senior leaders in both public and private sector organisations to better understand the success factors and obstacles involved in digital transformation, which the tech giant defines broadly as "harnessing new technologies to improve business outcomes".

Embracing digital transformation: Experiences from Australian organisations states that there is no right way to approach digital transformation; however, most Australian organisations opted for a "test and learn" approach involving discrete projects and experiments, rather than structured programs.

This experimental approach allowed for faster iterations and encouraged buy-in from the rest of the business, according to Microsoft's research.

Improving customer experience remained the top driver and starting point of digital transformation. Empowering employees, optimising operations, and developing new products and services also influence technology investments in Australia, the research found.

"We've found that every organisation -- no matter how large or small, whether they're in the private sector or public sector -- is thinking about how they prepare themselves for whatever digital future might be appropriate for the businesses they operate," said Steven Worrall, enterprise and partner group director at Microsoft Australia.

He added that the reason Microsoft takes a broad view of digital transformation is because the ability to invest in new projects is directly related to the savings that come from moving workloads into the public cloud.

"An organisation moving their application base off their own datacentre or an outsourced datacentre into the public cloud can save 30 to 40 percent of their existing cost to run applications," Worrall said.

"Those savings can be reinvested into new applications that your customers might use tomorrow or in a new part of the business, or a new application that you might roll out to a new segment of the market."

Microsoft's research also found that digital transformation requires a pro-innovation corporate mindset before the right technology can be deployed across an organisation. Successful transformation programs are supported by strong leadership, an entrepreneurial culture, and a pipeline to digital skills.

"Transformation is underpinned by a digital mindset that is a unique interplay of technology, people, and process. It is adopting this mindset that we believe truly puts an organisation on the path to digital transformation," said Microsoft Australia's managing director Pip Marlow.

Organisations fell into two groups: "Proactive and embracing" and "motivated but constrained".

Proactive and embracing organisations made digital transformation a priority, and encouraged their people to pursue it. They also recognised the importance of questioning existing business models and experimenting with news ones; however, only a handful were acting on this as part of the digital transformation process.

"Proactive organisations have a clear strategy around those four parameters -- that is, customer experience, employee empowerment, operational optimisation, and business model transformation -- as to where they wanted to have the most impact and the sequence with which they would then undertake investments necessary to build out that digital capability," said Worrall.

Meanwhile, motivated but constrained organisations found their digital aspirations hampered by internal obstacles. These organisations were found to have a risk-averse culture, with their leaders avoiding making decisions that could lead to failure.

"A lot of the discussion around digital transformation becomes a technology discussion -- who's got the best mobile phone, who's got the best security infrastructure, who's got the best public cloud service," said Worrall. "We found that technology is a secondary issue. It's more about people, leadership, and the capabilities they had inside the organisation to adopt and adapt some of these new digital technologies to their business."

While respondents said the pace of technological change presented ongoing challenges, most believed that upcoming innovations including expanded cloud computing services, the Internet of Things (IoT), artificial intelligence, and virtual reality would drive new inventions.

"There's no doubt that harnessing the right technology can dramatically improve customer and staff experiences and lift productivity," Marlow said. "It can even take organisations into whole new areas of business or allow new ones to emerge."

Worrall said a lot of Microsoft's knowledge was gained from its own digital transformation journey.

"Microsoft was a dominant leader in the industry for the first 30 years of our history. For the next 10 years, we struggled," Worrall said. "We've been on a journey of learning over the last 10 years. We were being viewed as an organisation that was not as relevant as it had been. Now we're in the process of reinventing ourselves.

"Organisations that feel like they're at the top of their game and they just need to keep the machine going, we think they're more likely to suffer disruption than those organisations that are constant learners, that are running experiments, that are trying and failing, and that are learning and improving."

Worrall also said that digital transformation is percolating into unexpected industries such as agriculture, hospitality, and sports.

Microsoft is currently working with a Tasmanian company called The Yield that helps oyster farmers save money through technology, allowing them to analyse components such as salinity levels in the water and predict when oysters need to be pulled out.

"If there was a storm and you knew polluted water was going to move towards the oyster farm in the next 24 hours, then you can take action to pull the oysters out," Worrall said.

The tech giant is also working with a company that's putting sensors in pineapples so farmers can identify the optimum time to harvest them based on weight and other factors.

Another client of Microsoft is Cricket Australia, which has been using predictive analytics to estimate when its athletes will perform their best, or when they're likely to get ill or injured.

"We're helping them be more scientific about how they manage player welfare. Predictive analytics is really useful for them, because they were able to tailor training workloads leading up to a big game," Worrall said.

"They were finding that their athletes were not subject to the sort of injuries they were experiencing in the past."

Meanwhile, travel booking site Webject recently developed a blockchain solution in partnership with Microsoft, which it will be implementing into its supply chain, from acquiring wholesale hotel rooms to selling them. The companies said the solution has the potential to transform the way the entire travel industry handles online payments for hotel bookings.

"We're also seeing legal firms use blockchain to help automate some of their contractual processes, so technology we thought would be used in one space is being applied in new ways to another," Worrall said. "There are as many business problems as there are technology solutions waiting to solve those problems."

In another study, Microsoft found that almost half of Australian IT leaders will drive their organisations' transition to hybrid cloud infrastructure over the next 12 to 18 months.

"The cloud holds rich new applications which will enable better management tools, intelligent applications, and advanced analytics to not just reduce cost and increase efficiency but to also innovate and enable faster time to market. As such, it can't be ignored but it needs to be managed," Mike Heald, hybrid cloud product manager at Microsoft Australia, said in early November.

The Telsyte Australian Infrastructure & Cloud Computing Market Study 2017 also showed that big data analytics, storage, IoT, artificial intelligence, and process digitisation are all driving the demand for cloud services.

VMware CEO Pat Gelsinger believes half of all enterprise workloads, about 300 million, will exist on the public cloud by 2030.

The Telsyte Australian Digital Workplace Study 2017 found that Australian enterprises are spending more of their IT budgets on the development of new products, making it a high priority compared to two years ago when their focus was on reducing operational costs.

Telsyte's research indicates a greater uptake of emerging technologies among Australian enterprises, with 24 percent using 3D printers or having exploratory projects in place. Gartner also forecasts significant growth in the 3D printing market -- nearly 456,000 3D printers will be shipped globally by the end of the year, doubling the 219,000 units that were shipped last year, with 44 percent growth in enterprise shipments alone.

In addition, one in three enterprises intend to use robotics, while 25 percent of organisations with more than 500 employees are already using robotic process automation, according to Telsyte's research.

Augmented reality (AR) and mixed reality (MR) are also of high interest, with 57 percent of enterprises currently using or intending to use AR/MR technology. Interest in Microsoft's HoloLens has been claimed to be "very high".

Telsyte's research also found that 22 percent of enterprises have IoT programs or pilot programs in production, while 29 percent have IoT devices and a strategy, but nothing in operation.