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transformation
Experiences from Australian organisations
Contents
Welcome 3
Executive summary 4
About this research 8
What is digital transformation? 10
How to transform your organisation 14
Success factors 30
Future trends 35
Your next steps 38
Further information 41
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 2
Welcome
Its my great pleasure to present this report marking Microsoft Australias latest
contribution to helping Australian organisations survive and prosper in the digital age.
Theres no doubt that we are in the middle of a digital revolution. Our world is being
transformed before our eyes as new technologies give some organisations a huge
competitive edge, and see others left behind.
In a similar study conducted by Microsoft in the UK, 44 per cent of respondents believed
existing business models would cease to exist within the next five years and half expected
industry disruption within the next two years.1
Here in Australia, we know its time to transform beyond business as usual to tap into
the extraordinary potential of digital technologies and find new ways of doing business.
But how can you fully commit to this journey and push on when obstacles arise?
To answer this, we conducted in-depth interviews with a rich array of leaders at Australian
companies and government agencies. They are all Microsoft customers or partners,
or developers we work with closely. Their enthusiasm was apparent as they envisioned
a future brimming with opportunity, but they were also honest about the challenges
involved in achieving digital transformation especially within sizeable businesses.
The most digitally advanced organisations had a number of factors in common.
Their success stories were underpinned by leaders who embraced digital transformation
and empowered their people to pursue it. They typically exhibited entrepreneurial
cultures and had access to beneficial skillsets.
We also found that there is no right approach to digital transformation. In fact, the leaders
we spoke to recommended that when other organisations develop digital transformation
strategies, they should stay flexible and let initiatives evolve day by day. The key is to start
somewhere and just keep moving an approach we are all capable of taking.
I hope this report helps you move forward on your own digital transformation journey.
Id also like to give a big thank you to all the participants who generously donated their
time and insights to make this research possible.
Pip Marlow
Managing Director
Microsoft Australia
1
Digital Transformation:
The Age of Innocence,
Inertia or Innovation,
Microsoft UK, 2016.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 3
Executive summary
Executive summary
On the agenda
Digital transformation is topping the These traits present challenges for
agenda of organisations worldwide. organisations across industries and around
the world, but they also present immense
The World Economic Forum gathering
opportunities. For example, one study
in January 2016 contemplated the
estimates that digital optimisation can
possibilities of digital transformation
boost profitability by 20 to 30 per cent
under the banner of the Fourth Industrial
in large enterprises.3
Revolution. The Forum contrasted discrete
digital technologies such as electronics,
IT and automated production with
todays integrated cyber-physical systems,
and highlighted their distinguishing
characteristics: breadth of impact and
unprecedented speed.2 2
The Fourth Industrial
Revolution: What it Means
and How to Respond, World
Economic Forum, 2016.
3
The digital utility:
New opportunities and
challenges, McKinsey &
Co., 2016.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 5
Executive summary
A practical approach
Against this backdrop of challenge and These organisations were also taking a very
possibility, we asked 30 senior leaders of practical approach to transformation. They
Australian organisations to share their were experimenting with and implementing
experiences with digital transformation. digital tools to better engage customers,
empower employees, optimise operations
All our interviewees viewed digital
and transform products and services.
transformation as a competitive necessity,
and most saw it as a significant opportunity. Typically, organisations were motivated to
They expected the impact of transformation transform the customer experience first, but
to keep increasing, and emphasised were starting to realise the importance of
the importance of getting started or other dimensions in particular optimising
maintaining momentum. operations for wide-scale transformation.
A handful of organisations were reinventing
Most organisations were undertaking digital
business models to get the most out of
transformation in a series of strategic shifts.
digital transformation.
Despite feeling a strong sense of urgency,
leaders recognised it was unrealistic and All the leaders we spoke to said education
often unhelpful to expect change to and tracking progress were essential for
happen overnight. This was especially the successful transformation. Most reported
case in large, well-established organisations. significant, measurable pay-offs that
motivated forward momentum.
By and large, these organisations viewed
digital transformation as a journey that
started with isolated digital experiments
and built up progressively over time. They
typically started these journeys with a
strategic plan. We found that half of all
strategies were initiated in the past two
years, indicating the newness of large-scale
transformation efforts.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 6
Executive summary
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 7
About this research
About this research
The organisations span the private and We conducted our research in August
public sectors and a range of industries, and September of 2016. This report
including manufacturing, finance, retail, presents the qualitative comments and
technology and healthcare. A majority were high-level quantitative findings revealed
happy to be acknowledged as contributors during one-hour, face-to-face interviews
to this research and some interviewees are with these executives.
quoted directly.
Research participants were asked to define
digital transformation and comment on the
changes their organisations were making.
They were also asked about the related
payoffs, opportunities, challenges and
critical success factors.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 9
What is digital
transformation?
What is digital transformation?
Improve outcomes
Interviewees agreed that digital Others took a practical view. For me,
transformation was about harnessing digital transformation is about getting away
new technologies to improve business from the traditional cumbersome processes
outcomes. This typically involved changing of paper, said Danny Lindrea, Director of
business processes and even business ICT Architecture at Bendigo Health.
models to make the most of those
Some organisations viewed digital
technologies.
transformation as revolutionary to every
Some, such as Michael Osborne, Head aspect of their business. Wayne McMahon,
of Technology at Cricket Australia (see Group Chief Information Officer at pizza
the case study on page 19), saw it as chain Dominos, which is actively exploring
an extension and acceleration of the the potential of digital technologies, said,
investment that organisations had been Our share price is now over $65. This is not
making in information and communications based on product sales alone. We have a
technology (ICT) over many years. high PE ratio because were seen, act and
behave like a technology company. And
To a certain extent, digital transformation
so we have a tech company share price.
to me is a bit of a buzzword. Organisations
have been applying emerging and
increasing technological capabilities
for decades now, so to me its the next
iteration of that, he said.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 11
What is digital transformation?
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 12
What is digital transformation?
Create systems
According to our survey group, digital Here, digital transformation is about
transformation offered significant building rich systems to better engage
opportunities at every turn with customers, empower employees, optimise
more potential gains for Proactive operations and transform products and
and Embracing than Motivated but services. Its about using this intelligence to
Constrained organisations. access data insights for a laser-sharp focus
on commercial objectives and converting
As Figure 1 shows, respondents were
that into intelligent action.
most bullish about the potential of digital-
led change to help them better engage Previously, businesses designed, built,
with customers and employees. This was produced and shipped a product, and
followed by potential gains in the area of then customers bought it. That was the
transforming products and streamlining end of the cycle. Now, organisations are
operations. re-envisioning entire business models.
They are building in continuous digital
Our view is that successful digital
feedback loops sensors in products,
transformation requires these four
after market services and customer
dimensions to eventually converge.
feedback from a variety of channels.
By systematically combining information
These are systems of intelligence.
technology and operations technology,
an organisation can reap the true benefits These systems are underpinned by a
of creating systems of intelligence. digital mindset that is a unique interplay
of technology, people and process. It is
adopting this mindset and a systems-
based approach that we believe truly puts
an organisation on the path to digital
transformation.
4.7 4.2 4.6 4.5 4.6 4.5 4.55 4.4 Proactive and Embracing*
Motivated but Constrained
* Includes technology
partners.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 13
How to transform
your organisation
How to transform your organisation
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 15
How to transform your organisation
One such organisation was the mortgage The beauty of digital feedback loops is that
broker Aussie. Richard Burns said the they enable fast, reliable measurement, as
organisation had changed various structures observed by Silvano Tittoto, General Manager
in the past 12 months as part of its digital Data Analytics & Insights at WorldSmart.
strategy. This included restructuring Its not like you get traction and you
marketing and technology teams, might see results in three months time; its
implementing process innovations and instant, he said. We can track you on day
refocusing to make the most of new skillsets. one. So, if that thing hasnt had an impact,
you can make modifications on the fly. Richard Burns
Data Scientist Dr Suresh Sood, from
the Chartered Accountants Australia Leaders said their organisations mostly General Manager
Customer, Aussie
and New Zealand, also emphasised the measured success via feedback sessions,
importance of examining business models forums with internal and external
as part of digital transformation. Digital stakeholders, and annual surveys; for
transformation offers an opportunity to example, for employee engagement.
change the business model. Now, if you Those organisations without formal
change your business model, you are going feedback loops said they aimed to
to change the way in which people work stay informed by encouraging open
and you are going to change processes. communications about digital initiatives.
So, to me, the essence of transformation
All organisations recognised the importance
is the opportunity to build new business
of internal communication in digital
models and shift from outright purchases
transformation. Interviewees said this
to a pay-as-you-go mentality, he said.
education process enabled the adoption of
The leaders surveyed agreed it was new technologies by building understanding
important to track the progress of and confidence. They also said that having
digital initiatives. This included collecting well-informed teams was critical to the
feedback, measuring return on investment effective use of new digital systems.
and taking appropriate action. Tracking
progress can help secure buy-in for future On the monetary side, our budget
initiatives, correct design flaws and pinpoint has gone down by 20 per cent
knowledge gaps. over the past 10 years. And we
probably provide 200 to 300 per
cent more services for a 20 per cent
lower budget This was a five-year
program of work and we injected
a huge amount of transformation
very quickly, and at the end of it we
were two steps above everybody else
and we could leverage that going
forward. So, digital transformation
has been significant to us.
Phil Sherwin Director Strategy and Architecture,
NSW Department of Education
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 16
How to transform your organisation
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 17
How to transform your organisation
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 18
Case study
Cricket Australia intelligence shaping team
and player performance
Cricket Australia is the national governing The TPP platform is powered by the
body for the game in Australia. Its purpose Microsoft Cloud Platform and the Cortana
is to unite and inspire Australia. Australian Analytics Suite, and uses machine learning,
cricket has more than 14 million fans and predictive analytics and rich visualisations.
1.3 million participants. These technologies will help Cricket
Australia track and manage injuries, report
According to Michael Osborne, Head of
on athlete and team wellness and readiness
Technology, one of the organisations goals
for matches, and even set intelligent alerts
is to produce the best teams, players,
that watch for specified issues and flag
competitions, coaches and officials in
when intervention is required.
the world. Its all part of our vision to be
Australias favourite sport and a sport for
all Australians, he said.
We not only want to help define
and drive this evolution, we also
This is an ambitious goal, requiring a want to feed into the development
state-of-the-art approach to performance
management. Mountains of performance
of the worlds best practices in
management data are available internally; sport data analytics. We aim to
the challenge is putting it to best use. unlock the insights buried in the
Cricket Australia is addressing this with
data surrounding our athletes
technology. Working with Microsoft, it is and make the data more actionable...
developing a team and player performance tailored not just for every individual
(TPP) platform that aims to supercharge player but also to take into account
player results. The platform will include how each player responds to
a visual and intuitive dashboard that will particular conditions and their role
surface key insights to help coaches and on the team.
high-performance staff prepare players for
peak performance. Michael Osborne Head of Technology, Cricket Australia
The TPP is about giving each athlete and
team every possible advantage, and that
translates to scoring more runs and taking
more wickets. As Osborne said, The results
will play out on the field.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 19
The Australian cricket team.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 20
How to transform your organisation
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 21
Case study
Macquarie Group creates virtual
corridors around the world
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 22
How to transform your organisation
4
Ted Shadler, In 2017,
Digital Transformation
Budgets Will Top The
Billion-Dollar Bar, Forrester
blog, 1 November 2016.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 23
Case study
Webjet builds first-of-a-kind travel
industry blockchain solution
5
Hotels Market (Type
1-star, 2-star, 3-star, 4-star,
5-star, and unrated)
Global Industry Analysis,
Size, Share, Growth, Trends
and Forecast 20152021,
Transparency Market
Research, July 2015.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 24
Case study
continued
The scale of this challenge led Webjet The companys digital solution for
to explore blockchain as a way to resolve optimising operations is also becoming a
issues created by data mismatches. This disruptive new business in its own right.
new technology encrypts data to enable
security and transparency. Blockchain helps We realised facilitating bookings
businesses to almost instantaneously make in the travel industry through
and verify transactions, streamline payment blockchain could become an
processes and save money throughout the additional business we could
distribution chain.
enter in the future, and the same
Webjet is using the technology to underpin technology could also help solve
the use of smart contracts. Blockchain problems outside the travel industry.
eliminates transaction errors by having
an indisputable record of truth, and as
Undoubtedly, the blockchain
weve tested the technology, we quickly technology built with Microsoft
realised its potential to improve processes is an exciting opportunity for us.
with the rest of our travel partners who John Guscic Managing Director, Webjet
face similar complexities. It didnt just
benefit the Webjet environment, but it
could assist every one of our partners in
the supply chain to improve their efficiency,
said Guscic.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 25
How to transform your organisation
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 26
Case study
The Yield Smart farming combats uncertainty
Saving oysters
The Australian oyster industry, which turns
over about $100 million a year, loses an
estimated $25 million annually from rain-
related closures. Oysters are filter animals
and accumulate contaminants from run-off.
Food safety authorities close harvesting
when it rains to protect human health.
The Yield used the Microsoft IoT hub
Barilla Bay, Tasmania in the Azure cloud to create a system
of sensors at 14 oyster harvesting sites
Established in 2014, The Yield is an in Tasmania. Using real-time salinity data
Australian technology company focused on from the leases, instead of rainfall data
the agribusiness sector. Its founding vision, from the nearest weather station, The
as described by Ros Harvey, founder and Yields technology reduced the number
Managing Director, is to help feed the of unnecessary harvest closures by 30 per
world without wrecking the planet. cent. This has saved the Tasmanian oyster
The Yields customers are growers, industry alone an estimated $1.6 million
food processors and industry regulators annually. Both the NSW and Tasmanian
who need access to accurate, reliable and food authorities are customers.
current data to support their decision The Yield can also use machine learning
making. The Yields goal is to help its to predict closures so that growers can
customers deal with the uncertain effects get their oysters out of the water before
of weather on food production. The Yield is harvesting is closed down.
applying intelligent digital solutions to help
The Yields technology is also being
solve this challenge in two primary fields:
used to proactively manage the risk to
oyster farming and crop production.
oysters of a virus called Pacific Oyster
These solutions combine IoT technology, Mortality Syndrome, to track food
Microsofts Azure machine learning provenance and to improve labour
and apps to measure and predict productivity by up to 25 per cent through
hyper-localised growing conditions. highly localised tide predictions.
They distil this into elegantly simple
user interfaces designed in collaboration Basically what that means for
with growers. The result? Growers can me is when I see trouble brewing,
make fast decisions with confidence. I now have enough time to start
getting the oysters out of the water,
five hours in advance, when I used
to just have five minutes.
Justin Goc Manager, Barilla Bay Oysters
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 27
Houston Farm, Coal River Valley, Tasmania.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 28
Case study
continued
Watering crops
Crop irrigation presents a major challenge When youre harvesting hundreds
for farmers. Decisions about when and how of tonnes of lettuce each year, this
much to water plants have traditionally app makes it less farmers intuition
relied on a combination of experience,
and more of an exact science.
intuition and guesswork.
The Yield has developed a technology On a tangible level, each year we
that Ros Harvey describes as taking the lose around 200 tonnes of lettuce
guesswork out of growing. It measures to water-related issues. With The
and predicts hyper-local real-time weather Yield, we think we can reduce that
data at the farm, field, row and even
plant level. The Yield then converts this
by 30 per cent, saving hundreds of
into crop-specific knowledge that growers thousands of dollars each year.
care about, such as when to plant, irrigate,
Liam Houston Agronomist, Houstons Farm
feed, protect and harvest their crops. Its
apps are designed with growers to solve
on-farm challenges.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 29
Success factors
Success factors
Common barriers
The organisations surveyed identified their These findings show that strong leadership
top four barriers to digital transformation and culture are important foundations
as availability of talent, culture and mindset, for digital transformation, but that as
leadership and clarity of vision. momentum builds, other layers need to
be added. In particular, access to talent
Collectively, organisations cited availability
whether internal, outsourced or via advisory
of talent as the number one constraint,
or technology partners is critical for
followed closely by culture and mindset.
sustained success.
However, when we divided the sample into
its two groups (Proactive and Embracing,
and Motivated but Constrained) we found
some variation. Specifically, Motivated
Figure 2: Top barriers to digital transformation
but Constrained organisations perceived (all respondents)
leadership and culture to be greater hurdles
to transformation than availability of talent. Availability of talent
Culture and mindset
Leadership
Clarity of vision
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 31
Success factors
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 32
Success factors
Talent
The organisations we spoke to accessed Some organisations had created
digital talent from a variety of sources. specialised roles, such as futurists and
They all employed IT specialists (and chief digital officers, to spearhead their
often digital experts too, distinct from IT). digital transformation efforts. Others
Some outsourced their digital capability had restructured their IT teams to give
and others used shared services. All digital specialists more autonomy,
organisations used technology partners plucking digital support and development
to augment capacity and capability. staff members from shared-service
IT teams. They were placed under
Opinions varied about whether or not it
designated digital leaders with unique
was challenging to find digitally aware
key performance indicators and budgets.
talent and build a business case to
employ them. Phil Sherwin from the Yet other organisations were combining
NSW Department of Education, said there IT and marketing departments in a
wasnt a scarcity of digital talent, but powerful, cross-functional approach
that the hype and fast pace associated to improving the customer experience.
with digital developments led to fairly For example, Phil Sherwin said,
high turnover and a corresponding lack We have seen ourselves move from
of maturity in digital transformation staff. being a purely back-office cost centre
to being business enablers.
The skillsets required for transformation
stretch beyond digital savvy, and this
means organisations must pay attention
to the quality and diversity of their entire
talent pool.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 33
Success factors
Further inhibitors
In addition to the above factors, In most cases, security concerns were
interviewees said their digital not a deterrent to digital transformation;
transformation efforts were often they just put organisations on guard.
hampered by concerns about security, Graham Anderson from Webjet said,
confidentiality and regulatory compliance. We want to make sure we are
maintaining a good level of security with
Public sector organisations, in particular,
anything that we put out, and we want
were affected by privacy and security
to educate our own folk around whats
concerns. Lynn Warneke from Deakin
out there in the big wide world of digital
University said, When you want to pursue
transformation and what they need to be
the most ambitious personalisation
mindful of from a security perspective.
agenda possible, it means you have to
know an enormous amount about that Some respondents from large businesses
individual so you do butt up against said the size of their organisations worked
issues of personal readiness, privacy against them, breeding a risk-averse
concerns, trust and data security. culture and the sense they had a lot to
lose. However, one interviewee said his
Anthony Corbitt from the Department organisations bigger balance sheet gave
of Immigration and Border Protection, it an advantage as it could invest more on
added, I think the main thing for an automation.
organisation like ours is the classification
Respondents also cited other barriers
of the data that we hold and the
to transformation, including legacy
protection that we need to put on it.
systems and public scrutiny. The role
So if you had guaranteed cloud-based
of big data was also raised.
services that were in Australia, and
the ability to make sure that ours were Peter Harvey from Macquarie Group
segregated appropriately, you would said it was a challenge to harness data.
have a faster shift towards it. Data is abundant and big data can be
wonderful in the focus and insight it
provides. It is no small exercise though,
taking a sea of data and turning it into
truly meaningful and actionable insights.
Its a long-term journey the organisation
is on.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 34
Future trends
Future trends
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 36
Future trends
Quantum Bots* Virtual Artificial Internet Cloud Scale out of 7
computing reality intelligence of Things computing
* Process automation
via software robots.
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 37
Your next steps
Your next steps
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 39
Your next steps
Prerequisites
Initial steps
Ongoing
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 40
Further information
www.microsoft.com.au/digital-transformation
Embracing digital transformation: Experiences from Australian organisations. Microsoft Australia 2016. 41