Digital Transformation Requires a Cultural Shift

By Greg Gorbach

Technology Trends

Across boardrooms, the most discussed topic in recent years has been the digital transformation journey – the strategies, technologies, and best practices.  At the ARC Industry Forum in Orlando, ARC’s Greg Gorbach, Vice President, asked John Kovac, Director-Manufacturing, Microsoft, about digital transformation, both from the customer standpoint and how it’s transforming the company.  This blog focuses on the highlights of their interesting discussion.  You can watch it here and/or on YouTube.

Microsoft on Digital Transformation

“Digital transformation is pervading all manufacturing.  It is accelerating at a pace that was unimaginable a few years ago,” said John.  Just last year, Microsoft saw a lot of companies going through this transformation.  Microsoft was helping companies with onboarding these technologies, doing proof-of-concepts in their factories and operations; and then taking that knowledge and expanding it into their plants.  “It's been a true transformation throughout organizations.  To really permeate the entire organization and expand it on a global scale requires a cultural shift.  It requires leadership at the very top, willing to make a change, and driving that change through operations,” opined John.

In this context, John spoke about Microsoft’s CEO Satya Nadella’s book called Hit Refresh, in which he identifies the three ways to go forward with digital transformation: bringing clarity to the organization;  driving out the elements that don't matter; and removing entry barriers to effectively collaborate and innovate.  An organization must “generate energy.”  In other words, it should be a great place to come to work every day.   John said that Microsoft has done that by way of true collaboration in the way they go to market, in the way they sell products and solutions to their customer base and so on.  Also, the company has an open and inclusive culture, and that has really paid dividends.  Finally, what is required is to make things happen and execute with a sense of urgency, because time is critical.  John said that this incredible transformation is reflected in the company’s stock prices, which has increased over five-fold since Nadella took over as CEO six years ago.  Microsoft made a massive shift to the cloud, where it has over 50 global data centers and over two kilometers of fiber optic cables.  

Organizational Culture

Greg asked him about how companies should deal with some of the workforce issues related to introducing new technologies and scaling it up.

This is something that is dealt with on a daily basis, explained John.  The earlier employees in the back office were used to fax machines, typewriters, telephones, etc., and Microsoft introduced them to Microsoft Word/Excel/PowerPoint, enabling them to do their jobs more efficiently.  “Then you transform new workers in the new age - the frontline workers (estimated to be about two billion) who represent the brand in the market,” said John.  Microsoft has an open culture around technology as these frontline workers use different devices and technologies.   So, the company drives more of that transformation from a technology perspective, allowing frontline workers to have access to technology to allow them to do their jobs better, communicate with corporate, etc.

Microsoft also provides technology – HoloLens - for those in the manufacturing line and design center.  This is truly transformational in the way you can interact, as it is augmented reality with the ability to simulate both a real environment and a virtual environment.  John cited the example of one of their clients who is actually using the HoloLens tool to train people to route cable wiring inside of a door and a wire harness situation.  This reduces training time for new employees by over 70 percent. 

Artificial Intelligence and Machine Learning

John said that artificial intelligence and machine learning are visible everywhere, and Microsoft is helping their customers with proof of concept in these areas.  He gave the example of a client who has implemented cameras in the middle of an assembly line, where they take an image and a picture, and that image is compared to good and bad images up in the cloud using machine learning AI algorithms.  This enables them to detect faults and manufacturing defects earlier in the process.

Microsoft has transformed its manufacturing and supply chains operations, starting from their factory in China, where they make the HoloLens, the X-Box, all the surface hubs, all the laptops, the accessories, etc.  The company uses artificial intelligence extensively from the manufacturing operations all the way to tier two of the supply chain.  Now, their supply chain planners don't have to analyze and approve things, as artificial intelligence is doing that, and they are free to do other things that are more cognitive in nature.

Training and Re-skilling

Talking about AI, John expressed that as it becomes more widespread in the manufacturing sector it's going to disintermediate some of those workers.  There are some that are going to be put into other roles, or they'll lose their positions.  “We have to worry about how to retrain those folks, and we have to up train those folks who are coming on stream and need to learn how to program IoT and AI,” he said.   This provides an opportunity for training on both ends. 


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