Microsoft Financial Analyst Briefing 2017 - Judson Althoff
Filter Events:
Microsoft Financial Analyst Briefing 2017
Financial Analyst Briefing
Judson Althoff
May 10, 2017
ANNOUNCER: Please welcome Judson Althoff, Executive Vice President, Worldwide Commercial Business.
JUDSON ALTHOFF: Good afternoon. So I have three things I really want to talk to all of you about to provide some objective evidence around our commercial growth and the progress and momentum we're seeing in this space.
The first is how digital transformation is really fueling a lot of momentum for our commercial customers.
The second is how when enterprises are choosing to go to the cloud, they're choosing to go to the cloud with Microsoft. They saw the investments that we've made in security, data privacy, and sovereignty, and our true global scale.
And the third, how our commercial customers are really becoming the digital partners of the future, and these partnerships are actually creating very unique opportunities for us in the marketplace.
So Satya talked a lot about digital transformation and about how our three bold ambitions or our three core areas of innovation compose together to enable digital transformation for customers.
I thought what I might do is at least explain what digital transformation means to us, because if you hauled 100 people into a room and asked them what they thought digital transformation is, you'd probably get 100 different answers.
To us it's very simple: It's a wave of business innovation that is empowered by cloud technologies like the Internet of Things, augmented reality, artificial intelligence, and data, that enables businesses to grow better and faster and more efficient than ever before.
It has impact across four core areas of our customers' businesses. One, it's driving new innovation in how our customers engage with their customers. It's also changing how our customers empower their employees, how they optimize their operations, and how they actually transform their own products.
I want to talk to you a little bit about the impact that it's having across industry. The logo slide you see behind me here is just a reflection of the customers where we've driven a digital impact over this last year. And from aerospace to agriculture, from Boeing to Land O' Lakes and Ecolab, to the world of creating candy in the Hershey's realm, to counting the beans with UBS, we're having a material impact in growth across all of these industries.
So recently we announced a partnership with UBS where we've taken their risk management portfolio, all of their software assets, and put them on top of our cloud platform to enable their risk management solutions to run 100 percent faster than they've ever run before, at 40 percent of the cost. This expands the ecosystem of risk management solutions they can provide to not only their employees but their entire partner portfolio that leverages their digital assets.
In the realm of Hershey I mentioned how we can actually digitally transform candy. We have taken the Internet of Things and enabled Hershey to create the Internet of Twizzlers by actually IoT enabling the machines that create candies. And it's sort of laughable, yes. It allows people to actually extrude licorice like never before.
But the business impacts are real. In fact, Hershey is now saving half a million dollars per batch of candy they produce as a result of using AI to predict the formula in which they produce the candy, the temperature, the humidity, the speed and operational settings of their devices. It's dramatically improving their operations.
We also announced a few weeks ago a partnership with Maersk. Maersk has been a commercial customer of ours for many, many years, and we've provided them with all kinds of technology assets.
But what's new about our relationship is we've taken the software they've built -- many customers are actually becoming IoT -- we've taken the software they've built, put it on a platform so that they can actually change how they do business. Rather than just shipping containers from Port A to Port B, they can now deliver quality-of-service solutions and guaranteed SLAs across the entire supply chain and logistics business that they operate.
It's also opening up new partnerships for them as well as they extend it to people that create smart cities and smart ports. And so it's completely changing how they do business with us, as well as how they do business with their partners.
I want to actually drill into what it takes to drive these scenarios to market and really create an impact with customers, because we've been doing a lot of work to effectively retool our sales force to really make an impact with customers that's truly different from how we've operated in the past.
So I want to take you through a couple of in-depth scenarios. The first is with Land O' Lakes. And so when I say Land O' Lakes, you say -- thank you -- butter. Thanks for being a part of the survey.
So you might think, Judson, how would you digitally transform butter? Well, so in effect if you actually seek to deeply understand Land O' Lakes' business, their core is sort of the dairy business, but they also produce seed and feed for farmers. They are a co-op. In fact, the farmers that they serve actually own their business.
So we've been on a journey with them for multiple years about helping them reinvent their company, from the type of talent they recruit into their company, to how they engage with farmers, their customers, to how they actually even reshape their business to modernize and capture the value of the data about their business. In so many of these digital scenarios the data about the business actually becomes more valuable than the business itself.
So a bit of the timeline and the journey that we've been on with Land O' Lakes. It started, as I said, several years back in helping them to rethink how they attract millennial talent into a company that's been around for many, many years.
The most important thing for them first was to get productivity in the cloud, productivity enabled across every device, whether that be how they simply communicate over email, how they collaborate with video and voice, to how they share information across their enterprise social fabric.
From there we went on a journey to empower them with our Surface devices. If you think a little bit about how this journey maps to what Satya unfolded earlier, it's very similar. You think about the need for customers to actually empower their employees through these user, per user productivity scenarios, it's very personal, that's in fact a journey we were on with Land O' Lakes.
It became very, I would say, revolutionary to them when we started actually analyzing their products. You might once again say, OK, so let the cat out of the bag here, how do we digitally transform dairy.
Well, it turns out after working with them to better study their business and understanding the data that they possess, they have decades' worth of satellite imagery for all of the farms that they support around the world.
So we took all the satellite imagery and loaded it into the cloud. We then put an intelligence fabric on top of it so that we could start to predict the hybrid seeds and the volume of seeds and soil treatments that would best produce crop output on a given plot of land. And when I say, a given plot of land, down to one square meter of dirt, in fact.
From there we actually could create a prescription for how you would variably plant a farm. We then worked with them and John Deere to take these prescriptions, download them into semiautonomous driving tractors, variably plant farms with the hybrid seed prescriptions from the cloud and the intelligence that we produce.
The net impact and output is pretty astonishing. It turns out an average acre of land produces about 130 bushels of corn per acre. Using this technology, you can produce over 500 bushels of corn per acre. So we've improved the impact and their output by 3 to 5x, depending on the farm that we work with them on.
I wanted to reflect again about how important it is, the strategy that Satya articulated, relative to where we're putting our R&D investments and how that directly applies to customer engagements like this.
Satya talked about Cosmos and the need to be able to harness data, and he talked about intelligence and intelligence at the edge. These things compose together in a very differentiated fashion for us at Microsoft.
Intelligence gets all of the attention these days, but it is in fact data that fuels intelligence. In fact, if you think about it as systems can actually be only as intelligent as the data over which it reasons. If you don't invest in getting your data estate in order, you can have the most elaborate AI strategy, and all you will do is make mistakes with greater confidence than ever before.
So this notion of being able to harness all of the data, the traditional relational estate, the unstructured data in the cloud, what we're bringing to bear with Cosmos, is actually what brings this solution at Land O' Lakes to life.
We then moved on from just variably planting farms to actually changing the type of food they produce for cattle and for livestock. We've taken the same kind of AI algorithms with the data that they have and can track the life cycle of a cow, and the dairy output that cows produce based on the type of feed that they're given, and the hybrid feed that they're fed throughout their life cycle. And again we're having a massive impact on the output and the product that they produce.
Finally, the latest state in our journey with them is we're actually using augmented reality, our HoloLens technology, to help not just farmers in North America but farmers in remote locations around the world better understand how to use the same technology. So we literally have farmers in Africa participating in an augmented reality session with farmers in North America to compare the seed yield output scenarios that we're driving to market with them.
So you can see this is a very different type of business that we've ever had with our commercial customers. It's not just about selling them product, it's about actually changing their business outcomes, their digital realities.
The net of it, though, when you think about that financial impact and how Satya reflects upon this growing total addressable market that we have now is that we're actually doing twice as much business by revenue with Land O' Lakes as we've ever done before. So there is a real economic bottom-line impact to our shareholders as a result of empowering our customers to achieve more in their own reality.
I thought I would actually share a video with you because to me the most astonishing impact is actually when you hear it live from a farmer, what's the impact from the farmer. So please roll the video.
(Video segment.)
JUDSON ALTHOFF: So it's a good story about how what was once just a commercial customer relationship for Microsoft has actually become a true partnership. We're helping Land O' Lakes take their solutions to market, sell more effectively, and as a result they've created a precision agriculture business in excess of $13 billion. So when I say partnerships are really fueling our growth, that's happening from Land O' Lakes through to Boeing through to Maersk through to UBS, across industry.
I want to talk now a little bit about how we've learned from this experience to evolve and actually scale it more effectively to many customer scenarios.
Satya talked about the connected car, and we have, in fact, struck agreements with BMW, Renault-Nissan, Toyota, Ford, and Volvo as a result of our digital efforts.
And what we've learned through the engagement at Land O' Lakes is it takes a different kind of sales force, frankly, to interact with our customers. You have to deeply understand the industry that the customer operates in, you have to provide much greater technical expertise, and you actually have to kind of roll up your sleeves and code alongside the customer to help them along this digital journey.
So through our learnings over the last couple of years, and engagements like Land O' Lakes, we've created a Microsoft digital organization that goes and works with customers like Volvo.
And so you can see on the timeline that we have with Volvo it's a much more compressed engagement cycle with very much the same kind of output. We've been involved here now really in depth over the last year, and we started out with a precision envisioning session that leverages assets that we call the Book of Dreams that talk about how across a given industry you can leverage these technologies to really change your business and provide material impact.
From there, we decided the most immediate impact we could have for Volvo would be in how they design products and bring them to market with greater speed than ever before.
So here we turned to HoloLens and augmented reality again, which enabled them to do much faster turns and iterative refinement on the product design.
We then actually struck a partnership once again where we've embedded Skype for Business inside of the car to actually transform the driving experience in the semiautonomous modes for their cars.
The results for them have been very impactful. The S90 product came to market much faster than any previous product they've ever released. They've received all kinds of industry accolades for the innovation they've brought to bear. And once again it is a partnership.
So again it's really three core things: Digital is fueling a tremendous amount of growth for us. In fact, enterprises, when they're choosing to go to the cloud, are choosing Microsoft because of the long-term investments we've had with them, the scope and scale, the breadth across industries, the security we can bring to bear, the local data privacy and sovereignty capabilities we offer, and then the partnerships that we can create, really again taking our commercial customer relationships and creating the digital partners of the future are really what's transforming our growth.
So that's all I had to share with you. Next up, Phil Spencer will talk about our Xbox strategy. Thanks.
(Applause.)
END
Upcoming Events
- July 30, 2024 2:30 PM - PT
Microsoft Fiscal Year 2024 Fourth Quarter Earnings Conference Call
- Satya Nadella, Chairman and CEO and Amy Hood, EVP & CFO