Microsoft's Satya Nadella: Marching Orders For Digital Business

New CEO lays out four forces driving change at Microsoft -- and just about every other company. Are you paying attention?

The first memo from new Microsoft CEO Satya Nadella (courtesy of Re/code) contains this money paragraph:

I believe over the next decade computing will become even more ubiquitous and intelligence will become ambient. The coevolution of software and new hardware form factors will intermediate and digitize many of the things we do and experience in business, life, and our world. This will be made possible by an ever-growing network of connected devices, incredible computing capacity from the cloud, insights from big data, and intelligence from machine learning.

Sound familiar? If these forces don't ring true to what you and your teams are thinking about every day, start worrying. Nadella's giving marching orders to Microsofties, but the exact same challenge faces every business/technology leader, whether your company makes software, trucks, drugs, loans, or deliveries.

The challenge is harnessing the potential of digital technologies and applying them to your business model before your competitors get there first.

[Nadella has many challenges, but also support from his predecessors. See Microsoft Names Nadella CEO: What He Inherits.]

Nadella got me thinking about those four elements -- network of connected devices, computing capacity from the cloud, insights from big data, and machine learning -- and where we are in their adoption. Here's what we at InformationWeek are seeing from companies across industries trying to use these tools to create new products or lower costs.

1. Ever-growing network of connected devices
Don't mistake the overwhelming volume of Internet of Things chatter for an overwhelming volume of implementations. We're in the earliest hours of this capability. The promise is that we can collect data from things (cars, parking meters, heart monitors, phones) and use that data to offer new products and services, avert breakdowns, etc. But in the real world, those connections are more limited than outsiders expect. Factories and power plants are monitoring the health of a single machine, but not the entire production or distribution process and the relationships among their machines.

Companies need better and cheaper sensors, batteries, and connectivity, and better systems and processes to make sense of all that data. They need apps that connect online and offline worlds in relevant ways. Even among leaders in logistics, manufacturing, utilities, and healthcare -- industries where the value of monitoring and analyzing to avoid problems is clear -- I'd characterize the Internet of Things as an early-stage project.

2. Incredible computing capacity from the cloud
Yes, computing capacity is soaring. But for most companies, it's a tale of two clouds. There's the in-house datacenter that companies are trying to run with all the flexibility and efficiency of the web. And then there's the public cloud, run by the likes of Amazon and Microsoft, which remains separated from company datacenters by security, integration, policy, and cost concerns. Just 12% of companies in our 2013 InformationWeek 500 rankings can switch workloads easily between their datacenters and public cloud services. Hybrid clouds are a goal, not reality, but they're necessary to truly tap into this huge cloud capacity.

3. Insights from big data
Analysis of big data is delivering the most concrete benefits from these four digital business drivers. Drug companies are combining genomic data with other resources to test new treatment options. Marketers are combining in-house and external data for better segmentation and understanding, with the promise of better marketing (with mixed results). Where big data hasn't changed the game yet, though, is weaving this kind of analysis into real-time operations. We see a hospital using electronic health record data to avoid one particularly bad type of drug reaction, or spot one type of infection. But use of big data analytics isn't a routine, everyday outcome at most companies. More of that will come as we network more devices (see above), thus creating more relevant operating data to which people can react.

4. Intelligence from machine learning
This is uncharted territory for me. I can't think of an instance of a company changing how it operates or the product it offers based on machine learning. I've heard IT execs talk about this need, that machine learning is the only way we'll make sense of the quantities of data we're collecting. But I haven't seen it. Is your company gathering intelligence from machine learning? Do share.

What each of these forces share is the power to disrupt industries, leaving onetime leaders playing catchup exactly the way Microsoft is in phones, tablets, and search. So if you think Nadella has a hard job ahead of him, swallow hard. It's not so different from yours.

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