European Business Journal: Mr. van Heijst, ‘digital transformation’ is the term on everyone’s lips. What does it mean to Microsoft?
Floris van Heijst: You are right! The digital transformation phenomenon is affecting every industry and most of our customers. Already, the associated key words such as mobility, cloud, Internet of Things and social enterprise are changing our way of working. You could even call it a revolution. We believe that the new technologies offer new opportunities – opportunities for our clients, opportunities for the whole IT industry and opportunities for all consumers. Digital transformation enables us to go beyond limits that were previously insurmountable, allowing companies to generate competitive advantages and economies of scale. You can reach new target groups and enter a new world of productivity. Microsoft benefits twice from this development because we are transforming ourselves. Companies have to adapt new technologies in order to stay competitive in the long run and to be able to succeed in the war for talents. On two counts, Microsoft is one of the most important protagonists of the digital transformation. In Germany, we unite a network of over 36,500 partners. Together, we provide all of the technologies companies need to manage the transformation process of their business. Our company keeps moving forward, too, and uses the opportunities created by digital transformation, for example by offering flexible working opportunities to our workers based on mutual trust. Today, Microsoft Germany is one of the most popular employers nationwide. We were rated first in the competition “Germany’s Best Employers 2014” by the Great Place to Work Institute in the category 2,000 to 5,000 employees.
European Business Journal: What role does Microsoft want to take in this process?
Floris van Heijst: We are actively involved in this process and are able to set benchmarks. Digital transformation means much more than just digitalizing an existing business model or concept or transferring it online. This is a very limited view. Digital transformation is about creating new opportunities and the benefits resulting from these measures. Yet, digitalization is not the goal; it is only a tool helping you to reach your goal. It is our job to provide the products and services needed. For example, with our #modernbiz competition for small and medium-sized businesses, we are trying to motivate companies to try out digital technologies and opportunities.
European Business Journal: The winners of the Digital Transformation Award 2014, which was given by neuland consultancy together with Wirtschaftswoche, were distinguished for “customer experience,” “product and service innovation” and “company 2.0”. Are there any other important factors?
Floris van Heijst: It is particularly important to talk about success stories from different industries in order to deal with people’s fears and to demonstrate the benefits of digital transformation. Also, it is important to keep in mind that digitalization means significant changes for your employees. How can you enhance their efficiency and motivation? Thanks to new technologies, you have many new options to choose from.
European Business Journal: In many companies, the increasing digitalization of work processes causes fear and refusal.
Floris van Heijst: Digital transformation requires courage. There are so many negative associations. Therefore, it is crucial to regard all dimensions. You have to integrate your staff: The satisfaction and efficiency of your employees are crucial factors to your success as a company 2.0.
European Business Journal: What about customer experience?
Floris van Heijst: Due to the digital revolution, our buying behaviour has changed. We all know that. Even more important is that our expectations have changed, too. For example, we want direct and prompt feedback, different communication channels and quick delivery. For some firms, these are the most obvious aspects to stand out from competition. Altogether, these factors provide the new experience. Often, the consumer’s buying experience is the trigger to buy something. Against the background of growing competition, the experience factor will become even more important in the coming years.
European Business Journal: How important is innovative strength?
Floris van Heijst: Many companies will continue to sell the same service or product, but they will change their sales approach. There will be cases where the products benefit from the changes and others where digital transformation improves processes.
European Business Journal: What do you think: Why do many companies, especially medium-sized companies, have difficulties with digital transformation? What are the most common challenges and stumbling blocks?
Floris van Heijst: To a great extent, fears result from typically German thoroughness. At the same time, this is a very positive characteristic. Imprudent speed bears at least as many risks as slowness or thoughtfulness does. A comprehensive and sustainable transformation process should not be carried out in haste. In Germany, data security and data protection are big issues. According to the latest studies, the biggest fears are found among German medium-sized entrepreneurs. Yet, we should also keep in mind that EU security standards have been closely adapted to the German standards. I also believe that companies hesitate because they do not understand their benefit in the beginning. Here, we have to deliver the right answers and convincing solutions. We will have to communicate the benefit of the cloud much more strongly. The Boston Consulting Group found out that small and medium-sized German enterprises would be able to increase their revenues by up to 16% by using modern IT. In discussing the cloud, we also have to talk about the safety concerns of German enterprises. Here, Microsoft is one step ahead of the competition. As a cloud hosting partner, we are the only provider who ratified its standard contract clauses concerning data security according to European law. This way we guarantee our clients the EU data protection standard. Also, we refuse to deliver our data to US services outside of the United States. We always follow two guiding principles when developing new products or solutions. These are “privacy by design” and “privacy by default.” Our products meet the highest security requirements and are equipped with settings that ensure the highest level of security. Thanks to the hybrid cloud, our users can choose which data they store in the cloud and which data they keep on their computers. In order to make the cloud compliant, we entered into a strategic partnership with KPMG. At the end of the day, I can say: Today, the cloud is the safest solution to protect your data against external access and abuse.
European Business Journal: But why do so many medium-sized companies fear the cloud? Do they fear investments in infrastructure and know-how?
Floris van Heijst: Again, we are talking about security concerns and to a great extent about emotions. Though, for many enterprises, a professional cloud infrastructure or technological security structures of hosting centers are much safer than in-house computing centers. Often, people are not able to evaluate the opportunities and risks of digital transformation due to a lack of know-how. Here, we have to deal with a real knowledge gap. The cloud is something you cannot see or touch, and this causes fear. Whenever we organize an information event in cooperation with KPMG, we are overrun with questions. Once people have overcome their emotional inhibitions, they understand the advantages of cloud computing and recognize that the cloud ensures security and speed. Of course, the cloud is not the best solution for all processes but for many.
European Business Journal: What do you do at Microsoft to minimize the knowledge gap you just mentioned?
Floris van Heijst: We believe that it is our responsibility to explain the cloud. And here we can offer a true USP: We are one of the very few providers where you can choose from global data centers, for example in Ireland and Holland, as well as among many Germany-based hosting partners and data centers, thanks to our extensive partner network. Our clients can choose their data center or hosting partner.
European Business Journal: So, your strategy to approach the medium-sized firms is cloud computing via hosting?
Floris van Heijst: If this is what our clients want. In fact, there has never been only a Unix, a Windows or an Apple universe. And we will never have a public cloud universe. There will always be private clouds, hosted services, individual data centers and others. We believe in the heterogeneity of the world, and this attitude fundamentally differentiates us from competitors. We offer a hybrid form, and this is rare in the market. In short: Cloud OS is our answer, and this is a family with three different options.
European Business Journal: So far, we have been talking about the importance of cloud solutions for the digital transformation. What about mobility?
Floris van Heijst: Mobile devices in general and the use of private smartphones and tablets at work have changed the working environment significantly. And they will continue to do so. Data and applications have to be accessible via mobile tools. There is no cloud strategy without a mobility strategy. There are no cloud innovations possible without innovative hardware. Here, we stay true to our integrative approach, too. Therefore, we also provide solutions for Apple or Android devices. Both trends – mobility and cloud – are closely connected as you have to consider how the cloud is used and how you can offer security.
European Business Journal: Will there be a German cloud for medium-sized businesses?
Floris van Heijst: This is an emotional reaction to emotional fears. I cannot imagine a German Internet. But we will be able to say “hosted in Germany.”
European Business Journal: Are social media important for digital transformation?
Floris van Heijst: Social media have become a mainstream tool. We all live in a socially cross-linked world. Therefore, it is just a logical consequence that companies and shops, too, try to use the advantages that social media offer. At Microsoft we believe that you cannot define on paper which social strategy will be the right one for an enterprise or a person. Yet, if a company does not communicate with its clients via social media, this is a distinctive feature – a negative one. Using social media as a communication tool means that you are willing to establish a dialogue with your customers – directly and constantly. Previously, companies had a Facebook page for image reasons. Today, Facebook is about dialogue. Customers want to be met where they communicate. Of course, social media are important tools for your internal communication, too, to keep up a dialogue with your employees. At the end of the day, a company is a social institution as well. Therefore, you have to cross-link all your mobile employees, your freelancers, for example. IDC forecasted revenues of around 200 million USD for German enterprises with social enterprise solutions. Worldwide, this figures amounts to 2.8 million USD. This means that the German market grows twice as quickly as the rest of the world.
European Business Journal: What about big data?
Floris van Heijst: The Internet of Things and social networks will increase the volumes of unstructured real-time data tremendously. Big data is the appropriate technology to analyze these data and to use them in a profitable way. Big data offers enormous potential for the economy and for users in terms of innovative strength and revenues. Experts predict a global rise in our data volumes of up to 8 ZB in the course of this year. Companies which aim to compete globally in the long run and want to open up new business opportunities will have to use these trends and digitalization possibilities – or they will not survive. But we have to admit here: Big data is still in its starting blocks. Technologically speaking, there are many opportunities, but we do not have user scenarios for the respective industries. Today, we are not able to imagine any limits yet.
European Business Journal: What does the Internet of Things mean for digital transformation?
Floris van Heijst: The Internet of Things will speed up everything we just talked about at a new level. A building will heat itself intelligently, we will have smart directories, and wherever possible, we will connect human action to sensors. These scenarios offer a major increase in efficiency. Today, some industries are pioneering this trend. There are great innovations in the elevator market or in the oil industry, for example. At Microsoft, we believe that you cannot implement a cloud strategy without considering the functionality and management of connected sensor technology.
European Business Journal: In general, what is the role of Microsoft in the mega trend of digitalization?
Floris van Heijst: We have been involved in the digitalization of offices and companies for many years now. Around 30 years ago, we launched Windows. Exactly 25 years ago, we introduced Microsoft Office. For 25 years now, we have been the market leader with our office package, enhancing productivity and work efficiency. Therefore, we have already driven the digitalization of our society forward. To us, “mobile first, cloud first” is much more than just a slogan; it is the strategic guideline of the fundamental changes in our modern working environment. Over the years, Windows and Office have become even more efficient. Today, these two solutions integrate all important functions on just one platform. In addition, our productivity solutions are available for almost all device types and platforms, for iOS, Android and OS X. With Microsoft Azure, we offer the most comprehensive cloud platform in the market and integrate Office and Windows into one cloud. Yet, we do not just aim to develop and produce new products. We are much more than just a software trader. We lay great emphasis on the design of modern offices and on the sensible use of our technologies in order to meet changing demands. We have always provided a broad portfolio, and we feel responsible for social issues such as labour law and employee satisfaction.
European Business Journal: The dispute between Germany’s Minister of Economic Affairs Sigmar Gabriel and Google Chairman of the Board Eric Schmidt demonstrated that the digital revolution has dark sides, too. Some examples are the loss of data control and the usability of people. Do you think that digital transformation needs rules? If so, what rules does it need, and will we be able to implement them?
Floris van Heijst: There is no doubt that the digital revolution needs rules. There are some rules already, for example data protection laws or company-wide policies and compliance regulations, which ensure data protection compliant behaviour. However, it will not be possible to answer all ethical and political questions of the digital revolution with rules. Therefore, I believe that it is equally important to improve people’s ability to handle new technologies and to sensitize them to the risks. Those who know the risks of an open society will use new technologies and their know-how carefully. This means that all people and companies involved have to share the responsibility. At CeBIT 2013, we introduced this topic for the first time. We believe that we need a new deal. It is the job of politicians to ensure access by law. People should not miss out on current developments. Especially Germany has to use its chances for the Internet of Things and local software development. Here, the preconditions are excellent thanks to the superior academic level and the high numbers of engineers. It would be a shame if Germany was left behind.
European Business Journal: What would you recommend to a medium-sized entrepreneur to transform his or her enterprise into a 2.0 company?
Floris van Heijst: I would advise him or her not to look back but to focus on the future. Sooner or later, in every industry, there will be a concept or product that will revolutionize the whole market. Often, these revolutions are initiated by newcomers from other professions who will stop at nothing. Also, I would tell an entrepreneur or manager to deal with this issue professionally, to consider what changes digital transformation will bring his industry and company. It is important to take the time you need. There will not just be one answer. The answer is not only the cloud or only mobility. You need a real strategy to enhance the digitalization of your company. This strategy has to be cross-linked to enable your company to develop your Internet of Things. If you are quick, you can still sign up for our #modernbiz competition for medium-sized businesses until 15 January 2015. Here you have the chance to try out the digital transformation without any risks. It is free of charge but not for nothing.
European Business Journal: Mr. van Heijst, thank you very much for the interview.
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