Satya Nadella: Worldwide Partner Conference 2016

Remarks by Satya Nadella, Chief Executive Officer, in Toronto, Canada, July 11, 2016.

GAVRIELLA SCHUSTER:  Welcome to the 2016 Worldwide Partner Conference.  On behalf of the entire Microsoft team, I want to thank you for joining us right here in Toronto.

I also want to give a special thanks to our first-time attendees, to our longtime attendees, and to our sponsors. Without all of you, this conference wouldn’t be the special event that it is every single year.

Our sponsors and our exhibitors have created an amazing experience in the Commons and on the expo floor, and I encourage all of you, if you haven’t already, to make a point of checking it out throughout the week.  It’s a great place to hang out, grab a coffee, meet with new connections and old friends.

Now, I’m down here with our 2016 Partner of the Year award winners.  These partners are the best of the best.  They represent innovation, expertise and customer focus from around the world.

I am personally inspired by the amazing work you are all doing for our customers, and I encourage all of you to make a point of connecting with someone in this group.  That is the power of partnership.  Congratulations to all of you.

(Applause.)

It was great to hear from K’naan and the kids, as well as from Ariela.  Ariela is an incredible example of empowering people and organizations.  Her mission to disrupt the cycle of violence is making an impact in one of the most dangerous countries in the world.

I’m happy to say that the first 5,000 people to stop by the Microsoft Retail Store in the Commons will be able to take home a bracelet sponsored by Microsoft.

(Applause.)

All of us at Microsoft appreciate everything you have all accomplished this past year.  We’ve asked a lot of you through the past few years of transformation and you have stepped up to this challenge to drive tremendous growth across the business.  So I want to say thank you, thank you, thank you.

(Applause.)

Today is all about where we’re going.  Satya will come out and share our vision and the opportunities out on the horizon.  Tomorrow, you can look forward to hearing from our business and engineering leaders about the many innovations in the year to come.  And then on Wednesday I’ll be back, along with our new commercial leader, Judson Althoff, to make it all real.

So let’s get going!

(Applause.)

CORTANA:  Is this thing on?  Just kidding, I knew it was on.  I just always wanted to say that.

Satya will be here soon.  In the meantime, let’s take a look at what we’ve done this past year.

Wow, what a year it’s been.  We launched some incredible new products.  On a personal note, I expanded my horizons to new places, learned new languages, and made some new friends.

We connected people across the globe, while making computing more personal.  And powerful.

And, of course, I’m thrilled to see more interest in AI.

With our growth mindset we set out to reach new markets:  #squadgoals.

We reimagined productivity for developers, gamers, professionals and students.

MIKAILA ULMER:  To really grow my company I know that technology is the answer.

CORTANA:  We helped customers with their digital transformation, while building the best intelligent cloud platform.

But, of course, we had some fun, too.

As you can see, Satya and I had a really full calendar this year, with some pretty amazing moments.

Most importantly, we pursued our mission, helping societies transform themselves, and empowering others to grow and create a better world around them.

I’m excited for what we can create to help people around the world.  And it feels like we’re just getting started.

(Applause.)

SATYA NADELLA:  Good morning.  Good morning, and welcome to WPC, welcome to Toronto.  It’s fantastic for me to be back here.  In fact, one of the highlights for me is the kickoff of our fiscal year with partners.

You know, Cortana did a fantastic job of recapping the momentum that we have, whether it be the commercial cloud or Windows 10 and the devices and the enterprise adoption.  And none of this would be possible but for the partners.

You know, Microsoft has always been a partner-led company, and we’ll always be a partner-led company.

But what really drives us, what makes it all possible is your passion, your commitment, and your drive to make us better.  Your feedback, those mails I get from all of you throughout the year, pushing us to do better, is what I am really, really thankful for, because that’s what it takes for this partner ecosystem to thrive and have the impact we all desire.

So thank you so very much for everything that you do to make this partner ecosystem the very best there is in the world, thank you.

(Applause.)

So we want to talk about the future.  But it starts for us with our mission.  Everything we do, every product we build, every decision we make in even our partner programs is grounded in our mission to empower every person and every organization on the planet to achieve more.

There’s so many key things that we need to remind ourselves each day that are key to our mission.  We’re the only ecosystem that cares deeply about both people and organizations people build to outlast them.

When we think about our software constructs, we think deeply about institutions that have to thrive because of software capabilities inside of those organizations.

We were the original democratizing force.  I always think about this, because I wouldn’t be here on this stage if it was not for this ecosystem and its ability to get technology to every corner of the world.

But perhaps the thing that makes the biggest difference is that last part of achieving more.  It’s not about celebrating any one of our technologies, products or services; it is about celebrating what our customers are able to do with technology, how they are transforming their own business, achieving their own success and having their own impact.

And talking about impact and achievement, what is top of mind as I travel the world, as I talk to many other CEOs today is digital transformation.  That’s the theme, in fact, for even these three days.

So I wanted you to get a firsthand feel for what are CEOs thinking about all over the world when they say digital transformation.  So let’s roll the video.

(Video segment.)

SATYA NADELLA:  So what you heard from those CEOs is their desire to use digital technology to change their business outcomes.  Whether it be how they engage their customers and personalize that, how they empower their employees so that they can make better decisions and drive their business forward, how they optimize their operations, how they build out that predictive power inside of their organization so that every operation is intelligent, and lastly how they transform their products and services and the fundamental business model, it’s these digital outcomes that every CEO deeply cares about.

In fact, the thing that we will talk a lot about is every customer of ours now is not only looking to use digital technology but they are building digital technology of their own.  And that’s really the opportunity.

You may think sometimes that all this is only for large businesses.  I had a chance to meet this one entrepreneur, who changed even my own perspective on how broad this digital transformation applicability is going to be.  It’s going to be for every small business, not just Silicon Valley startups; every small business in every part of the world is going to be a digital company because of people in this room.

Let’s roll the video of an entrepreneur who inspired me recently.

(Begin video segment.)

MIKAILA ULMER:  Well, when I was four years old I got stung by two bees in one week.  But instead of being afraid of them, my parents encouraged me to do some research.  And that’s how Me & the Bees was born.  To really grow my company I know that technology is the answer.

(End video segment.)

(Laughter, applause.)

SATYA NADELLA:  Now, I must say it was one of the most impressive CEOs that I had a chance to meet — (laughter) — and really taught me a thing or two on stage presence.  (Laughter.)

And my daughter was in the audience, too, and she came back and said the same thing, and so it was fascinating.  (Laughter.)

When I think about all of this and the opportunity it represents, it’s unprecedented.  As a percentage of GDP, IT is a healthy 5 percent.  It’s fantastic, and it’s growing at around 8 percent CAGR.  So by itself we are lucky to be in information technology as the world is digitizing.

But when you look ahead, you see that every place where there is today operating expense, there is increasing levels of automation, increasing drive for productivity, increasing drive for efficiency.  That means opportunity for digital services, products from all of you.

But it doesn’t stop there.  Perhaps for the first time where there is COGS expense, whether it be a car, a refrigerator, an elevator, all the sensors in the world, every place, that means every city, every traffic light, every retail operation is going to be connected and digital.

That truly is the opportunity in front of us.  It’s the entire GDP that is being shaped by digital technology as we go forward.

This represents a huge opportunity for everyone in this room.  Whether you’re serving large businesses or small businesses, whether you are a large system integrator or a solution developer, whether you’re doing services or IT, everyone in the audience has an opportunity to tap into this revolution.

And it’s this opportunity that drives our ambition.  So we’ve talked about these three ambitions that we have:  reinventing productivity and business process, building out the intelligent cloud, and more personal computing.  But at the core of it is helping our customers achieve digital transformation.  Every one of those ambitions builds towards it.  Every one of your competencies around these ambitions builds towards that digital transformation outcome.

So I want to spend time this morning giving you a bit of a little more of an outline for what we’re doing in each one of these ambitions, and how that will help you build towards these digital transformation outcomes.

So let’s start with reinventing productivity and business process.

For me the dream has always been how can we transform how work is done, how do we digitize, in fact, the work such that all these impedances that exist today in how I work go away.

I mean, think about it; today there are two particular places where this impedance or friction shows up.  I use my collaboration and communication software, I use my business applications, and then, of course, I even have my professional network.  And I have to stitch it together.  The cognitive load of how I work across all of this is something that I personally have to overcome.

But what if the software was built in ways that we could connect these disparate worlds?  What if we could bring together the business applications that you use for customer service or sales or field service with the collaboration and communication software in seamless ways?  That’s been the dream, and that’s what we really are at the cusp, at the threshold of being able to solve.

And we’re well on our way in this transformation.  The progress that we have collectively made with Office 365 is tremendous.  The move to the cloud is transformative.  The fact that you have the application endpoints now in every device, the usage there is growing every day.

But perhaps the most salient point of this cloud transformation is the transformation around data.  In other words, it’s not just a new way of delivering the software as a service, but it’s fundamentally changing the value we deliver.

The fact that you move to the cloud means for every customer the rich information model of people, their relationship with other people, their calendars, their projects, their work artifacts, are all exposed as a rich graph structure.

And, of course, we reason on that data to create new products.  Think about Clutter in Exchange or Cortana itself or Power BI or Delve.  These are all information products, that’s new value that’s being created that’s relevant for a large business or a small business because now we can reason about all the data in the cloud in real time, add the machine learning and AI capability to create these new AI products or information products.

But it’s not just limited to the products we create.  The opportunity every one of you has to be able to extend the Microsoft Graph, all of the tenant information that is there to add value to each customer I think represents a huge new opportunity for us.

And now I’m so excited about Dynamics 365, because what you saw with Office 365 is what’s happening with Dynamics 365.

With the move to the cloud, the first thing, of course, is you’re going to have these purpose-built, role specific, task-specific micro-services or micro-business-process applications.

You’re going to have modern interfaces.  Just like what we did with Office 365, you’re going to be able to use these business applications everywhere.

You’re going to have a very different business model where you can, in fact, have the business applications needed for a particular role, so you get away from suites to plans by role.

But again the most transformative thing is the data, the fact that you have the leads, orders, shipments, inventory, field service orders, everything represented in the cloud, exposed in the cloud, for others to build, extend is what’s going to make the difference.

But the way we are building out this platform, because that’s what we’re doing, we’re not only building these SaaS applications but we’re building out these SaaS applications with what Microsoft has always done, a platform approach, we are creating a platform of opportunity with AppSource.

AppSource is a way for you to create solutions that then extend everything that we’ve done in Office 365, Dynamics 365.  We expect customers to take the services that you’re building, the services that we are building, and then tailor them for their specific business process needs.  In fact, they want to build a digital feedback loop using all of this technology.  And that’s what we enable, Office 365, Dynamics 365, all of the applications in AppSource, plus Azure, represents that platform for every customer.

The thing that I’m also excited about is that last mile of customization.  How do you build these digital feedback loops and tailor them for the specific business processes across the variety of vertical industries in every part of the world?  This has been a place, again, a lot of friction.

But with these modern tools, Power Apps, Power BI, and Flow, you have the ability to reduce the integration costs and bring together these composable business applications that speak directly to the digital transformation needs of customers.

That’s the new way to frame what’s happening with Office 365, Dynamics 365, the opportunity it represents for everyone here, and most importantly how we can help transform customers and their digital transformation outcome.

I just want to give you a feel for this at work by picking Ecolab, a customer that we’ve been working with.  They’re into water management, and water management is perhaps one of those topics that is so important for our time.

And they are looking to transform the business from the boiler room to the boardroom.  They’re using digital technology to be able to take their existing systems and build new systems to create this one feedback loop that allows them to change the outcome around water management for their customers.

And to give you a feel for how this is working and the technologies at use, I wanted to invite up onstage Steve Clayton, one of my colleagues.  Steve?

(Applause.)

STEVE CLAYTON:  Thanks, Satya.

So like many of you, I started my day this morning with a cup of coffee.  But did you know that cup of coffee took 55 gallons of water to produce?  The shirt I’m wearing took 700 gallons of water to produce.  And the cars that we all drive every day take a staggering 39,000 gallons of water to produce.

So as Satya said, water is this incredible resource that’s vital to life but it’s also a finite resource.

So Ecolab are focused on preserving water and helping their customers preserve water.  And what I’d like to show you today is that scenario from the boardroom to the boiler room, three different people inside of Ecolab and how they’re using this digital technology, this fabric of digital information across their environment.

So we’ll start in the boardroom and talk about how the boardroom has access to real-time data.  Then we’ll take a look at the operations room and see how they can take action on that insight.  And then we’ll look at the customer success manager working at the customer site on behalf of Ecolab and see how this is one consistent joined-up feedback loop.

So let’s start in the boardroom.  This is the view that Ecolab, the board of directors has or the people who run the company have, is a Power BI dashboard that presents them real-time, live insights from data across the organization, site management, performance of the business, their retail performance, and also their operational performance.

And we can see immediately that we have an issue here with one of our customer sites, with City Power, where our goal is to be at 85 percent utilization, we’re currently at 87 percent.

So this is where we can go directly from seeing that insight and be able to start down a path of taking immediate action based on that insight.

So as we drill into the Power BI dashboard, we can now automatically see or immediately see where the issue is occurring.  So we have an issue over here in the cooling tower, and we can see the impact of that down on this chart with the blue line where the quantity of water usage is going up.  And immediately we can see if we click on the dollar sign how that’s impacting the bottom line targets around consumption of water.

So that’s the view from the boardroom.  Now I’m going to switch into how can we take action based on this insight.

So if we move over into the service alert that’s automatically being created based on this issue, not a manual creation, an automatic process that takes insights from Azure IoT Suite, Cortana Intelligence, and combines that with Dynamics 365.

So what we see here is the beginning of an automated process to create a work order to resolve this issue.  It starts with, if I can draw your attention to the middle of the screen, resolving water alerts from a 3D TRASAR sensor.  And if I open this up, this is a knowledge-based article, that Cortana Intelligence has recognized the issue, pulled this out of the Ecolab knowledge base and presented it back to the customer operations manager, giving them some advice on the actions they should take in this type of incident.

So the action that’s suggested is to send a remote command to see if we can address the issue remotely.  And we can do that directly here from the service issue.  So if I choose to send command, using Azure IoT suite this is literally sending a command down to the TRASAR sensor in that cooling tower to see if we can resolve the issue.

It turns out that the probe was operating correctly but there seems to be an issue that requires a manual inspection.

So now we’re going from this remote interrogation, this remote action, to a whole work order being created.

So you can see again, if I draw your attention to the middle of the screen, four things have happened.  We’ve automatically assigned a field technician based on their expertise, based on the location, and based on the availability of parts that they have in the van to resolve this issue.

We’ve also noticed that if we apply this part to that issue, then the amount of parts that we have in our system have been depleted, so we automatically replenish the order system.  We take the knowledge-based article, we send that directly down to the field technician, and we also schedule the work order.

So that’s gone from our boardroom into operations, automatically all of this process has been created.  What was previously a set of phone calls, was previously maybe a set of faxes, was previously a set of e-mails is now an entirely automated process, through combining Dynamics 365 with Azure IoT and the Cortana Intelligence Suite.

And if we take a look at the schedule board for the operations that we’ve just scheduled, if I draw your attention to the item in red here, we can see that Jamie Redding is the person that’s been assigned to this issue with City Power.  If we click on Jamie, we can see over on the map her immediate location.  So we can track in real time how this issue is being addressed and where the field technician is.  So it brings together this digital feedback loop from the boardroom into operations, down to the field technician.

Now I’m going to move over and be the customer success manager.  So I’m the person working on the site on behalf of Ecolab at City Power.

And over here on my phone, on my iPhone I can see a set of notifications has appeared on my phone.  So I have a Wunderlist notification about this work order being created, I have an Outlook e-mail, and I have a Flow that’s being kicked off because of this.

So how did all of that happen?  It happened because of the power of Microsoft Flow, a new tool in the armory for you guys as partners to go and build these digital applications on behalf of your customers.

So the flow I have here that I can literally create on my mobile device says that when a record is updated in Dynamics 365 for the customer Ecolab and it’s a work order that meets a set of conditions — if I open the conditions, it says when that work order is equal to critical, it will then kick off a set of actions.  And this is where we take on the power of the Microsoft Graph that Satya talked about.

So I’m going to send a critical e-mail alert, send a push notification to my phone.  I’m going to create a Wunderlist task.  I’m a big fan of Wunderlist.  And I’m also going to create an update in our SharePoint site for all of the customer success managers who monitor City Power.  So we’re taking information out of one digital system, in this case Dynamics 365, and then flowing it through a whole set of other operations, completing this digital feedback loop.

The other thing I have on my phone as the customer success manager onsite is this application that gives me the same view of the same data that the field technician has, the same view that customer operations has, and the same view that the boardroom has.

So you can see I’ve got Power BI embedded here.  It’s showing me the same KPIs that they were viewing in the boardroom.  I can see the recent activity from that work order being created, and I can see the current events that are taking place at City Power, my customer, all of that created inside of Power Apps, just an incredible tool for you to be able to create applications on behalf of your customer.

So let’s take a quick look at Power Apps.  If I move over to the PC, how do we build those types of powerful applications?

So this is me in Power Apps on the PC literally building the application.  So this is the type of thing that you could work with, with a business analyst inside of an organization.  It’s a visual design environment that will let you create these incredibly powerful digital applications.

So I’m in the middle of building my application right here, and you can see that I’ve got a couple of errors on this screen.  And all I need to do is to wire my application up to Office 365.

So if I click on Add Data Source, you can see I’ve got a bunch of data sources in here.  I’m going to show you some of the other ones that we have available, though, a wide variety of data sources that we can connect to, whether it’s Dynamics 365, Office 365, SharePoint, even things like Salesforce.  So we’ve got the ability to create these connections into these multiple different systems.

I’m going to choose to just add a connection to Office 365, and as that gets wired up, you see the application is completed and my schedule appears in the events there.  I click run on that application, and it will run here on the PC the same way that it runs on the phone.  So we’ve got this powerful ability to create these amazing applications that build this digital feedback loop.

Speaking of the feedback loop, the final piece in this process — so we’ve seen the boardroom view, we’ve seen the customer operations views, the field technician view, we’ve seen the customer success manager onsite.  Finally, this is the dashboard using the same technology, the same data that the customer sees.  So this is the dashboard that Ecolab presents to City Power, their customer, so presents them with real time access, the exact same information that everybody else is seeing across this entire feedback loop.

So what we’ve seen here is the ability to build these end-to-end digital systems.  And you can be as a partner a participant in all of this, you could build all of this system, or you could build pieces of this system.  It represents huge opportunity across the entire digital feedback loop to bring these systems together in an intelligent way.

Thanks.  Back to you, Satya.

(Applause.)

SATYA NADELLA:  Thank you, Steve.

So hopefully, you get a feel for how customers like Ecolab are going about their digital transformation.  It’s no longer about one monolithic suite and its deployment, it is this continuous wiring and rewiring of the digital feedback loop.  That’s where the power of the cloud, the power of the Graph, of the data in the cloud underneath all of our applications, and the tools like Power BI, Power App and Flow come to bear.  So that’s the opportunity in front of us.

One of the things that I’m really excited about as part of this reinvention of business process and productivity is conversation as a platform.  This is the next experience platform that directly flows from this notion of having these data graphs.  Because in everything that you use today and you saw today, we still have to navigate the operating system shell, you have to use individual applications, learn about individual applications, menu structures.

But what if we could teach all computers and computing around us human language?  What if you could just simply text or speak and the applications were brought in context of your task?  That’s what conversations as a platform truly enables.

There are three different actors.  There is us humans having these conversations in conversational canvases like Skype or Cortana.  There are bots.  So pretty much everyone today who’s building applications, whether they be mobile apps or desktop apps or websites, will build bots as the new interface where you have a human dialogue interface versus menus of the past.

And Cortana, our agent, which is a special form of a bot, which knows deeply about you, it knows about your original context, and it knows the world, and it then mediates your tasks and your work with all of the services.  So as application developers, as IP developers, you will wire your applications as skills into Cortana, you will build bot interfaces.  So that’s how this conversations as a platform is going to become a reality.

In fact, just this week we launched Skype Bot Framework where there’s plenty of B2C activity, banks, retailers building out especially customer service bots that are getting built.

We also have a Bot Framework that’s getting richer, that can, of course, help build bots that plug into Skype but not limited to Skype.  It can go to Line, it can go to Facebook, any one of those channels where people are communicating.  In fact, the Bot Framework is perhaps the only framework that allows you to be able to plug into all the conversational canvases.

To give you a bit of a feel, I just wanted to give you a couple of screenshots to get you thinking about how you would start tapping into this potential.

Let’s say I’m going in to a meeting.  Cortana, because it knows about my original context, that means it knows about Office 365 and schedules, automatically wakes up, tells me about the meeting that I’m going to and all the people that I’m meeting, because it can even tap into LinkedIn.

It even takes one particular contact and then tells me about that contact and the connection I may have.  It can even tap into CRM, because I ask a query about this particular customer I’m meeting, and ask it what’s the pipeline look like.  And it comes back with the pipeline information coming from the CRM system.

I can even ask it about prediction, and it comes back with a prediction around how these opportunities are likely to close.

And then I can even ask what I should do next.  And this is a place where, in fact, one of the applications in the AppSource today happens to build using Cortana Intelligence Services predictions on things that you should do.

And so this is a way for anyone who is today operating on data in CRM to be able to plug into a conversational interface.

So that’s a new way of how computing is accessed.  Just like the browser in the past was born on the desktop PC, the web was born on the desktop, these conversational interfaces will be born on the devices you use today as an additional entry point, as an additional experience, but over time will fundamentally revolutionize how computing is experienced by everybody.

And so I think that this is something that I would encourage people in the room to start thinking about are you building these bot interfaces, are you plugging in your applications into Cortana.

The next ambition I want to talk about is building out the intelligent cloud.  The opportunity that developers have in building out applications, in fact, it’s such a golden era for building out your big data applications, advanced analytics applications, mobile apps, web apps, IoT apps, SaaS applications.  You name it, it’s an amazing opportunity because infrastructure is infinite, easy to provision, you can have the databases you need, the containers you need, the virtual machines you need in order to build these applications, the app services and the runtimes.

And the combination of Azure and Azure Stack provides you that unparalleled cloud platform.  It’s the only hyper-scale cloud platform that is available across the globe.  It also provides you that true hybrid computing infrastructure that is needed.  Essentially, I think of our servers as the edge of the cloud, very, very relevant especially in IoT scenarios.

The levels of trust you need in order to be able to operate as a worldwide company, if you want to deploy in China, in the European Union under German law, the idea of having one application work worldwide with trust is something that’s very unique to what we as an ecosystem can do.

But perhaps the most differentiating aspect of Azure is the productivity gains for everyone inside of your organization.  With Visual Studio, Visual Studio Online, Operations Management Suite, we are talking about the productivity of every developer and DevOps scenario.

And having this cloud infrastructure, this intelligent cloud makes it possible for us to help build out this world where every company going forward is going to be a digital company.  Every company is going to build their own digital technology and these digital feedback loops.  And the goal of having a cloud infrastructure is to be able to realize that potential.

And talking about every company becoming a digital company, there is no better example than GE.  And there is no better example of that than Jeff Immelt as the leader of GE, who has helped transform this industrial giant into a full-blown digital company.

So I wanted to invite up onstage Jeff to come share his thoughts about this transformation.

(Applause.)

JEFF IMMELT:   Good morning.

SATYA NADELLA:  Good morning and thank you so much, Jeff, for being at WPC.  This is a group of 20,000 or so of our closest friends who are helping us all over the globe transform customers.

I know you’ve been at the helm for now 15 years at General Electric, and it’s been quite a transformation.  Maybe to start off you can share a bit of that journey with the audience here.

JEFF IMMELT:  So, Satya, it’s great to be with you, and great to be with all of you.  Really an impressive story at Microsoft, and congratulations on everything you’ve done.  It’s been fantastic.

So in 15 years I would say four important transformations in the company.  GE is 140 years old.  If you want to stay around a while, you have to be willing to drive change.  I think big portfolio change to really center the company on high-tech infrastructure; really profound investments in technology so that today we have basically our install base is worth about $2 trillion with our customers.  In 2001, we were 70 percent inside the United States.  In 2016, we’ll be 70 percent outside the United States.  And really the fourth big transition that I’ve been involved with in GE is really creating this digital industrial, what you’ve talked about, which we really started in earnest in 2010.  And that’s accelerating today.  It’s maybe in 34 years at GE this is the single most important change I’ve ever driven inside a company.

SATYA NADELLA:  That’s pretty amazing.  There must have been a moment in time when you recognized that you, of course, are an industrial company, but digital is going to be a core part of your future.  How did that realization come about, and how did you go about that change?

JEFF IMMELT:  So you know, Satya, it never happens in like one minute or one thing.  You know, like most industrial companies or people in this room, we’ve always had software engineers and things like that.  But I think increasingly we saw that the nature of our technology was changing.  The jet engine was no longer a jet engine.  A jet engine had 30 sensors, was taking a terabyte of data at each flight.  And I would say 2009, 2010, we basically said, this isn’t a question of whether or not we’re a software company or an industrial company.  Industrial companies are going to become software companies, and the nature of our customers were changing and the nature of our products were changing.

So we didn’t go to bed one night and dream and say, oh, we have to wake up tomorrow and be Microsoft, even though you’re a great company.  I think we said to be a better industrial company, we can’t allow our digital future to be created by others.  That basically our products, the technology, what our customers demanded were going to really require that we do that.  And so we’ve invested in massively to drive this digital transformation.

SATYA NADELLA:  And culturally were there things that you had to sort of really do differently to make that change from being an industrial company to a digital company?  And did you rely even on others from the outside to help with that?

JEFF IMMELT:  So, Satya, what I would say is there’s really three levels of driving that kind of change that you talked about.  The foundational point is really talent and culture.  And fundamentally we had to go outside the company to get the talent we needed.  We had to sell them on the mission to say there was going to be a brave new world called the Industrial Internet that basically people like GE could play.  They saw us invest the money.  They saw us hire the people.

And at the same time we had to change the way we worked inside the company.  We had to take out layers of management, and we had to embrace speed, what we call fast works inside the company.  We basically took all of the old Six Sigma, lean manufacturing, and put them into a software context.

Then we’ve invested in technology both having our own platform, but also what we call the digital twin.  We’ve created around each industrial asset kind of a digital corollary, if you will, that can do predictive failure driving a digital thread inside the company.  And then you have to massively change your sales force.  The way you interface with customers is more outcome based.  And we’ve tried to create inside GE our own ecosystem of partners.  If you told me even five or ten years ago that we would do anything inside our company open sourced, or open up to partners, I would have said that’s not how industrial companies work.  Now it is how every industrial company has to work.

So culture, talent, technology, ecosystem with customers, we’ve really embraced all of this change to improve the company.

SATYA NADELLA:  Yeah, I mean listening to you it’s just like how we think about building digital products.  I mean I love that metaphor of a digital twin for every industrial asset.  Today we are very excited about the announcement that we are jointly making with you about GE Predix coming to Azure and I think it represents a huge opportunity, in fact, for everyone in the audience to be able to say GE Predix and all the rich data services and infrastructure services of Azure and build out the Industrial Internet solutions for world over.  But maybe you want to talk a little bit about GE Predix.

JEFF IMMELT:  I agree.  I think one of the dangers everybody gets into is you want to make consumer internet exactly the same as enterprise, exactly the same as industrial, when in point of fact all three are going to be different.  You may have similar competitors, but the way they roll out are going to be very different.  And I think we see in Azure not only a great crowd technology, or cloud technology, the ability to really globalize quickly, but it’s a platform on which other platforms can go.  And I think the relationship we see with Microsoft will allow us to move more quickly in places that are important for us, which is really all over the world.

And our idea is to put a real industrial-strength analytically based, really looking at asset performance management inside Azure to open up Predix.  And hopefully many of you in this room will then develop applications that go on in our customers and the industrial base like the ones you saw earlier today.  And what we bring is we bring this marriage between analytics and physics.  You know, if you talked about the new world of Industrial Internet you talk about things like no unplanned downtime.

Now no unplanned downtime doesn’t sound sexy, but that’s worth tens of billions of dollars of productivity and you only get that between physics and analytics.  So I think a relationship like ours allows both of us to move more quickly.  You know, there’s going to be places where we have to work with others and will work with others, and these will be open relationships.  But I think in the end customers are going to determine who is successful and relationships like this allow us to move more quickly and be able to port for chief technology officers to be able to go from IT to OT relatively quickly.  And we think that’s important.

SATYA NADELLA:  Yeah, I think that bridge of IT to OT is what this partner ecosystem, in fact, is also striving to do and having Predix now on app store really helps these partners to be able to really go and talk to that IT leading OT opportunity ahead of us.

The last thing that I wanted to talk about, one of the things that I recently had a chance to read was the transcript of your speech at Sterns, which is an amazing speech about I think what’s the future of a multinational company, in fact, what the new ethos of a multinational company is when you think about a global multinational, but then yet creating local opportunity.  And I know it’s a new pivot that you’ve started talking about and I think it’s very relevant for all of us and in this audience, too, as we think about local partnerships and global growth.  Maybe you want to share with us.

JEFF IMMELT:  Really for more than let’s say almost 10 years, globalization has been important always for GE, but we’ve focused on really localizing how we go to market.  And I think you can see it both in politics in the U.S. and politics in Europe and really politics everywhere that globalization and big trade deals are going to be harder to do.  But what we’ve really tried to build our global network around is localization.  It protects us, really, and our customers from the vagaries of politics and things like that, but more importantly it makes us a part of the local economy.

So we see solving problems on a local basis as the ‑‑ let’s say the competitive advantage that GE has and in many ways the digital transformation makes this easier.  It allows us to solve problems that you used to take sending people from headquarters or things like that and now allows us to solve those on a very local basis.  It’s allowed us to decouple our supply chain, to go from multi-thousand-person factories to 300- or 400-person factories all around the world.

And the earliest, the people that embraced the Industrial Internet the earliest are really people in Pakistan, and South Africa, and Saudi Arabia, and Indonesia, because the difference between success and failure is just one more hour of uptime per week.  And so the use of the tools, the use of the digital tools is moving much more quickly globally, but each country needs its own solution.  It’s not kind of one-size-fits-all.

And in that regard the Industrial Internet is going to be very different than the consumer internet, and I think those differences are going to be why people like GE can be successful and people like Microsoft can be successful in the same industry.  It’s because it’s going to be a unit of one, not necessarily a unit of many.

SATYA NADELLA:  I think what you just said is so true even of what we’re seeing in terms of global growth.  In the past when we just had servers, the penetration of that infrastructure required a lot more sophistication and cost to the edge, and that in some sense stymied our global growth.  But now you see even the smallest of businesses in emerging markets hacked into the cloud.  Public sector organizations all over the world are doing machine learning in order to be able to do predictive outcomes.  And so to me that kind of transformation being able to be possible locally is just very encouraging.

JEFF IMMELT:  And we see the same thing.

SATYA NADELLA:  Maybe as a parting piece of advice to people in the room, because there are lots of CEOs, they’re all running their own businesses, they’re also navigating the changing times in digital technology.  Any advice for anyone who is an entrepreneur, a CEO leading an organization?

JEFF IMMELT:  So I would say point number one is, you just change.  Basically, 25 years ago in GE the biggest goal was to outsource everything.  Today if you outsource all of your technology, all of your software, all of your notions on digital, you’re going to lose.  You’re going to lose badly.

The nature of the CIO is also going to change dramatically from a staff function to an operational productivity function.

And then the last thing I would say is that if we can do it, you can do it.  Not only must you change, but you can change.  But it’s going to take investments in culture.  It’s going to take investments in technology.  And you’re going to have to change the business model with which you interface with your customers.  And so you’re going to have to really dedicate yourselves and your organizations to do this.

But my belief, this is the biggest — we’re in a line of demarcation for industrial companies.  There’s a past, and there’s going to be a future.  And the future is really going to be derived on who digitizes the fastest.

SATYA NADELLA:  Thank you so very, very much.

JEFF IMMELT:  Thank you very much.  Good to be with you.

(Applause.)

SATYA NADELLA:  That’s some of the best advice we can get.  Leadership in today’s age is about driving successful change.  And you can’t drive successful change if you don’t think about all the dimensions that need to change, whether it be the product concept, the capability that you need inside of your organization, and the culture.  And what Jeff has been able to do in a 140-year-old company is pretty inspiring for us all as we look to lead our companies.

Talking about the intelligent cloud, the next phase of building out this platform is the build out of cognitive services.  Cortana Intelligent Services already have great machine learning capability, advanced analytics capabilities.  We’ve got many of the App Store’s applications are built on it.

But we’re now seeing the beginnings of a new platform with cognitive services.  We’ve taken decades of research from Microsoft Research in speech, in computer vision, in natural language text understanding, as well as knowledge, and made them available as APIs.  We have over 22 APIs that are available at Cognitive Services today.  And these APIs are being used by developers everywhere to infuse into the applications perception, the ability to understand speech, the ability to see, that is computer vision.

And it’s fascinating to see the types of applications.  You may think that this is, again, mostly consumer internet.  It’s not.  It is every business process application you can conceive of can be transformed by these cognitive capabilities.  In fact, we’re working with McDonald’s on one such app.

I mean, for McDonald’s, as you can imagine, the most mission-critical application is the efficiency of their drive-through.  I mean, that’s what fast food is all about.  How can people get in and get out fast with the order that they want.  And so I don’t know how many of you have worked lately in a McDonald’s, or have gone through a McDonald’s, but I want you to listen to what a typical order through a drive-through sounds like.

So let’s play the video clip.

(Video segment.)

All right.  Now take out your Surface and your pen and write down the order.  I mean think about that, you have all of these characteristics with ambient noise.  So what we’ve done is taken is taken the speech, or what McDonald’s with a partner has done is taken the speech out, tuned it, in fact, of the specific ambient noise of a McDonald’s drive-through.  That’s that frontier of machine learning and AI.  It’s not about one speech recognition algorithm.  It’s the ability to be able to recognize speech in different context with different vocabulary for different business processes.  And that’s what really you’re seeing, the fidelity of the recognition and the precision, it’s high because of that tuning that you all can do on top of these APIs.

But not just that, not only can you transcribe it in text, you can in fact punch that order directly into the point of sale, because now that you can recognize the order in text you can transform it, in this case into some kind of a JSON object and put it right into your point-of-sale system.  That type of integration of cognitive capability into business process is what we’re enabling today.  And that’s that next frontier, the next platform of the intelligent cloud that we collectively as an ecosystem can and are leading in terms of innovation.

So moving to the last ambition of more personal computing, when I think about more personal computing this last year has been a year of tremendous progress.  Windows 10 is transformative.  It’s conceived as a service that spans all the devices from Raspberry Pi to HoloLens.  It is not just a device operating system for a single device.  It is an operating system for you across all of your devices.  That’s the big conceptual departure or breakthrough in Windows 10.

It’s got one developer platform, one store, one IT control plane for management and security, and that’s what makes Windows 10 unique.  The enterprise adoption cycle, that is really begun in earnest, I think is a massive opportunity for everyone in the audience, because no digital transformation outcome, whether it’s about engaging customers, empowering employees, or optimizing operations is going to be complete without having devices, the right device at the edge.

But one of the things that more personal computing or personal computing has always been shaped by is these category creation moments when input and output have changed.  And one such moment is upon us now, and that’s mixed reality.  And HoloLens, that is available today, is bringing forth a new medium, a new paradigm of mixed reality where, for the first time in our history, we have the ability to take the analog world and superimpose in it digital artifacts and create this mixed reality.  We have the ability to solve for what has been a dream of computer science, which is presence.  In other words, you can be everywhere from anywhere and then do all of this in a completely untethered way.

It’s the combination of these three attributes that make this perhaps the ultimate computer that we’ve always wanted.  So we’re very, very excited about HoloLens and the opportunity it represents.  So to give you a flavor for the types of applications that you can start building for customers today I wanted to invite up on stage two of my colleagues, Lorraine and Arancha (ph) from the HoloLens team to give you a flavor for the types of apps we are building.

Lorraine?

LORRAINE BARDEEN:  Thank you, Satya.  (Applause.)

We have seen the amazing impact of the mobility of experiences and productivity over the past several years.  Employees can extend their productivity beyond their desk, to the job site, the manufacturing floor, to the hospital ward, thanks to the power of cloud computing.  But they have never before been able to bring their digital content into their real world.  That’s what we call mixed reality.  This means there are some scenarios they haven’t progressed as far as they could have, like professional training and development.

So mixed reality has proven to increase the speed and the quality of learning and with Microsoft HoloLens employees can experience realistic 3-D training at scale, integrated with their existing productivity tools.  Now learning to work with complex machinery that’s hard to access presents unique challenges to trainees.  For example, no student could bring their own jet engine into the classroom.  And it’s incredibly expensive for an airline to reserve equipment that should be operational just for training.  Companies need flexibility to train their employees at lower cost, but with high-quality results.  And employees need to be able to weave their training into their workday.

My colleague Arancha is going to share the results of a close partnership with Japan Airlines, where we’ve helped them unlock a new training paradigm.  We’re going to show you how this works with Microsoft HoloLens and our special camera, which is going to enable all of you to see holograms.  Arancha is going to walk you through her day as an engine technician.

ARANCHA:  Thank you, Lorraine.  So let me put on my HoloLens and show you.  As you can see I’m here at my table with my HoloLens looking at a multi-monitor experience.  I have my most used productivity tools.  So I can see my e-mail, my calendar, the Edge browser, Skype, and a Power BI training report that I’m visualizing in 3-D.  Now I have a newly upgraded engine to learn about.  And it’s hard for me to complete my training.  But thanks to HoloLens I don’t need to work at training to go to a hangar weeks in advance.  I can just do it as part of my working day.  And this saves time and money for my company.  Let me show you.

LORRAINE BARDEEN:  Wherever she is Arancha just needs her HoloLens to learn about the fuel system of this jet engine.  She can use a self-contained app to explore all the important components and then learn about each one in context.

VOICE:  Fuel filter, this component plays an essential role in keeping the fuel clean before it passes through the rest of the system.

LORRAINE BARDEEN:  Now remember, with HoloLens she can still see the real world, so right now she could be talking to a teacher or to other students.

ARANCHA:  I don’t need to be tied to my workspace.  HoloLens has no cables, which means that I can learn anywhere at any pace.  And I can choose the size and application that fits my environment.  Let me show you.  But not only that, I can access parts that would otherwise be very hard to spot.  Show fuel pump.

VOICE:  Fuel pump, this is one of the essential components which is designed to supply the fuel to the system.

LORRAINE BARDEEN:  So at this manageable size an employee can learn in a small space, like at their desk, or at home.  But in real life this jet engine is an enormous machine with thousands of components and it’s just as important for employees to understand its true scale.

ARANCHA:  Show full size.

VOICE:  Full size.

ARANCHA:  Now I can continue to train.

VOICE:  Fuel nozzle, there are a number of nozzles designed to inject the fuel into the combustion chamber.

LORRAINE BARDEEN:  Safety is a hugely important part of training with machinery.  HoloLens not only allows trainees to negotiate that machinery in complete safety, it can also present hazard areas in new, unique ways.

VOICE:  Please be aware of the areas marked as hazardous.  In a real life scenario these areas must be clear for safety when you start an engine.

ARANCHA:  Now that I’m aware of the safe area, we can continue to learn in ways not possible in the real world.  This is a starter control from the cockpit.  Now I can literally understand how the fuel system reacts to it.

VOICE:  The fuel passes through each part of the system, being filtered, heated and pressurized, ensuring optimum engine performance.

LORRAINE BARDEEN:  In this short amount of time Arancha was able to switch from her daily work to dive into an important training, where she learned about a newly upgraded airplane engine.  HoloLens gave her the flexibility to learn in any location at any scale and at her own pace.

VOICE:  Training complete.

LORRAINE BARDEEN:  Any company that needs to train and develop their employees and any partner who helps companies with professional training has a big opportunity.  You will be at the forefront of the next major computing platform.  Customers and partners are already underway, as you saw, because this device is commercial ready and the devices are shipping.  So if you’re ready talk to your HoloLens rep, order on HoloLens.com and have fun.

Thank you.  (Applause.)

Satya.

SATYA NADELLA:  Thank you so much, Lorraine and Arancha.

Hopefully you get a feel for this new medium.  I mean every time I see these demos I think about that phrase that we used when we launched a year and a half ago, or we showed it for the first time, which is when you change the way you see the world you change the world you see.  It’s happening, whether it’s architecture, whether it’s industrial design, whether it’s retail, manufacturing, and everyone here can be at the forefront of this new mixed reality.  And so we now have HoloLens available both as a developer edition as well as an enterprise edition.  So I would encourage everyone to look at the applicability of this new medium in the context of everyday business applications, everyday enterprise applications, because I think it will really be the most transformative thing.

I want to close out by talking about the impact each one of us is having.  Tomorrow you’re going to hear more about the ambitions, you’re going to hear about more details and the programs or the technology from Scott and Kirk, and Yusuf.  They’re going to really drill into that.  But when I think about what you do it goes beyond technology, it goes beyond even the individual customer success.  It’s the impact you’re having in the communities that you serve.

In the last year I have had a chance to travel the world and visit many of you and many of the customers that you work with.  In fact, I started the last financial year in Kenya.  I went to this place called Nanyuki, which is a couple of hundred kilometers north of Nairobi in rural Kenya.  And a partner, Mowingo Network, took some technology that was developed at Microsoft Research called TV Whitespace, which is really the space that exists between TV stations, the spectrum that is unused most times, and built out a last-mile connectivity solution which is affordable even in the remotest parts of Kenya.  And even came up with a very innovative business model where the cost for a school, the hospital locally were subsidized.

In fact, this is the local internet cafe.  I visited that cafe and I, in fact, had a chance to meet a Windows 10 Insider there.  It was fascinating.  He was talking about the latest build that he was downloading.  In fact, right next to that person I even had a chance to meet a gentleman who was doing physics homework.  And I thought that he must be a physics student just doing his homework, and it turns out he was actually solving a physics problem for kids in Europe and getting paid in M-Pesa sitting in rural Kenya.  And that’s the economic opportunity that digital technology can bring about because of the ingenuity of people in this audience.

Then later I had a chance to be in Chile, in Santiago, and meet the people running this amazing organization, Teleton Institute, which is in fact a very big institution and part of the Chilean ethos providing healthcare services in particular to disabled.  And there I had a chance to run into a developer who built this application called Virtual Rehab.  In Chile, you are on a seismic zone.  So one of the things that you want to be able to do is have the ability to deliver physical therapy for those impacted by any seismic activity in remote parts of Chile from a world-class institute in Santiago.

And so this developer built a solution using Kinect connected to a PC that can be anywhere in a remote location in Chile and then the physical therapy solutions are personalized.  In fact, they’re learning to be able to personalize the physical therapy for these remote locations.

It’s amazing to see the innovation, the quality of innovation, and then the democratization of that innovation in a country like Chile.

I also had a chance earlier this year to visit a school in Changa (ph).  And to see, this is a school that was sort of built for people with hearing disabilities.  And I had a chance to go visit how students and teachers were interacting, they were using Office 365 and specifically Office Mix was being used for instruction.  And IT work built this out such that you could have the PowerPoint slides and then the sign language right next to it because of Office Mix.  And it’s changing the educational outcomes.

Again, a partner with an imagination making a real difference for the educational outcomes.  These are the kinds of things that I see every day every one of you do.  And when I look back even at Microsoft, there is a lot that I’m proud of in terms of the product innovation, the business impact, the customer impact.  But perhaps more than anything else personally, I’m most proud of the launching of Microsoft philanthropy.

You know, giving has been core to Microsoft.  We give more than a billion each year of technology and money to nonprofits all over the world, nonprofits driving access to education, helping people being displaced by natural disasters or manmade disasters, helping drive diversity in our industry and STEM education with diversity, bringing about, fostering equality and opportunity and reducing the inequity.

There are many points of light.  I’m so grateful to the work these nonprofits do to impact our communities, and there are many, many points of light.  But in this last week, I’m most deeply saddened by what has happened in the United States in Minneapolis, in Louisiana, in Dallas, in New York.  There is no place in our society for bias and senseless violence.

(Applause.)

We at Microsoft stand with everyone who is driving positive change.  And I urge us as part of this conference to all push to do the same in the communities that we live in, we work in, and we serve, because together we want to build this society such that it has tolerance, empathy and provides opportunity to all.

Thank you all so very much, have a great WPC.

(Applause.)

END