Microsoft and PROS Discuss Digital Transformation in Manufacturing

PROS Director of Industry Marketing and Business Intelligence, Richard Blatcher, sat down with Microsoft’s Global Lead for Discrete Manufacturing, Çağlayan Arkan, to discuss the shifts they’re seeing in the digital economy and exactly how tech and AI can satisfy manufacturer’s top priorities.

Watch the interview to learn more about the digital divide in today’s market between those with a clear strategy and those without. Microsoft and PROS discuss the digitally determined vs. the digitally distraught, and how critical pricing and selling solutions are to their success. Richard and Çağlayan also address common challenges and trends they are seeing today, and why the customer experience and a frictionless buying experience is no longer just a B2C demand, but a B2B priority.

Key Points

  • Richard discusses the “digital divide” in today’s market, referencing a statistic from the IDC that states that ½ of manufacturing leaders they spoke to are digitally determined. They uphold a clear digital strategy with their culture, change management, financial goals, and integration of technology.
  • Çağlayan discusses how company growth is driven by personalized customer connections, particularly on their digital standpoint. In response to the abundance of resources technology offers, Çağlayan emphasizes the customer need for fast, “personalized, relevant, compelling responses” to ensure an excellent end- to- end experience. 
  • Çağlayan says that manufacturer growth is currently focused on digital platform and eCommerce investments, working towards an intelligent “value-based approach.”
  • In review of the manufacturing industry’s challenges, Çağlayan alludes on how it’s crucial that businesses work to develop new approaches, but leaders are still using traditional methods for cost saving and efficiency and are evidently often slow to market.
  • In addition to these challenges, the complexity of the manufacturing world goes beyond other industries. Manufacturers often find it difficult to analyze the masses of data without the required insights.
  • In order to maximize the digital transformation shift, manufacturers need to embrace the technologies that can enable them to deliver the frictionless buying experience.  Çağlayan believes that leveraging artificial intelligence and scalable platforms is key to reducing internal complexity and channel consistency issues that several companies are currently facing.
  • Customers using PROS and Microsoft solutions are experiencing results: better and faster decisions, maximizing revenue, deepening customer relationships, achieving growth, and improving margins.
  • Richard brings up Gartner’s research, stating that “the value companies are realizing from the application of  artificial intelligence in their own business is going to grow to over 3.9 trillion just in the next couple years.”

In This Video

[01:16]: Defining the “Digital Divide”   
[02:03]: Where Microsoft Is Seeing Manufacturers Shift Their Focus 
[03:02]: How Manufactures are Changing Their Business Models 
[03:32]: Challenges for Manufacturers  
[05:18]: How to Maximize the Shift to Digital 
[08:15]: Gartner’s View  
[09:55]: How Companies Can Engage with  Microsoft and PROS

Full Transcript

Richard Blatcher: Hi there, I'm Richard Blatcher, Head of Industry Marketing and Business Intelligence with PROS and I'm delighted to be here at the headquarters of Microsoft in Redmond, Washington. Joining me today is Caglayan Arkan, who is the global lead for Microsoft's Manufacturing Resources Industry organization. PROS and Microsoft have partnered for many, many years in delivering many business solutions which enable companies to accelerate their shift to digital, grow revenue, and improve profitability....

Richard Blatcher: Caglayan, I'd like to discuss the digital disruption, transformation and opportunities that you're seeing in the manufacturing resources markets, and particularly how technology, including artificial intelligence, is playing a key role in addressing those challenges and realizing the opportunities in that rapidly growing digital economy. Let's begin with what we're seeing in the shift to digital economy. Of course, the number one priority for manufacturers is growth, and we've all talked to many, many customers and they always talk to us about growth.

Richard Blatcher: But what is really interesting is there's effectively a split emerging in the market, which we're calling a digital divide. In fact, IDC recently talked to many, many manufacturing leaders and half are what they called digital determined. In fact, it was 46%. Now, those digitally-determined manufacturers had a clear digital strategy, which is based around their culture, their change management, their financial goals  and the integration of technology. Interestingly, the other half, in fact the number was 54%, are known as digitally distraught. Now, they're having a standstill culture. They've got islands of innovation and they're working on a very disconnected project-by-project basis. With this in mind, Caglayan, where is Microsoft seeing manufacturers shift their focus?

Çağlayan Arkan: Richard, I'll say digital transformation is very, very relevant for manufacturing enterprises today. But really, when driving growth, it's about getting closer to the customer and connecting with them wherever they are on their digital journey. In this era of ubiquitous access to everything, customers have more information than ever before, and need personalized, relevant, compelling responses fast.

Çağlayan: We're seeing manufacturers developing new business models and services to shift the focus to the customer and to ensuring an excellent experience. If you're not able to offer them what they want when they want it, you're going to lose. And this is not just a B2C issue, it is here and now in the business-to-business environment.

Richard Blatcher: Absolutely. Great points. Now, shifting focus to the customer, how are manufacturers changing their business models to achieve this growth?

Çağlayan Arkan: We're seeing more and more manufacturers focusing their investments in commerce and digital platforms. But this goes well beyond just starting up a commerce platform. It is about really ensuring you have an intelligent platform that's powered by artificial intelligence with a value-based approach for customers. That's key, value.

Richard Blatcher: Got it. Let's shift focus to the challenges manufacturers are facing when they're creating those new business models that you talked about, and particularly when you look at those revenue streams that directly address those market shifts that you've described. Why is digital transformation and why are these initiatives so difficult for manufacturers to really realize the results that they've actually planned for?

Çağlayan Arkan: I will say a number of things. One is manufacturing is a little bit more complex than many other industries. Two, the decision maker is still perhaps not aware of the [inaudible 00:04:07] possible technology is just offering so many things, and technology works today. And many companies are still focused on the traditional approaches to efficiency and cost savings, just trying to bring that whole legacy with them and continuously improve. But perhaps digital calls for a different approach. So with the industry Internet of things and the buildings now out in the field, manufacturers are also dealing with huge, huge amounts of data and increased complexity across products, processes, and sales channels.

Çağlayan Arkan: Now, this makes it challenging for companies to analyze the massive amounts of data without the required insights. As new competition rapidly emerges, manufacturers no longer have the capabilities in their current processes to respond and are often too slow to market. They're no longer willing to wait. There are many other options and companies to choose from, and they will move on. So, it takes just one bad experience for a company to lose the customer.

Richard Blatcher: I couldn't agree more. It's all about that digital experience. It's all about that sales experience, that customer experience, as manufacturers know it. Shifting gears, Caglayan, how can those manufacturers embrace and maximize that challenging shift to digital?

Çağlayan Arkan: Manufacturers need to embrace technologies to enable them to deliver the kind of personalized and frictionless buying experience that their customers expect. This requires developing a new relationship with that customer. In order to do that, leveraging artificial intelligence and scalable platforms is key. This will reduce complexity and channel consistency issues that many companies are currently facing. So Richard, when companies embrace artificial intelligence solutions like PROS running on Azure, they are able to offer true value to the customer while being fast to market.

Çağlayan Arkan: Integrating PROS AI-powered selling and pricing solutions with Dynamics 365 provides a better experience and outcome for customers. The shift to digital is happening now. It's happening fast. And with those manufacturers that are using PROS and Microsoft are already experiencing significant results. They are able to make better and faster decisions. They're maximizing revenue. They're deepening customer relationships. They are achieving growth.

Çağlayan Arkan: This is where we started this conversation. They're improving margins and up and running in days and not weeks, and this is another time to value and the very much shortened cycles, that's another part of this digital age from hundreds of millions of dollars, years of never-ending projects. No, no more. It's like days today, and it's unbelievable, particularly in the face of the value that is being delivered so fast.

Çağlayan Arkan: We're seeing all of this today, Richard, and it is very, very exciting. I'll give you one example, Hewlett-Packard Enterprise. Everyone will know them, a provider of technology service and solutions in more than 170 countries, employing over 55,000  people, generating over $50 billion in annual revenue. They implemented a digital transformation initiative focused on modernizing their sales experience to grow revenue and improve margin. The implementation of PROS and Microsoft solutions enabled HP to optimize and accelerate their sales and quota process, resulting in $400 million of revenue uplift and an improved margin by 200 base points. Now this is incredible!

Richard Blatcher: Absolutely! And as you say, it's benefiting manufacturers now. It's benefiting them today. This is not a theory for the future. And of course, you've just described one specific example, and there are many, many, many other examples that PROS and Microsoft have and are and will be working on together. Another lens  is Gartner is predicting the value that companies are realizing from the application of artificial intelligence in their own business is going to grow to over $3.9 trillion-

Çağlayan Arkan: Wow! 

Richard Blatcher: -just in the next several years. However, what's interesting is when you dig further into the financial implications of what we described earlier as that digital divide, those manufacturers who, if you remember we called them digitally determined so they have the culture, they have the approach, they have the integration, they have that plan, they have a significant above-average return on both revenue growth and improvement in profit. In fact, if you look at revenue growth, it's about 1.2% above the average of other companies. And when you look at profit, it's over 2.3% above average. Now, when you look at the non-digital, or at least as we described earlier, those digitally-distraught manufacturers, it's equally challenging because it's well below the averages.

Richard Blatcher: And again, if you look at revenue growth, it's over 3% below average and the profit is 2.1% below the average profit of their peers. So of course, having that digital plan, being that digitally converse and having that approach with PROS and Microsoft can show those tangible results which you described with HPE and even people like IDC and Gartner are showing those tangible results today. Caglayan,  thank you so much for taking the time to discuss how AI is really the key foundation to successful digital transformation. One question, how can companies engage with Microsoft and PROS to really help accelerate that shift to digital?

Çağlayan Arkan: Richard, we're very proud to have PROS as a partner all around the globe. I'm actually very excited to have PROS showcased in our MTCs.  I am excited that we have all our teams around the globe working together, in America, in EMEA and in Asia, and we should keep doing that and we should keep doing more in terms of our teams coming together and addressing market needs and paying customers visits. And the whole point being we should encourage all manufacturers to talk to us about the power of AI in action as a result of PROS and Microsoft partnering.

Richard Blatcher: That's great! Thank you, Caglayan.

Çağlayan Arkan: Richard, thank you, and thanks to PROS for being an amazing partner.

Richard Blatcher: You can also visit www.pros.com  and see how PROS and Microsoft are powering the digital economy. Thank you all for watching and take care.

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