Accelerating transformation: How we’re reshaping Microsoft with continuous improvement and AI

Technology companies are really people companies. In an age of rapidly advancing AI, losing sight of this reality leads to an overemphasis on new tools while neglecting opportunities for the transformational change that AI offers.

Moving forward, the winners will be the companies that prioritize technological and operational excellence. Microsoft Digital, our company’s IT organization, is seizing this moment by reinventing processes for agentic workflows powered by continuous improvement.

We believe that AI-powered agents, Microsoft 365 Copilot, and human ambition are the key ingredients for unlocking opportunity across every industry.

“Continuous improvement is a natural, formal extension of our culture that applies rigor, structure, and methodology to enacting a growth mindset through understanding waste and opportunities for optimization.”

David Laves, director of business programs, Microsoft Digital

By combining our AI capabilities with continuous improvement, we’re executing initiatives that increase our productivity and improve our performance. We’re forging a new path for how companies operate in the era of AI.

Welcome to the age of AI-empowered continuous improvement.

Our vision for continuous improvement, powered by AI

At Microsoft Digital, we’re embracing continuous improvement to unlock greater operational excellence and better employee experiences.

“One of the main tenets of our culture at Microsoft is a growth mindset, and that involves experimentation and curiosity,” says David Laves, director of business programs within Microsoft Digital. “Continuous improvement is a natural, formal extension of our culture that applies rigor, structure, and methodology to enacting a growth mindset through understanding waste and opportunities for optimization.”

We use continuous improvement to establish a systematic, repeatable process for creating rapid learning cycles that we use to tangibly improve our operations and technology. It helps us foster clear definitions of success, drive disciplined execution, enact constrained problem-solving, and build systems that sustain and accelerate improvement over time.

“Continuous improvement is really about understanding your business, its needs, and where you can find value,” says Matt Hansen, a director of Continuous Improvement at Microsoft. “It gives us the language to scale our efforts out across everything we do.”

This process isn’t just another way to enable AI. In fact, AI is essential to enabling continuous improvement itself.

Operationalizing AI and continuous improvement

Like any organizational change, prioritizing AI and continuous improvement doesn’t happen by accident. At Microsoft, we’re operationalizing our continuous improvement efforts through appropriate sponsorship, resourcing, planning, skilling, and communication.

Leadership sponsorship has always been the catalyst for every major shift in our processes,” says Faisal Nasir, a principal architect in Microsoft Digital and a member of our AI Center of Excellence. “Our leaders ensure we invest in the right resources, strategy, and vision while working together to align efforts across the enterprise.”

To support leadership’s vision, we’ve put organizational resources in place to manage our continuous improvement investments, guide practices, and support teams. There’s an overarching continuous improvement team associated with the chief operations officer, and within Microsoft Digital, we’ve established the Continuous Improvement Center of Excellence (CoE), which works alongside the well-established AI COE.

“Continuous improvement is about process, but it’s also about people.”

Becky West, lead, Continuous Improvement Center of Excellence, Microsoft Digital

As we build out the organizational structures that underpin our investment in continuous improvement, we’re approaching the people side of change with intention. Currently, we’re undertaking skilling efforts and communicating with every employee about how their role fits into core continuous improvement tools like bowler cards, Gemba Walks, Kaizen events, and monthly business reviews.

The roadmap is there, the structure is in place, and we’re already seeing progress.

“Continuous improvement is about process, but it’s also about people,” says Becky West, lead for the Continuous Improvement CoE within Microsoft Digital. “A guiding hand like the Continuous Improvement CoE is how you make sure those two components align.”

Three Microsoft Digital continuous improvement initiatives

As we enter into the early days of the company’s continuous improvement journey, Microsoft Digital is becoming a proving ground for the larger framework we want to deploy across the company. Our teams are spearheading projects to bring the continuous improvement framework to diverse functions like asset management, incident response with a designated responsible individual, and third-party software licensing.

Enterprise IT asset management

Microsoft Digital’s Enterprise IT Asset Management team oversees the 1.6 million devices that power the company, from servers and IoT devices to labs, networks, and 800,000 employee endpoints. Safeguarding this vast landscape is critical to enterprise cybersecurity.

Three security pillars form the foundation of our security efforts: protect, detect, and respond. All of these depend on a complete, accurate device inventory.

Unified visibility enables proactive protection through enforced security controls, improves detection by spotting anomalies and misconfigurations, and accelerates responses by reducing investigation and remediation time. Without this foundation, security teams lack the precision to execute effectively.

To reach the goal of a unified inventory, the team initiated a continuous improvement initiative to build a consolidated source of truth for MSD IT assets. Grounded in the principle of “progress over perfection,” the team initially narrowed its focus to Microsoft Lab Services (MLS) and IoT devices, with a vision to expand to networks, employee devices, conference rooms, and printers, ultimately moving toward a truly comprehensive inventory.

This foundation will not only enhance security but also deliver enterprise-wide value through consistent policy enforcement, more resilient infrastructure, and comprehensive lifecycle management. By applying continuous improvement to prioritizing high-impact opportunities and using AI to accelerate outcomes, the program is enhancing Microsoft’s operational excellence and security posture.

“It’s better to do step ‘A’ than wait until you’re ready to do steps ‘A,’ ‘B,’ ‘C,’ and ‘D,’” says Aniruddha Das, a principal PM in Microsoft Digital.

As the team progressed from Gemba Walks to Kaizen events under the guidance of the Continuous Improvement CoE, they dug deeper into areas of waste, then identified potential actions, breaking them down into “value-add,” “non-value-add-but-essential,” and “non-value-add.”

“For every action item, we were always asking ourselves how we could make these things better through AI. We’re looking for ways to expedite our core outcomes with minimal human involvement.”

Ashwin Kaul, senior product manager, Microsoft Digital

This exercise helped them prioritize their activities and land on a starting point: A device security index that would provide an overview of our hardware environment’s security posture. Essentially, it would represent a list of device security statuses.

The team identified distinct improvement areas for IoT and MLS devices. For IoT devices, they needed to build the inventory from the ground up. MLS already had a fairly complete inventory of devices, so the team set a goal to improve data quality. Although each of these challenges is different, they’re excellent opportunities for AI-empowered continuous improvement.

Now that the project is underway, the team plans to use an AI agent to automate device registration for IoT devices, which currently relies on manually uploaded spreadsheets. It’s a prime example how streamlining a process with continuous improvement enables AI to automate and accelerate our work.

On the MLS side, the team is creating an AI-driven normalization tool to automate the de-duplication and correction of inaccuracies in device data. The goal is to get from less than 50% data quality to 100%, dramatically improving our security posture through greater accuracy.

“For every action item, we’re always asking ourselves how we can make these things better through AI,” says Ashwin Kaul, a senior product manager within Microsoft Digital. “We’re looking for ways to expedite our core outcomes with minimal human involvement.”

Continuously improving the designated responsible individual experience

On the Digital Workspace team, designated responsible individual (DRIs) are in charge of maintaining the health of our production systems. When technical emergencies arise, they’re the rapid-response point people who take the lead.

“We asked ourselves, ‘How can AI elevate the DRI experience to the next level?’”

Ajeya Kumar, principal software engineer, Microsoft Digital

That process itself can be incredibly stressful, and time is of the essence. When every moment counts, efficiency is key. Meanwhile, a big part of a DRI’s work is just finding out what’s gone wrong so they can fix the incident.

But their job isn’t just about crisis management. When there are no active incidents, they work on engineering enhancements to improve the efficiency of production systems and clear backlog projects.

There’s also a handover process that takes place when one DRI finishes their rotation and another goes on-call. That involves a report about any incidents that have occurred, active issues, actions taken, key metrics, and other important information.

With these two priorities in mind, our Digital Workspace team initiated a continuous improvement process review. Their Gemba Walk provided a crucial starting point.

“The planning stage is all about figuring out what the process is, what it should be, and what we can do to improve it,” says Ajeya Kumar, a principal software engineer on the Digital Workspace team within Microsoft Digital. “We asked ourselves, ‘How can AI elevate the DRI experience to the next level?’”

Collectively, the team decided to tackle these challenges with a multifunctional AI agent they call the Smart DRI Agent. This agent’s primary role would be synthesizing and presenting information to its human counterparts to help them save time in context-heavy situations.

The AI elements the team has planned break out into the following capabilities:

• Text summarization: Going through logs and identifying key insights.
• Data correlation: Tracking and collating error logs.
• Automation: Updating the status of issues, keeping abreast of communications, and providing point-in-time, daily, and weekly summaries of system health.
• Identifying patterns: Building troubleshooting guides based on frequency patterns.

The Smart DRI Agent is already in its pilot phase and producing results. It conducts four main activities:

• AI-generated summaries of DRI actions.
• Proactive notifications with AI-generated insights.
• Chat support to assist with all kinds of DRI queries.
• AI-generated handover reports.

“The continuous improvement framework that enables these pieces is the key to unlocking value,” says Aizaz Mohammad, principal software engineering manager on the Digital Workspace team. “It may seem process-heavy, but once you work through it, you’ll see the value.”

That value is apparent in their results.

In the first 30 days of the Smart DRI Agent’s pilot, there were 301 incidents, and the agent provided insights on 101 of them. That led to an approximate 100 hours of time savings for DRIs and a 40% improvement in our key network performance metric.

Third-party software license audits

Within Microsoft Digital, the Tenant Integration and Management team is responsible for a range of services, including third-party software licensing. This space is all about managing liability from both a security operations and an auditing perspective.

“It takes a tremendous amount of data and traversals through multiple sources to get us to the actionable data we need.”

Anahit Hovhannisyan, principal group product manager, Microsoft Digital

Without the proper security insights, the company could find itself with risks associated with 3^rd party software vulnerabilities. And without thorough auditing, we might experience license overuse and contractual issues that can lead to waste or expensive license reconciliations.

“It takes a tremendous amount of data and traversals through multiple sources to get us to the actionable data we need,” says Anahit Hovhannisyan, a principal group product manager within Microsoft Digital. “The goal for this project is to reduce that time to increase operational efficiencies.”

“It’s tough to sit back and be honest about what isn’t working because it ties into people’s personal value and worth, but it’s essential to the process.”

Kathren Korsky, team lead, Software Licensing, Microsoft Digital

The team decided to target the auditing process first. Currently, the software licensing team performs audits manually by looking at entitlements, contracts, purchase orders, and more while liaising with suppliers and our Compliance and Legal teams. That’s incredibly time-consuming.

During the software licensing team’s planning phase, they developed an ambitious goal of reducing the time to insights on third-party software license data from 154 days down to 15 minutes. During their continuous improvement Kaizen event, the team uncovered opportunities for AI-powered process improvements that eliminate waste.

“It required a lot of courage as we were identifying waste,” says Kathren Korsky, Software Licensing team lead within Microsoft Digital. “People are very invested. It’s tough to sit back and be honest about what isn’t working because it ties into people’s personal value and worth, but it’s essential to the process.”

Now, they’re building and implementing solutions, including an AI and data platform that provides business intelligence with custom reporting abilities, an AI agent that provides audit support and ticket creation, and another that automatically generates audit reports. The team has been using Azure Foundry and Azure AI services to create their agents because these tools have the flexibility to switch between different models and fine-tune their parameters.

“What continuous improvement gives us is the macro vision and the micro actions we can do to accomplish our goals.”

Kirkland Barret, senior principal product management manager, Microsoft Digital

As these agents emerge, they’ll take the most tedious and error-prone aspects of the process out of human auditors’ hands, freeing them up to focus on solving problems, not endlessly searching for them.

Realizing continuous improvement at scale

These are just a small selection of the many continuous improvement initiatives underway within Microsoft Digital and the company as a whole.

At Microsoft, most of our continuous improvement initiatives are in their initial stages. As they progress through the measurement and adjustment phases, two benefits will emerge.

First, we’ll iterate and improve the value that each individual initiative provides. Second, we’ll continue to build our discipline and cultural maturity around a growth mindset we’re operationalizing through continuous improvement.

“What continuous improvement gives us is the macro vision and the micro actions we can do to accomplish our goals,” says Kirkland Barrett, senior principal product management manager for Employee Experience in Microsoft Digital. “It’s about knowing our objectives, identifying upstream root causes, and rippling them throughout a mechanism of progress.”