Will the cloud rain on your parade?

Feb 06, 2018
Disruptors can now leverage the cloud to up-end entire markets overnight. How can your organisation protect itself?

Software is eating the world. This was the message from Marc Andreessen, published in a seminal Wall Street Journal article in 2011. His powerful message was that a new type of company would build “real, high-growth, high-margin, highly defensible businesses”. He argued that these companies would be software companies delivering services through cloud-based infrastructure. 

Marc founded one of the most successful Silicon Valley venture capital firms – Andreesen Horovitz – and was an early stage investor in emerging companies including Facebook, Skype and Twitter. The core of his argument was that the cloud helps to reduce a start-up’s costs. It facilitates faster go-to-market. It enables dramatically quicker scaling. In other words, a start-up can come up with a new idea and deliver it for a few hundred dollars a month on a hosted cloud service without making any investment in hardware or IT support services.

Before the cloud, a similar service might have cost north of six figures per month to host and taken months or years to bring to the market. The impact of the cloud has been startling and pervasive. Now a start-up can come up with a great idea and scale with remarkable speed.

Many industries have felt the impact faster than others. Retailers can tell you all about the impact of Amazon while traditional media has seen marketing dollars move at a frightening rate to new kids on the block like Google and Facebook, threatening their very existence. The examples are legion but the journey of disruption intermediated by cloud technologies has only started. No industry is safe.

It only takes one smart start-up to spot a new, compelling way to deliver a service and within a few months, you may well face an existential threat in your own business. So, what can you do? I want to make the argument for innovation as a strategic response to changes wrought by the cloud.

A common misperception

But first, a quick clarification. Innovation is frequently conflated with technology. After all, most of us have become acclimated to regular updates from Amazon, Samsung or Apple launching the latest consumer innovations in the form of devices and services, all of which falls roughly into the innovation bucket in the public consciousness.
Innovation is not a synonym for technology, however. New technologies are the outcome of innovation, which is an emerging yet practical management science that seeks out the customer rather than the research agency. It looks to test ideas in the market rather than the boardroom. Innovation is not expensive. It is quick, simple, low-risk and inexpensive. And that might come as a surprise. It is grounded in these straightforward steps:

  • Identify a customer problem;
  • Develop a service that solves that customer problem; and
  • Monetise the solution.
It couldn’t be easier, right? Well, not exactly. The concepts are simple but take focus and practice. It’s a little like golf. If you have ever been bitten by the bug, you will probably remember hitting one or, at most, two nice shots in your first round. It takes practice and focus to become adept – not to mention a few headaches along the way. Innovation is the same. You will almost certainly see quick results and quick wins, but you will need to work hard to build a consistent and repeatable pipeline of innovations.

Your starting point

The question for almost every organisation is: where do you start your innovation journey? Here are a few tips to get you started:
  • Be pragmatic: to borrow from Donald Rumsfeld, don’t start with the unknown unknowns. Focus on areas where you have a reasonable idea of the nature and scope of the challenge. Look for a quick win, build organisational confidence and develop velocity from there;
  • Keep it lean: keep your innovation focus narrow and lean. Keep costs low and look for evidence in the market before you take it further;
  • Don’t reinvent the wheel: do your research and look for ideas and approaches used elsewhere that you could leverage in your own business;
  • Train your team: get your staff trained up to understand innovation techniques and practices; and
  • Innovate from the top: innovation must be supported from the very top of the organisation. The CEO must give at least 45 minutes every week to innovation management.

Back to the cloud

And finally, a few quick ideas to get you thinking about the role the cloud could play role in your organisation.
  • Orchestrator: can you make use of existing cloud services or apps together with your organisation’s capabilities to create new services?
  • Data: do you have lots of data? Data is the lifeblood of many new offerings in the artificial intelligence and machine learning space. Many companies don’t have enough data to ‘train’ their artificial intelligence. Can you leverage this raw material to create new partnerships?
  • Incubator/open innovation: do you have capital and a strong management team?
  • Could you open your business to start-ups by providing work space, capital and management expertise? By opening your business up to the start-up community, you can seek to identify the start-ups that might disrupt your business and invest in them.

Embracing uncertainty

Innovation is never comfortable. It has uncertain outcomes that you can rarely foresee. Few managers are comfortable with backing uncertain outcomes; it has traditionally been career limiting. But the pace of change brought about by innovation and supported by cloud technologies requires managers to come up with new strategies. And as the cloud continues to facilitate the disruption of one business after another, innovation may be the umbrella you are looking for, or better still, it may help you to identify the silver lining.

David O'Leary is a Partner at DOL Associates, which helps businesses grow through innovation and digital strategy.

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