Cloudy Innovation – Part 2
A few weeks ago we discussed IT innovation, and whether the rise of the Cloud signals its demise. The conclusion of that post was that IT innovation is still a critical component to enable business differentiation, but it must be focused on areas of your business where innovation actually matters. In the time since that post, I’ve been asked how Cloud can actually aid IT innovation; after all, if Cloud = commoditization of IT (as many argue), how can anything that’s commoditized be a differentiator? The answer lies in understanding the difference between a component and a product. A simple comparison can be made with a familiar example: Intel and Apple. Intel, for all intents and purposes, operates in a commodity market with extreme price pressures and continuous innovation required to remain ahead of the market. Apple, on the other hand, uses Intel’s commodity components – the same as every other manufacturer – but is able to command nearly monopolistic prices because they are masterful in differentiating their products. It should be the same for your IT organization; use commodity cloud components to make a crucial service better.
Lets explore the lifecycle progression of manufacturing processes to help crystallize this argument. In general, and grossly simplified (many tomes exist on this topic alone), products go through four phases:
- Innovation: new ideas are brought to light
- Customization: people take these ideas and build on them, but variation is labor intensive (things are still ‘unique’)
- Mass production: variations are drastically limited in order to reduce the time and cost of manufacturing (think Henry Ford’s famous retort ‘you can have any color automobile you like, so long as it’s black’)
- Mass Customization: where the benefits of mass production and user-customization converge to provide the best of both worlds. Consider Dell’s approach to custom assembly of laptops as a premier example.
Most enterprise IT is still in the throes of shifting from the Customization phase to the Mass Production phase. Unfortunately, Mass Production only supplies efficiency benefits – it does nothing to differentiate your business.
Where does Cloud come in? There’s only one aspect of Cloud that, from an end-user perspective, can be treated as a mass-produced commodity product: SaaS offerings. Before you protest please think about it from the buyer perspective: any number of companies can buy the exact same SaaS product and derive the same benefits. Don’t construe this as negative, as it’s quite the opposite: it’s the perfect solution for aspects of your business where IT innovation makes no difference (freeing up capital for areas where IT innovation does matter).
The other Cloud areas of IaaS and PaaS are quite different, and should be considered in the same light as the Apple/Intel relationship mentioned earlier. For a time Apple believed having a proprietary CPU was a differentiating quality, but no longer. They realized that, to the typical end user, the value is further up the stack. Similarly, enterprise IT must recognize that the component resources (network, server, storage, etc.) are not where business differentiation and hence opportunities for IT innovation lie. These component resources, whether sourced internally or externally via a Cloud provider makes little difference; what matters is the end product.
If you accept this conclusion, you may still be wondering why leverage Cloud if it doesn’t matter for differentiation. Here’s why:
- Cloud lowers the barrier for innovation, allowing you to stretch limited capital funding and therefore conduct more innovation “experiments”
- Cloud reduces the time to market, enabling you to capitalize on shifting market trends
- If the idea is a winner, Cloud allows rapid and near-limitless scale
- If it doesn’t pan out, you can shut it down quickly and limit your exposure.
We hope this puts the discussion to bed, but as always comments are welcome. In the meantime, if you’re still trying to figure out where to focus your innovation efforts give us a call.
Category: Cloud Computing
About the Author
Jim is a co-Founder and the Chief Technology Officer of Adaptivity. In his CTO capacity Jim interacts with prospects, clients, and key technology providers to evolve capabilities and partnerships that enable Adaptivity to offer its comprehensive solutions for Cloud, Application Optimization, and Data Center Transformation. In addition, he engages with key clients to ensure successful leverage of Adaptivity's Blueprint4IT portfolio. In his prior role Jim was the SVP and Architecture & Strategy Executive for the infrastructure organization at Bank of America, where he drove legacy infrastructure transformation initiatives across 40+ data centers. Previous to that he was the Head of Utility Product Management, where he drove the design, services, and offerings for SOA and Utility Computing for Wachovia's Corporate and Investment Bank. Jim has also led leading edge consulting practices at IBM Global Services and Deloitte Consulting.View Author Profile
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This idea is an opportunity for IT to sit down with the business and ask ” what are the driving forces you are dealing with, and how can we help you enable your strategic goals”. That is a very different kind of conversation from a value point of view than being an order taker.
Moving up the value stack is more than a benefit for Senior IT bonuses, instead these kinds of discussions move IT into the strategic enabler view.
“How important is agility for the applications covering business group X, vs capital cost containment, etc.”
[...] Cloudy Innovation – Part 2 A few weeks ago we discussed IT innovation, and whether the rise of the Cloud signals its demise. The conclusion of that post was that IT innovation is still a critical component to enable business differentiation, but it must be focused on areas of your business where innovation actually matters. In the time since that [...] [...]