If you want to get a better grasp of what cloud computing can do for business, don't turn to vendor or technical manuals, and don't bet on anyone's cost savings estimates. Rather, check out a seminal work first published in 1995, by Michael Treacy and Fred Wiersema called The Discipline of Market Leaders. Their insights on what it takes to succeed in business provides valuable lessons on the direction cloud efforts need to take as well.
That's the word from Joe Weinman, cloud economics guru, and author of Cloudonomics and more recently, Digital Disciplines. Speaking at a recent IBM confab in New York, he stated that looking to cloud simply as a cost-reduction strategy is the wrong message. "That's missing the bigger picture," he remarked. "We live in a digital era, and face the rise of assorted digital players, moving into markets not even adjacent to their own. Often, those markets are completely random."
In essence, there is no way to effectively attach the costs and value of cloud -- and accompanying digital strategies -- to corporate balance sheets. We're in an era in which conventional thinking is being shattered on a daily basis, and cloud is contributing to that. There are well-known disruptors, usually cloud-borne, who are coming into markets, but established enterprises also are learning to employ cloud and digital services to enter new markets or redefine current ones, Weinman says. Corporations as varied as UPS, GE and Burberry are building new operational models and new levels of customer engagement through cloud and digital services.
Weinman's urging both IT and business leaders to look beyond balance sheets and billing cycles when it comes to cloud is notable, as he is well-known and highly regarded for his work in analyzing and providing formulas for determining the financial aspects of cloud. In a recent article for the IEEE's Cloud Computing journal, for example, he took a deep dive into the economics of hybrid cloud scenarios. His prognosis: hybrid cloud is a good hedge against the unexpected costs of public cloud services. "Hybrid clouds can offer economic benefits, even when -- in fact, particularly when -- the unit cost of public cloud services and resources is higher than that of private dedicated resources, a scenario that some reasonably sized, well-run IT shops can and have achieved."
However, Weinman explains, while these cost formulas work as a first step into cloud, the longer-term impacts on business are far more substantial, and are beyond measurement. It's time too look beyond the cost margins, and consider how cloud -- and the digital capabilities it engenders -- overturns most business models and delivers benefits beyond the scope of current businesses.
Cloud computing has become part of a market leadership strategy, Weinman continues. It delivers capabilities for the three fundamental precepts of market success: operational excellence, product leadership, and customer intimacy. He urges executives seeking to move further on their cloud and digital journey to embrace these three key lines of thinking:
Operational excellence: As Weinman explained, operational excellence is coming about as enterprises employ cloud and digital services to sharpen and accelerate business processes, enabling them to move faster and become more responsive. "This evolves to informational excellence, and informational excellence mirrors physical product excellence," he states.
Product leadership: What were "standalone products and services will eventually get connected to the cloud," Weinman states. In turn, this changes the nature of relationships with customers -- into ongoing relationships. Product leadership will come out of "smart, cloud-enabled product-service systems and ecosystems," he predicts.
Collective intimacy: The key to customer intimacy in the fast-moving digital economy, he states, is "virtual, algorthmically mediated relationships," such as those Netflix employs to deliver highly targeted recommendations and products. Innovation is at the core of market success, and cloud makes it possible, he explains, calling the phenomenon "cloud-mediated innovation." As a result of products and customers connected via cloud and digital services, "anonymous transactions become intimate, long-term relationships," he states.
Accelerated innovation made possible through cloud is the common denominator of these strategies, Weinman states. He adds a correction to Treacy and Wiersema's thesis, noting that they limited innovation to the product leadership phase. "Innovation is making a difference in operational processes and customer relationships as well," he says. The potential innovative disruption cloud brings goes deep into all the key phases of building and selling products and services.
