Now that cloud technology is a standard part of the computing landscape for many organizations, differentiation depends on looking beyond costs and using it to foster business innovation.
Not so very long ago, companies that used cloud technology enjoyed early mover advantages. The scalability and pay-as-you-go access to computing power afforded by the cloud helped these companies differentiate themselves from competitors.
Those days are gone. The cloud is no longer a new frontier—on the contrary, most companies have already embraced it to some degree. According to the Deloitte U.S. CIO Program’s 2018 survey of global CIOs, 90 percent of respondents say their organizations currently employ cloud computing. Adoption velocity and maturity may vary, but basic use of the cloud is now table stakes and no longer sets an organization apart.
So what is the next cloud frontier? For many organizations, the cloud’s greatest value now lies in the ways it can facilitate business innovation.
Four Dimensions of Opportunity
Where even leading organizations once looked at cloud technology primarily through an infrastructure lens, with a focus on cost and scalability, that view is shifting. Now that most companies enjoy those same basic benefits, the leaders are beginning to think instead about using the cloud to change the ways they compete in the marketplace. Four cloud-enabled capabilities help make that possible:
A broader view. Cloud technology can make it easier for companies to expand their field of vision and broaden their decision-making accordingly. Consider an automotive dealer focused on increasing sales. In the pre-cloud world, standard steps might have included talking to the sales team and analyzing data in the internal dealer management system. But imagine how much more complete that picture becomes if the dealer incorporates data about the weather, OEM rebates, advertising campaigns, social media activity, and competitive intelligence. Suddenly decision-makers gain a clearer, more nuanced view of what’s actually driving sales and can act accordingly.
Personalization and precision. Companies can also use the vast capacity and data-processing power of cloud technology to more precisely tailor products, services, and operations. On the consumer front, personalized medicine offers a prime example, as health care providers begin to use the oceans of data they collect from patients to make personalized treatment recommendations. Operationally, agriculturalists are tweaking applications of food, fertilizer, pesticides, and more on a plant-by-plant and animal-by-animal basis rather than at a field or herd level.
Dynamic decision-making. With cloud-enabled access to the data and analytics tools they need for deeper insights, management throughout the organization can make better decisions, often in real time. In the world of retail, for example, companies previously struggled mightily to respond in near real time to shifts in supply and demand. Those that had this capability typically relied on systems they had custom-designed and built themselves. Today, virtually every retailer can access the same kinds of capabilities through the cloud, adjusting pricing, messaging, staffing, distribution schedules, and more on the fly—thereby eroding yet another onetime competitive advantage.
Faster market entry. By providing immediate access to massive computing power in a flexible and scalable fashion, cloud technology makes it possible for companies to be bold and jump on opportunities as they arise. Vast amounts of data can be rapidly processed and analyzed, helping forward-thinking organizations to build new capabilities and enter new markets more quickly than ever. Once they’ve monetized an opportunity, they can exit the market and move on.
Two Leading Strategies
Each of these four cloud-enabled shifts is compelling, but the real power comes when they are combined and compounded. Suddenly, companies can not only find new opportunities for monetization but also can provide entirely new kinds of value and change the very nature of their brands.
Most organizations tend to follow one of two strategies:
- Enhance. Companies embracing this option stay in the business they’re already in, but they begin running it in a different way. Equipped with more data and the ability to make decisions dynamically, they can stay a step ahead of the competition.
- Reimagine. In this approach, organizations change their business altogether by innovating new business models. This can be transformative for the companies that do it successfully—and ruinous for their competitors.
In deciding on an approach, it’s essential to involve the company’s full leadership team from the beginning and to focus on business outcomes. According to a recent Deloitte survey, roughly 60 percent of current cloud initiatives are driven by a CIO or CTO; only about a third involve the CEO and business leadership.
That’s a missed opportunity. Elevating cloud conversations offers CIOs an opportunity to enhance their value as business partners and drive shareholder value. In fact, the cloud is now a board-level conversation: Directors want to know how the company is future-proofing its business and driving a growth agenda, and many perceive the cloud as integral to the effort.
Three Views of Value
Focusing on business outcomes also provides a more accurate picture of ROI, which can appear very different depending on the lens used to assess it:
- Infrastructure. For a startup, the mere thought of building out data centers and infrastructure can be daunting, but the vast majority of the Fortune 1000 have complex infrastructure landscapes. Cloud technology may replace a large portion of a company’s on-premise infrastructure, creating a complex mix of modern and legacy systems. If viewed only at this level, based just on what it’s replacing, the ROI for the cloud can appear neutral or even negative, resulting in a failure to launch or elongated timelines.
- Operations and productivity. Factoring in newly enabled approaches such as DevOps along with accompanying technology operating model changes and talent implications allows ROI assessments to capture higher fruit on the cloud tree, including new operational efficiencies, increased business speed and agility, new ways of partnering, and opportunities to pair humans with machines. When that happens, the value tends to be four, five, or even six times higher.
- Business value. This is the potential game changer, when the cloud enables the business to work fundamentally differently on a strategic level and rethink products, pricing, margins, global expansion, and more. At this level, 20x, 50x, or even 100x ROIs may be possible.
Cloud technology is driving new levels of change across industries, giving organizations the opportunity not just to enhance their operations but also to reimagine their businesses. That, in turn, calls upon CIOs to be nothing short of visionaries and to act with a sense of urgency. It’s never all or nothing with the cloud—in fact, one of the technology’s best features is its support for minimum viable products—so incubate at the edge, let an idea catch fire, and then push it to the foreground. Organizations can use the cloud to change the way they operate, the value they deliver, even their fundamental business models—and to build the capabilities they need to carry them into the future.
Some of the hardest working, smartest people I know work at Deloitte.
This article first appeared in the Wall Street Journal —by John Tweardy, principal and cloud strategy and analytics leader; Andrew Adams, principal; and Brooke Prouty, manager, Deloitte Consulting LLP