It’s the new mantra of organizations large and small as they attempt to navigate and get the upper hand in today’s hyper-competitive and unforgiving global economy.
But innovation is not cheap. It can be extremely risky, since a relatively small percentage of innovations actually deliver results in the end. The challenge is trying to figure out where to invest wisely, and which innovation is the potential winner. The natural reflex in the business world has been to avoid going overboard with innovation, since it means sinking considerable time and resources into ideas that don’t get off the ground.
However, cloud computing technology may be clearing the way to turn formerly hidebound businesses into innovation factories. That’s because it now offers a low-cost way to try and fail with new ideas. In essence, the price of failure has suddenly dropped through the floor. Failure has become an option.
A recent survey of 1,035 business and IT executives, along with 35 vendors, conducted by the London School of Economics and Accenture, has unearthed this new emerging role for cloud computing — as a platform for business innovation. Many people these days still see cloud within it’s information technology context, as a cheaper alternative for existing systems. But this may only be the first and most obvious benefit.
The study’s authors. Leslie Willcocks, Dr. Will Venters and Dr. Edgar Whitley — all of the London School of Economics and Political Science — identified three stages cloud computing moves into as it’s adopted by organizations:
1) Technology and operational changes. The one-of-one exchange of traditional applications and resources for those offered as services through the cloud — such as Software as a Service.
2) Business changes. Altering the way companies operate and serve customers, such as enabling faster service, faster time to market.
3) New ways of designing corporations themselves. “For especially forward-looking companies, cloud computing may provide a platform for radical innovation in business design—to the point where executives are actually provisioning and decommissioning parts of the business on an as-needed basis,” the study’s authors observe.
It’s in that third phase where things get really interesting. Cloud computing, the authors point out, enable companies to quickly acquire processing, storage or services as needs dictate. They can just as quickly shed those resources when a project is completed. As a result, companies with more advanced cloud sites are able to rapidly move through experimental or prototyping stages:
“Such a model supports “seed and grow” activities and faster prototyping of ideas. With traditional IT models, a decision to prototype a new system generally involves the procurement and installation of expensive hardware, with the associated checks and delays that conventional purchasing requires. Cloud provisioning, on the other hand, can be implemented rapidly and at low cost.”
An example, cited in the study, is an effort to innovate within processes and technologies related to sales support—for example, tracking contacts, managing and converting the sales pipeline, and generating revenue. Change would be difficult, if not impossible, for processes locked into traditional on-site IT systems. Consider the possibilities with cloud:
“The company could provision a combination of software as a service for sales, along with an enterprise system or financial management system. Sales personnel could have access to specialized sales support over the cloud. This ability to envision new combinations of cloud-based solutions and create new ways of performing end-to-end processes presents companies with new opportunities to be innovative in new-product development as well as in service and support.”
A couple of years back, Erik Brynjolfsson and Michael Schrage made similar observations about technology’s promise to lower the costs and risk of innovation in an article in MIT Sloan Management Review. It’s all about the power of online real-world simulations and samplings, which reduce the cost of testing new ideas to pennies. For example, with a Website, “companies can test out a new feature with a quick bit of programming and see how users respond. The change can then be replicated on billions of customer screens.” This capability can be extended to supply chain management and customer relationship management systems as well.
Implementation of new ideas is blindingly fast, Brynjolfsson and Schrage stated. “When a company identifies a better process for screening new employees, the company can embed the process in its human-resource-management software and have thousands of locations implementing the new plan the next morning.” Brynjolfsson and Schrage also predicted that thanks to technology, many companies will shift from conducting two or three real-world experiments to 50 to 60 a year.
“Technology is transforming innovation at its core, allowing companies to test new ideas at speeds—and prices—that were unimaginable even a decade ago,” they said. “Innovation initiatives that used to take months and megabucks to coordinate and launch can often be started in seconds for cents.”
We’ve already seen the impact of technology to shave tremendous time and costs in such areas as energy exploration and engineering. But now the ability to quickly test and deploy new innovations is available to all types of businesses. Add the ability to provision those workloads to on-demand cloud resources, and a huge weight — in cost and risk — has been lifted off innovation.
Over the past several months, Forbes has published a number of pieces in this space about Oracle’s adventures in the wild, wild world of cloud computing. They have touched in the business value the cloud can create, the profound impact the cloud is having within companies and across entire industries, and the vast potential the cloud offers for liberating IT dollars to fund innovation.
The cloud and its potential to help companies shift their IT spending away from infrastructure and integration and toward innovation, revenue growth, and customer engagement. Unless CIOs and their colleagues can get this IT-spending ratio under control, their companies will be unable to fund innovative new initiatives, and their ability to compete will decline. And cloud computing is the best way to begin attacking that problem.
The Cloud Revolution and Creative Destruction. That’s the central issue: what customers are doing with cloud solutions, how they’re able to free up more funding for growth and innovation, and how they’re able to adapt more rapidly and effectively to life in our customer-driven world. They ’ll begin to see the real the real creative-destruction power of the cloud unleashed when they begin to define the cloud in terms of what business customers want and need, and when stop diddling around with inside-baseball constructs that mean little or nothing to the businesspeople who are ready to spend many tens of billions of dollars on cloud solutions that focus on and deliver business value.”