Move over IT, here comes innovation
Companies invest in research and development (R&D) to improve their cost structure, speed to market, and quality of offerings. R&D spend is highest in industries where research efforts are linked to product roadmaps, as is the case in the healthcare, pharmaceutical, and technology industries. Those typically allocate 10% to 15% of their revenues to innovation. However, other industries only allocate 0.5% to 3% of their revenues to R&D, which amounts to discretionary spending that ebbs and flows according to short term technology infrastructure needs and industry trends. Those companies are now starting to digitize portions of their business, from processes to supply chains and operations. Innovation capabilities are critical to their success, and the cloud is a top enabler.
To understand why the cloud is so important to innovation, let’s go back to 1982, and an article published in the Harvard Business Review (HBR). This article started a debate on whether technology could be used to create a lasting competitive advantage. The author concluded that companies don’t have to rely solely on technology advancements to be successful. Doing so is difficult because technology investments are often disconnected from corporate strategy and business drivers.
Twenty years later, the dot com boom tipped the balance toward the “technology as a competitive advantage” camp. However, what was largely true for a small number of successful online companies didn’t prove applicable to the rest of the business world that had legacy systems or a brick and mortar operation.
Fast-forward another 20 years, and the debate has all but disappeared. The focus is now on finding ways to innovate faster and more effectively. Why? Because technology and innovation are no longer two separate corporate initiatives that compete. Cloud computing is a new method of consuming technology which provides infinite flexibility and scalability. It allows companies to focus on their customer needs, and work backward from there. Once they zero in on their desired outcome, they can leverage existing cloud services to solve the problems they identified, or to capture new opportunities. They don’t have to worry about setting up layers of hardware and software before developing applications that sit on top of it. It simplifies the innovation by eliminating the vendor/client relationship that IT and business have. Business teams become active participants in the development process and the focus remains on innovation, not on the enabling technology.
As a former digital transformation executive and the current innovation lead for AWS Canada, most companies I work with have an innovation agenda. The commonality among those that succeed is that they embrace the cloud and implement the associated best practices. I have boiled down the reasons why cloud computing is enabling innovation into four pillars. Every organization’s cloud strategy should account for these four pillars.
The cloud enables companies to consume the technology services that they need, when they need them. Although corporations had to purchase and maintain their infrastructure to be able to run their technology programs, they can now direct more resources toward those programs. When you build a house, you rely on an existing electricity grid, clean water, and a sewage system. If you had to build and pay for all of that infrastructure yourself, then you might not be able to afford the house, or it would be much smaller. The same is true for cloud computing. If you no longer have to pay for the entire infrastructure, protection, and maintenance, then you can allocate more funds to R&D and innovation.
Andy Jassy, President and CEO of Amazon, said “Invention requires two things: One, the ability to try a lot of experiments, and two, not having to live with the collateral damage of failed experiments.” The ability to use computing services on demand makes testing possible and much cheaper. Ideas can be quickly prototyped and piloted. At the time of this article, AWS had over 200 full services and is adding new ones rapidly. Users can now experiment with technologies that would otherwise be unaffordable: Quantum computing, satellite services, powerful data processing engines, blockchain and IoT services, contact center systems, machine learning (ML) platforms, and specialized databases to name a few. One mid-size company had a target of five concurrent new initiatives. The assumption was that it would shut down two and replace them with new ones, significantly modify one, and develop two. It could do that by leveraging existing cloud services that enabled it to test ideas without large investments, and then shut down failed ones without write offs.
Long implementations and procurement timelines are no longer in the way, nor are expensive technical experts too busy keeping the lights on to quickly respond to business requests. Instead, cloud services enable business goals and objectives. Not only does this eliminate the need for “shadow IT”, it promotes the creation of product teams made of multi-disciplinary members who align themselves around the success of their initiative. Deutsche Börse Group, an international exchange organization, built and launched A7, a new cloud-based data analytics platform, in just four months using AWS.
4- Customer focus
The cloud is enabling new ways to innovate by focusing on the customer. However, moving the infrastructure to the cloud doesn’t guarantee that the organization will become customer-centric. From removing organizational barriers to working backward from the customer, we’ve developed new techniques to create or accelerate the necessary cultural transformation to unlock untapped market potential. Those techniques, pioneered by AWS, are now available to every company in every industry, and they’re publicly available. They simply require business sponsorship and a willingness to challenge the status quo.
The tradeoffs that had to be made between technology and R&D are gone, and with them are the limiting factors that slowed down innovation. Companies that will benefit the most from the cloud will be those able to transform their capabilities (business, people, governance, platform, security, and operations) to utilize the cloud. Innovation enablement starts with a cloud migration strategy and a change management plan. Cloud computing has finally rendered the 1982 HBR debate obsolete: Innovation is what can provide a lasting competitive advantage, and technology enables it.
Learn how to get started on your move to the cloud here, and if you want to push innovation boundaries in your company, you might be interested in the experience of AWS customers around the world.
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