Cloud Strategy: Disrupt the Market; Not Your Business
“Business success contains the seeds of its own destruction…the [company] who is the star of the previous era is often the last one to adapt to change.”
– Andrew S. Grove, Only the Paranoid Survive
It’s a fact: your business is under attack. Within the next five years, your industry will be disrupted by a new competitor that will fundamentally shake long-held operating models and reset expectations for today’s empowered and demanding customers. In the words of former Intel CEO Andy Grove, your company has two choices: adapt or die.
Whether it’s the 5 billion people shaping a new middle class in emerging markets like Brazil, Chile, India, and China. Or the tech-savvy millennials challenging traditional thinking on how we share; how we view brands; how we buy and consume; and where and how we work. Today’s business is being shaped by unprecedented growth, change, and globalization – change at a pace so fast it’s unthinkable.
Our consumers, co-workers, and “friends” are more connected, more empowered, and more demanding. The convergence of technologies like cloud, social, and mobile are changing how we engage and flooding us with new information that we must access, digest, and analyze faster than ever before. It’s also enabling new business models and competitors that are fundamentally shaking the roots of entire industries.
Remember what happened to Tower Records? How about Borders Books? Or Blockbuster? These long-held industry leaders were unseated by new entrants (Apple) and upstarts (Amazon and Netflix) introducing new customer-engagement approaches and entirely new business models powered by the simplicity, scale, and ubiquity of the cloud.
Think of them, and then give some thought how new cloud-powered payment upstarts like Square and crowdfunding businesses like Kickstarter are shaking goliaths in the financial services sector. Or how Uber and Airbnb are tapping into the cloud to deliver services designed to challenge century-old models in the transportation and hospitality industries.
It’s not a question of if your industry will be disrupted by a new cloud-based business model, but of how soon will it happen. And what can your company do about it?
Innovation without Disruption
It’s simple to say that your company must find ways to leverage the cloud to introduce new engagement and business models that will give you a competitive advantage. But effecting such change in an established business is not always easy.
If your company is like most, you don’t have the luxury from starting from scratch. Most firms have long-held business models, established operational and technology infrastructure, and a legacy customer base that is invested in your existing products or services, and is paying the bills that keep the lights on. In order for your company to tap the cloud as a disruptive innovation platform, you must start by understanding the mistakes other enterprises have made and how to avoid them:
- Don’t get mired in TCO debate: You’ve probably heard a lot about the total cost of ownership (TCO) and IT efficiency benefits of the cloud. While the cloud certainly offers a cost advantage, the real benefit the cloud brings to business comes in two flavors: innovation and agility. With easy configuration and advanced development platforms, the cloud gives companies the agility they need to adapt processes quickly and simply to capitalize on changing market dynamics and stay ahead of the competition.
- Don’t do the same old things in the cloud: Many companies make the mistake as viewing the cloud merely as a new delivery model or subscription based pricing option. Sure, the cloud frees you up from the headaches of software and hardware maintenance and upgrades. And, yes, the cloud can help you shift IT costs to a variable operational expense on your balance sheet. Yet, savvy companies view the cloud something far more valuable: a platform for disruptive innovation. These firms are tapping into the cloud to unlock new business processes and insights and to power new business models that were previously unimaginable.
- Don’t feel forced to replace: Many companies have shied away from the cloud because vendors have told them they need to rip-and-replace their established systems to take advantage of it. Yet, innovative businesses know the cloud isn’t an either-or proposition. It’s not even an and one. When leveraged correctly, the cloud is an and-better offering, empowering you to leverage and extend your traditional, on-premise systems of record with cloud applications that can unlock innovative new engagement models with customers, employees, and partners.
Cloud-Powered Innovation in Action
Forward-thinking businesses are beginning to take these steps.
- T-Mobile, for instance, has extended its traditional Customer Relationship Management (CRM) solution with cloud applications for listening, analytics, and service to deliver an entirely new model for social care. T-Mobile is not just responding to customer requests through traditional channels, but actively listening to customers on Twitter, Facebook and elsewhere in order to identify and resolve questions and issues quickly and publicly. Since employing these new cloud-based engagement tools, T-Mobile has dramatically improved first-time resolution rates and improved customer satisfaction and renewals. T-Mobile is also turning these new engagement approaches to listen to what their competitors’ customers are saying and using this information to win them over.
- Marriott has extended its core HR system with cloud-based tools for talent recruiting and performance management and social business collaboration. The new engagement tools have helped the global hospitality company quickly on-board and track both full-time and seasonal workers. Marriott has also used social collaboration to drive innovation, empowering property managers to invent and test new services and offers and share the results with other properties around the world.
- American Electric Power extended its core financials systems with a cloud-based business network to power a new dynamic payment process. The North American electric utility leader was not only able to automate formerly complex and paper-based invoice reconciliation and payment processes, but tapped this real-time intelligence to employ a new collaborative and dynamic discount management model that has dramatically improved working capital performance for both AEP and its supply partners.
There are plenty more examples of savvy companies like this who are investing in the cloud to enable new processes and achieve new insights that allow them to run their business in an entirely new way – not just do the same old things using a different delivery or pricing model. They’re creating disruption. Fueling innovation. And driving competitive advantage.
You can either adapt by fueling your own innovation in the cloud. Or stay the course and join the growing list of also-rans. The choice is yours.
Good post! Hopefully the SAP sales team reads it too. Finger-pointing: the selling of Success Factors vs SAP ERP as in the two-edged "we won't support SAP ERP for long anymore". In the end for a customer switching form SAP ERP to Success Factors, SAP doesn't seem to realise that selling Success Factors is a kind of "cold calling". There is too little in common between SF and SAP so a customer is totally free to move to a different cloud solution - they'll have to implement most of the migration anyway. That's why SAP should not disrupt their own business, which is mostly SAP ERP at the moment.
[Edit]: all from an HR consultant's point of view...
Thank you for the feedback. I agree. Every customer is different. Our job is to prescribe the best solution to not only meet their needs but to allow them to simplify their business and gain a competitive edge.
To your point, for the SAP installed base, this often means demonstrating how they can extend their core SAP investments -- say SAP HCM -- with the Cloud -- say SuccessFactors Talent Management or Workforce Analytics -- to enable new processes, new insights, and create new value.
The Cloud has the potential to unlock new models of engagement with customers, employees, and partners. Companies should be empowered to access the benefits of the Cloud without disrupting their core business or well-established and well-functioning infrastructure.