Cloud computing opens a new era of corporate strategy

In the era of cloud computing, corporate strategy is also due to the "cloud" and change. That means everything from a new revenue model to a superb technology can be built on a new product.

Cloud computing is changing everything that the company has to offer, and in the case of corporate strategy, I've listed 5 aspects (actually, a lot more). Simply put, the company's strategy needs to get rid of the 20th century mode of thinking, to the 21st century mode of thinking.

1. Contingency policy rules

Over the years, corporate strategy practice has been guided by value chain analysis, Porter's five-force model analysis framework, or newer, strategic intent-driven concepts such as blue Ocean strategy. The problem with the framework-driven model is that the model assumes a very static, paradigm-setting world. When the problem of the variable is already well known, the model user responds to it, and the reaction rate is slow.

Cloud computing is not a problem that can be solved by a company strategy with a clear purpose. There are many unknowns in the environment in which cloud computing applies, many of which are rapidly changing. For example, a small company might be able to develop valuable things very quickly and accumulate millions of of users in a short period of time, when all of the competitor's reaction equations, supply and demand forecasts become irrelevant. Therefore, a framework solution must be discarded to move to a more agile approach.

2. Subject-related experts turn to technology-related experts

Since traditional economic growth frameworks and models are useless (see item 1th above), so are the experts who have mastered these frameworks and models. The MBA does not have a degree in this area, and there is no such expertise in the cloud environment, as the expertise of the underlying technologies provides the company with advice on future product design or development.

Do you need a strategist? The answer is no. Companies should hire technicians and entrepreneurs who can actually talk about practical issues, and they can customize the enterprise prototypes and demo models, and make customers happy. Think about it, who would like to open another PowerPoint to see if the market will reach 5 billion or 500 billion dollars next year? Companies to hire capable patriots, to create this huge market!

Traditional enterprise Strategy team members generally have a large consulting firm consultant experience. If you're in the middle of a discussion about the development plan in the cloud, find a way out for yourself as soon as possible. The company may transfer strategic team members to departments that have little impact on business and strategic decisions or retrain them. Even the billionaire mayor of New York wants to retrain himself and learn to code!

3. Product team informs business growth, not strategic team

If you learn from the corporate strategy team what the next wave of innovation is, you've missed it. Ask your product strategy team for advice, and they are in touch with your customers every day. They can tell you where the next economic growth is. Because they are spending time interacting with customers and thinking about how to grow their business, while corporate strategists are still analyzing financial statements and profit pools, or analyzing market access issues, perhaps your company has been left out of the market.

Matt Maloney, chief executive of GrubHub, said: "Strategy can be written in the form of paper, but the only way to test the effectiveness of the product is to push it to the customer." ”

4. Long tail theory + order economy = revenue growth

Companies worth billions of of dollars are able to Mickle and grow, largely thanks to the lock-in effect. After a year of demand for consumer money bags and an almost monopolistic possession of market share, incremental-driven innovation has finally begun to focus on the cloud industry, as it is easy to see that cloud production, cloud distribution and cloud pricing channels are changing economic growth patterns. Large software companies used to invest a lot of money to authorize software development or sales, and now as cloud computing has changed, they have had to compete with lightweight, flexible open-source software companies that can offer similar or better software for a few dollars a month. New production, distribution and pricing methods are changing the roots of the original competitive model.

To deal with the competition in this field, companies must make strategic adjustments to rethink what growth means, and the question is: can big companies focus on small amounts of business income? The reality is that it took AWS nearly eight years to achieve the maximum of $1 billion trillion in revenue, and its rival Rackspace spent the same amount of time earning only 188 million dollars.

It can be said that there is a very long way to go to achieve large operating income or profits, and more trade-offs are needed. For example, Evernote, a popular SaaS note (note-taking) application, has an average operating income (ARPU) of less than 2 dollars per user for most versions.

5. Growth through M&a reorganization

The existing large number of non-cloud computing technology companies, are denounced in the m&a to seek ways to develop. The M&A projects of these business cases are based on collaborative operations, requiring respect for intellectual property rights and the distribution of products through years of development.

There is a problem here, the part of the collaborative operation needs to be able to reduce costs substantially, and when you meet the managers who can reduce the cost, they may not know what can be used to motivate or drive innovation and industry research. They just get the chopping board, cut the cost, and that's it. By then, the R&D budget will be disposed of, and you will reap an innovative cloud start-up that is squeezed inside a non-cloud enterprise, and it is not clear what is the element that will bring lasting innovation.

Again talk about the acquisition of IP, many innovative enterprises are developing IP will consider the user interface and user experience, which means that it will discard some of the old factors, so that the practice becomes simple and easy to use. In this new environment, it is difficult to measure the term IP by traditional representations. On a deeper level, most of the current development is rooted in open source and people's co-operative technology, so when you buy a cloud computing start-up, you will have little or no patented technology.

Finally, the distribution channels of existing enterprises are rarely continued to be exploited, as the delivery patterns of cloud services have changed significantly compared to previous services. Tens of thousands of companies are now using open-source technology to develop apps in the weekend programming marathon, then uploading them to the App Store, or posting them to the company's site and providing it to each user in the form of an internet link. Few companies make meaningful investments in such a developer's value chain.

The leadership style of the cloud era

Companies need strategic decision makers and executives who can overcome their own cognitive biases. In other words, companies need executive supervisors to see the world from the perspective of modern technology and business paradigms, and are willing to study the latest applications, have a strong interest in their aaarr indicators, and take measures to capture and guide the market. These will greatly enhance their ability to develop and implement enterprise strategy practices in the new cloud computing world.

Original Author: Prabhakar Gopalan

Source: GigaOM

(Responsible editor: Lu Guang)