IBM Research Shows How the Cloud is Driving Business Model Innovation

5 minute read
Barb Mosher Zinck avatar

The decision to move to the cloud has traditionally been about operational efficiency, but according to IBM's research, we'll soon start to see organizations take advantage of the cloud for business initiatives and that kind of stuff is a whole lot more fun.

We had the opportunity to talk about the IBM study with one its authors, Saul Berman, Global Lead Partner for Strategy Consulting and Innovation and Growth for IBM Global Business Services. It's important to point out that this study was conducted from a business perspective and not a technology perspective, which is a refreshing approach to understanding how the cloud can work for your business.

Editor's Note: Read the full study: The power of cloud. Driving business model innovation (1.35 MB PDF)

The Power of the Cloud IBM Study

This study was conducted through the IBM Institute for Business Value, in conjunction with the Economist Intelligence Unit. It included 572 business and technology executives across the world, in organizations ranging from large (greater than US$ 20 billion) to small (less than US$ 1 billion). The results?

That, although many organizations focus cloud initiatives on operational efficiency, we'll see that slowly decrease over the next few years (from 55% to 31%) in favor of innovative business plans, like new lines of business/industries, new pricing models and better partner collaboration.

When surveyed, here's what items topped the cloud adoption list for most organizations:


Tapping Into That Power

One issue that has the ability to slow down the use of cloud models for innovation is that many organizations still see the cloud as an IT solution. But as its importance starts to reach further into the business, the opportunities available are being recognized.

IBM notes six "game-changing" business enablers that will transform how organizations leverage the cloud for business innovation, shown below:



Learning Opportunities

Cloud Enablement Framework

It's not a cloud maturity model, you aren't going to move your organization through each phase:


IBM Cloud Enablement Framework

The framework looks at two things: the customer value proposition and the value chain. Along each of these dimensions there are different types of organization models. You need to look internally and decide where in this model your organization fits. Are you:

  • An Optimizer: Optimizers are about enhancing what they have now and improving operational efficiency. They aren't ready to take the risks and therefore won't get the revenue and market share gains that Innovators or Disruptors will. But the opportunities are there to deepen relationships with customers and enhance products and services.
  • An Innovator: Innovators take advantage of the cloud to greatly extend the value proposition. This can change their role in the industry and/or lead to new markets or industries. It's about extending what they have and transforming in ways that lead to new revenue streams and market opportunities, thus gaining competitive advantage.
  • A Disruptor: For a Disruptor, it's about radical change, creating new markets/industries or disrupting existing ones. It's big risk for big reward.

Berman says you can choose to evolve over time from one type to the next, but some organizations are going to be innovative or disruptive from day one. He points to the media/entertainment industry as an example of an industry where you might want to focus more on innovation and disruption than worry about an existing business model that may be under attack.

But how do you know which one you fit? IBM offers three key actions to help you determine which way to go:

  1. Make your cloud strategy a shared responsibility between business and IT. This will help ensure that your business and marketing strategies are aligned with your cloud strategy. Have a senior business executive work closely with the CIO on cloud strategy and establish a governance committee that is a mix of business and IT.
  2. Look around, within your organization and outside, to see what cloud opportunities can (and should) change your role in your ecosystem: new partnerships, new customer segments, etc...
  3. Figure out where you sit within the framework today and where you need to be in the next few years. If you want to be in a different place, or you need to be because your market is changing rapidly, then make sure you build the business and technology skills to help you get there.

Key Takeaways

There are several key takeaways from this study. The first is that organizations need to recognize that the cloud is not simply an IT strategy. There are a number of great opportunities to change the way you do business or do what you do now better, to reach new customers and markets and enhances the ones you have. So you have bring IT into your business strategy plans and work together to identify the best approaches for your cloud strategy. This is a challenge in many organizations today Berman indicated.

It's also important to recognize that you don't have to be a disruptor and take big risks to take advantage of what the cloud model has to offer. Sometimes small changes are big enough to keep you competitive and your customers happy. But, if you are in market of rapid change and disruption, you need to figure out how you can leverage the cloud to outperform the competition, and that might mean taking big risks.

As Berman points out, "like strategy, there no one answer for clients, but you've got a new tool, a new capability, a new way to compete and a new way to create business models that didn't exist before and the opportunities are there for people to innovate around them."