Wednesday, June 15, 2011

Clouds in the Blue Ocean

When I read Kim and Maurborgne’s article,” Blue Ocean Strategy,” I was struck by the figures.  They discuss a study of 108 companies where only 14% of new ventures were attempting to create a new market, yet this small percentage brought in 38% of the total revenues for the company and 61% of the total profits.  I believe it is difficult for companies to look at their investment and revenue strategy and see this level of yield for every investment (what if the risk doesn’t pay off?).  A few key concepts caught my attention:

1.       Competitive advantage is the antithesis of Blue Ocean Strategy.  In fact, the idea of the blue ocean is not to extend current products and try to outshine competition, but to actually go where there are no rivals and be what one I’ve heard attributed to various military and political figures: “Be the first-est with the most-est.”     
2.       Value creation is suggested as being a bigger driver for a “Blue Ocean creation” than technology.  Frequently, new innovations in technology are touted as the reason for the creation of new markets, as with the notion of Disruptive or Game-Changing Technologies (described in the charts by Killion and Lampson below), but Kim and Maurborgne’s article highlights that technology alone is not a significant driver.  There has to be a strong value for the service offered that may be strongly supported by new technology innovation, or likely a more highly valued use of existing technology.   

So, in today’s market, I was thinking how to identify Cloud computing against the blue ocean (or sky?) backdrop.  In an article in the Cloud Computing Journal from posted July 28, 2010, the authors highlight what they see as irony- that “the best analogy for describing the opportunity that Cloud presents is the ‘Blue Ocean Strategy’…  However, if we look at two of the tenants of Blue Ocean I mentioned previously, it’s not clear to me that it is.  Cloud is not exactly a product or a technology, but is more a business and economic model enabled through technology innovations like virtualization and software as a service.  According to Foster, et al in the cloud computing model, computing power, software, storage services, and platforms are delivered on demand to external customers over the internet.  It has been touted as providing unprecedented advances over traditional hardware/software infrastructure for organizations while reducing IT infrastructure costs, so it passes the “value pioneering” driver (#2 above).   So, now we go back to #1, which has to do with competition.  Stated another way in the Kim and Mauborgne article, the imperatives, “Make the competition irrelevant” and “Create uncontested market space” gives me pause.  With Cloud, whether we’re talking about public or private clouds, software-, infrastructure-, or platform-as-a-service clouds, there seem to be many contenders that are highly relevant- IBM, Cisco, Microsoft, Google, Amazon, Akamai, to name a few.  Suggested by the volume of advertizing coupled with technical conference topics and papers focused on this topic, the Cloud model does not appear to be a blue ocean creation.  Companies can choose to adopt cloud to enable them to pursue lower cost and higher capacity IT infrastructure, but the market space for Cloud itself is highly contested and…well, even a little cloudy.  Sorry for the pun…

·         Srinivasan, et al. “Cloud- A Blue Sky Strategy for Telcos.” Cloud Computing Journal, July 28, 2010.
·         Foster, I., Zhau, Y., Ioan, R., & Lu, S. “Cloud Computing and Grid Computing 360-Degree Compared.” Grid Computing Environments Workshop, 2008.2.
·         Slide- Dr. Thomas H. Killion, Enabling Future Technology Ultra-Large-Scale Systems in the Army
·         Kim, W.C. and Mauborgne, R. “Blue Ocean Strategy.” Harvard Business Review, October 2004.
·         B. Lampson
·         Lewis, G. Basics about Cloud Computing. September 2010


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