Digital-native companies use the latest technologies to launch new products and business models faster than their competitors and gain a wide variety of advantages.
For example, Capgemini-Sogeti’s 2018 report “The Automation Advantage,” found that 84% of digital natives have increased revenue and lowered operating costs with cloud technology, while 81% have used the cloud to achieve business model innovation.
So how can established companies that operate on legacy infrastructures keep pace? By borrowing a page from the upstarts’ playbook and moving at least some operations to the cloud.
“On-premise solutions require costly resources to deploy and don’t offer the agility or the time-to-innovation that companies need to compete in today’s market,” said David Mann, VP of Digital Innovation at US-based software consulting firm XD Innovation. “We provide cloud- based solutions because we understand our customers’ financial and operational needs and know that it will easily scale to their future requirements.”
Here are five key areas where adopting cloud technologies can help established firms act like startups:
1. Train on the latest capabilities
Parker Hannifin, a Fortune 250 global leader in motion and control technologies, is using cloud-based technologies to roll out new capabilities.
“The number one thing that a cloud platform brings us is new features and functions well in advance of when we’d be able to deliver them on premise,” said Bob Deragisch, director of engineering services and IT at Parker Hannifin. “We couldn’t dream of delivering that power as rapidly as it’s delivered on the cloud. The functionality allows our teams to work in new ways and perform better.”
Critically, the company’s cloud-based applications allow it to capture knowledge from its designers and developers, who have centuries’ worth of skill and expertise among them, and apply it to future product development.
“We believe that design reuse alone will help us to achieve a 30–60% improvement in overall development,” Deragisch said. “This is not just about applying one product from one application to another, but discovering features and functions and reusing them in ways we hadn’t previously. Before, a design was in the realm of the individual who created it; now we can use that information and integrate it across design and planning to production and assembly to create a digital thread throughout the product’s lifecycle. It’s a big part of where we’re heading and will add to our market strength."
2. Increase speed and agility
The cloud helps move products from design to manufacturing at a speed and scale previously impossible with legacy IT infrastructures.
“Our customers need technology that is scalable, agile and quick to deploy because it is becoming a core component of their business model,” Mann said. “Leveraging cloud-based implementations allows companies to say to their investors and board members: ‘Hey, we’re adopting technology that’s actually going to drive the speed of execution that you demand from us,‘” he said.
For Parker Hannifin, speed is critical. “We need to be first to market, and our cloud- based tools give us access to knowledge much earlier so we can capture requirements, define specifications and develop more rapidly than ever,” Deragisch said. “We can then use advanced tools and capabilities like artificial intelligence to improve designs and more rapidly turn them over to manufacturing and engineering to plan how we produce each product. Enhanced collaboration and feedback capabilities ensure we don’t waste time designing something we can’t produce.”
3. Improve customer-centricity
Capgemini-Sogeti’s report found that 86% of businesses have improved the customer experience as a result of cloud-based technologies. Deragisch attributes this to the cloud’s ability to embed knowledge-driven processes and quickly assimilate customers’ requirements to achieve engineering breakthroughs. “We can now listen to our customers’ needs more and deliver solutions that overcome their issues,” he said. “Customer experience is key, and the experience they had yesterday is not the experience they expect tomorrow. Without these cloud-based technologies, the changing business landscape would literally be getting away from us.”
One of the biggest changes Parker Hannifin has made in the past five years is to establish high-performance teams with the freedom to embrace an entrepreneurial mindset.
“These teams work in a fairly autonomous way, similar to how startups operate,” Deragisch said. “Using the latest cloud technology, they can quickly sign up new servers to support peak workloads and collaborate on new ideas without being constrained by legacy processes and platforms. We allow them to think out of the box and ensure that technology helps them rather than hinders them.”
4. Commit to ongoing innovation
Most startups are born with a spirit of innovation, while established businesses traditionally focus on protecting their installed base. Lack of innovation gives customers a reason to move, however, so established businesses are refocusing on creating an open-minded culture that encourages new ideas and learns fast from failures.
“Cloud is an enabler for our customers’ vision of adopting more innovative and lean processes,” Mann said. “Invariably, their first reaction will be ‘Okay, I did it like this with the old technology. How do I replicate that?’ That is the biggest challenge—transforming the way their organization has always operated. It isn’t about replication of the past—it is about reinvention.”
Parker Hannifin’s transformation involved far more than implementing new technologies. “We look at innovation as not being just about the tools,” Deragisch said, “but the fact that they’re readily available in the cloud to help solve critical engineering challenges allows us to create an atmosphere of empowerment so teams are encouraged to ask those ‘what if’ questions and truly listen to the customers’ needs as we all pursue the dream of a better tomorrow.
“Innovation is something we recognize as the only way we’re going to continue to grow and develop,” he said. “It requires an environment that allows you to take risks early on with a new technology, make sure it’s doing what the customers want, and then rapidly developing it into a solution that we can launch to market.”
5. Become a digital leader
McKinsey observes that, just like Parker Hannifin, businesses need to do more than move their applications to the cloud if they want to keep pace with startups.
“Just taking legacy applications and moving them to the cloud—lift-and-shift—will not automatically yield the benefits that cloud infrastructure and systems can provide,” McKinsey said in its 2018 article, “Cloud adoption to accelerate IT modernization.” “In fact, in some cases, that approach can result in IT architectures that are more complex, cumbersome, and costly than before. The full value of cloud comes from approaching these options not as one-off tactical decisions but as part of a holistic strategy to pursue digital transformation.”
Using the cloud as a strategic enabler rather than simply a new IT function is helping to drive Parker Hannifin’s future business strategy, Deragisch said.
“One of the key metrics for our enterprise is digital leadership,” he said. “Without the speed, agility and innovation that we’re bringing to these difficult engineering problems, we would not be able to meet our customers’ requirements in the timeframes they have now come to expect. We recently redefined our company’s purpose, which is to enable engineering breakthroughs that lead to a better tomorrow. I truly believe that our cloud strategy is a key part of allowing us to achieve this. We simply cannot make engineering breakthroughs without this technology.” ◆