According to recent research conducted by Gartner, a staggering 75% of cloud strategies currently being implemented are deemed not fit for purpose. This raises important questions regarding the reasons behind such inefficacy, as well as the ramifications of a suboptimal cloud strategy and how to resolve it. This will be the focus of this post.
Let’s get to it!
In today’s fast-paced business environment, organizations are turning to the cloud to help drive their digital transformation efforts. However, simply moving to the cloud is not enough. A business outcome-driven cloud strategy is crucial to ensure that the organization is getting the most out of its cloud investment. Yet, I find there is a lack of alignment in most cloud strategies I review.
It is not uncommon for organizations to experience confusion when distinguishing between the concepts of cloud strategy and cloud implementation plans. However, a clear understanding of these two essential concepts is vital for any organisation considering a move to the cloud.
In essence, cloud strategies should provide answers to two critical questions: Why adopt cloud services, and what services are necessary to achieve the organisation’s business goals? On the other hand, implementation plans should provide detailed information on how and when cloud adoption will take place.
For a cloud strategy to be successful, it must align with the organisation’s overall business strategy to address the why and what questions. In this way, cloud adoption can be viewed as an essential driver of business success.
Impact of Poor Cloud Strategy
The implications of a poor cloud strategy are significant and far-reaching, and could lead to:
- Wasted Investment. If an organization moves to the cloud without first considering its business goals, it may end up investing in services that it doesn’t need or that don’t meet its requirements. This can result in a poor return on investment and little business value gained.
- Loss of Competitive Advantage. Poorly aligned cloud strategies can result in a loss of competitive advantage, as competitors may leverage the latest cloud technologies
- Operational Inefficiencies. Without a clear understanding of how the cloud will fit into its overall IT strategy, an organisation may end up with a patchwork of different cloud services that are difficult to implement and manage. This can lead to increased costs and reduced productivity.
- Risk Exposure. The adoption of cloud services that do not meet security requirements due to poorly aligned cloud and business strategies could result in reputational damage, data breaches, and compliance issues.
Business Strategy vs Cloud Strategy
Business strategy is defined as a long-term plan of action designed to achieve specific business goals and objectives. For instance, an effective business strategy might be to focus on a particular market segment, develop a new product line, expand a business into a new geographic area, etc. While cloud strategy is a plan for implementing cloud computing solutions. The relationship between the two is clear, as the use of cloud computing can significantly impact a company’s speed and ability to achieve its business objectives.
What I often see in cloud strategies miss the target of business outcomes alignment and instead focus on the cloud technologies (Multi-Cloud, AI, Edge, Microservices Architecture, etc.
Business Outcomes Driven Cloud Strategy
How can a business outcome-driven cloud strategy benefit your organization? Rather than serving merely as a cost center, this approach aligns cloud investments with business objectives. An outcome-driven cloud strategy also ensures that organizations focus on the right areas when investing and allocating resources. Technology leadership needs to articulate its value to the business to sustain the cloud’s value (and IT in general).
Identify Business Outcomes
To develop a business outcome-driven cloud strategy, organizations must first identify their business outcomes. This involves asking questions such as: What are our top business priorities? What are our most significant challenges? Once these outcomes have been identified, organizations can then develop cloud initiatives that are directly mapped to these outcomes. By using a line of sight to connect these initiatives to business outcomes, organizations can ensure that their investments are delivering real value.
To identify business outcomes, organizations must first consider their overall business goals. What are the organization’s top priorities? What challenges are they facing? Once these goals and challenges have been identified, organizations can then consider the specific cloud technologies that will help them achieve these business goals.
Many of the cloud strategy documents I review often contain generic business outcomes, such as enhancing agility, increasing sales, or reducing costs. These outcomes are not specific enough to achieve the intended business outcomes. Comparatively, it is like writing a heartfelt Valentine’s Day love note and addressing it to “Whom it May Concern.” In such cases, the generic nature of the note is unlikely to yield the desired results!
Line of Sight
Achieving successful alignment between cloud initiatives and business outcomes requires creating a clear line of sight. This means establishing a transparent mapping between cloud initiatives and desired business outcomes that is easily understandable by both business and technical stakeholders involved in the cloud adoption process.
Creating a line of sight involves several key steps. First, it is essential to define the desired business outcomes. This may include identifying objectives such as improving efficiency, increasing revenue, or reducing costs. Once these outcomes have been specified, the corresponding cloud initiatives required to achieve them can be determined.
In addition, it is important to identify relevant metrics to measure progress toward achieving the targeted outcomes. These metrics should be specific, measurable, and relevant to the business outcomes in question. In addition, identifying relevant metrics to measure progress toward attaining the targeted outcomes is crucial.
To illustrate, consider a couple of examples from different sectors.
Artificial intelligence (AI) can be used in a variety of ways to improve the financial services industry. One example is in call centers, where AI can be used to segment customers based on demographic, financial, and behavioral data. This information can then be used to identify which customers are most likely to be interested in certain products and create customized offers for them. Additionally, AI can analyze a customer’s past interactions and website activities to predict their future needs and preferences, allowing advisors to offer the right product or service at the right time. By linking actionable cloud strategy and business outcomes, banks can improve their sales and customer satisfaction. One example of a supporting metric for these benefits could be an estimated 30% increase in cross-sell and upsell sales over a 24-month period which equates to £5 million increase in sales.
Energy and Natural Resource
In the mining industry, data is generated at an unprecedented rate, particularly during extraction and production processes across multiple sites. This vast amount of data must be analysed for optimisation, efficiency, and cost reduction. In order to link cloud strategy with business outcomes, mining companies must develop a comprehensive approach that includes advanced analytics and machine learning in the cloud to optimize production and reduce costs. Predictive maintenance, real-time monitoring of operations, and resource forecasting are some examples of such strategies that can help improve efficiency and drive cost savings. Additionally, security and compliance concerns should also be addressed within cloud strategies, including data privacy and sovereignty, network security, and regulatory compliance to ensure compliance with industry-specific guidelines. A well-designed cloud strategy can help mining companies achieve better operational efficiency, reduce costs, and improve overall business outcomes.
The proposed cloud strategy offers several benefits to the mining company, which will enable it to achieve key business outcomes. Firstly, the company can improve efficiency through real-time monitoring and predictive maintenance, leading to cost savings and reduced equipment downtime. Secondly, better resource utilization can be achieved through accurate forecasting, which minimizes waste and increases productivity by optimally allocating resources. Thirdly, real-time monitoring can help identify potential safety hazards, reducing the risk of accidents, thus mitigating risks. Finally, data and application migration to the cloud can lead to cost optimization, reducing infrastructure costs, and optimizing resource allocation. Overall, this cloud strategy can provide significant value to the mining company, enhancing its operations and contributing to its business success.
Examples of supporting metrics for these benefits could include:
- Downtime Reduction: Predictive maintenance will reduce equipment downtime by 10%, saving £5 million annually.
- Resource Optimisation: Forecasting will reduce waste by 20%, saving £2 million annually.
- Safety Improvements: Real-time monitoring could reduce accidents by 30%, saving £1 million annually.
- Cost Savings: Migrating to the cloud could reduce infrastructure costs by 50%, saving £10 million annually.
Overall, creating a line of sight between cloud strategy and business outcomes can help a organisations clearly articulate the value of the cloud to the business and elevate IT to a strategic business partner role.
Testing Cloud Strategy Fitness
To assess the effectiveness of a cloud strategy, it is essential to have experts review it. I often support clients in ensuring that their cloud strategy aligns with desired business outcomes.
Additionally, the napkin test can serve as a quick assessment method.
A friend of mine, a CIO of a medium firm was invited to a 1 to 1 breakfast by the new CEO. The CEO acknowledged lacking tech savvy and sought assistance in understanding the return on investment for the significant funds already invested in cloud technologies, as well as those anticipated for the future.
Suppose the cloud strategy is centered solely on technology; articulating its value to the CEO on a napkin measuring 10×10 inches would be a daunting task. On the other hand, if the CIO has mastered the art of connecting business outcomes with cloud-based strategies, IT can showcase its worth as a strategic partner.
Considering this scenario, if you were the CIO, what approach would you adopt to articulate the value of the cloud to the CEO in a concise yet effective manner?
In conclusion, a successful cloud strategy demands a clear understanding of the connection between business outcomes and cloud-based initiatives. Focusing on generic business outcomes is unlikely to lead to the desired results. Instead, a line-of-sight approach that establishes a clear connection between cloud-based strategies and desired business outcomes is critical.
Whether you are looking to reduce operational costs, increase revenue, improve compliance, or mitigate risks, cloud-based solutions can provide immense value to your organization. However, aligning cloud strategy with business objectives can be a challenging task as it requires cloud technologies and sector experience.
My team and I, take pride in helping organisations of all sectors to effectively develop and align their cloud strategies with their overall business strategy. We utilise our wealth of knowledge and expertise in cloud technologies, coupled with our specialized sector-specific experience to formulate actionable cloud strategies that seamlessly align with your business objectives.
I hope you have found the post informative. As always, any comments and questions are welcome. Please feel free to share comments/questions here, VirtualTarzan, or on Twitter @VirtualTarzan
I am available for a chat if you want to discuss how we can align your cloud strategy with the business strategy.
Thank you for reading and sharing.
Big JApril 5, 2023
Looks like I’ll have to go back to the drawing board with my cloud strategy. I was hoping to just put everything on the cloud and then forget about it, but apparently that’s not the best approach 🙂
DaveApril 7, 2023
The author’s emphasis on a business outcome-driven cloud strategy is spot on! Cloud investments must align with business objectives to deliver real value. I believe this approach is lacking in most cloud strategies as indicated in Gartner study.
Mark RApril 12, 2023
I forwarded this article to our CIO as I felt our cloud strategy lacked any kind of alignment. He dismissed the post as “another blue sky thinking”! A week later all cloud and enterprise architects were gathered in a room and asked to do the napkin test! We failed miserably! 🙂
Virtual TarzanApril 20, 2023
It sounds like your CIO was not ready for a “Blue Sky Thinking!” Well, at least you didn’t fail the “tablecloth test”. That’s when you try to draw out your cloud strategy document on a tablecloth at a fancy restaurant, only to accidentally spill wine all over it and have to explain to the waiter why you need a new one!
CathyApril 13, 2023
I am making the assumption the 3 out 4 “not fit for purpose” cloud strategies were led by experienced, competent, technical folks. So what caused the failure?
T JamesApril 13, 2023
As a CIO, I couldn’t agree more with the point about the importance of business alignment. It’s critical that companies prioritize technology investments to remain competitive in today’s fast-paced business environment.
Virtual TarzanApril 20, 2023
Thank you for your comment! Business alignment is indeed crucial for technology investments to drive competitive advantage in today’s dynamic business landscape. I appreciate your insights!
Virtual TarzanApril 20, 2023
The answer is in the question itself: “led by experienced, competent, technical folks.” Most cloud strategies are led by IT, who are only comfortable talking about technical subjects. However, when the discussion shifts to business subjects such as time to market, share value, Net Promoter Score, etc., they feel out of their depth. However, it is important for IT to master these non-technical conversations, and cloud strategy needs to be a cross-functional activity, not just an IT-led one.
Thank you for reading and asking a great question.