The terms Cloud-based and Cloud-Native sound similar right? Wrong. Chris Skinner (aka The Finanser) put out a great piece on what is happening right across many industries – not just banking.
I am having a debate on a regular basis about being cloud-native and digital at the core versus cloud-based and adding digital. The two are very different. Most big banks are moving to be cloud-based and adding digital, but that is not digital at the core and cloud-native. The latter has a business model born for the internet; the former is evolving an old business model for the internet ageChris Skinner
Chris also focuses on a report from PwC stating “Of the $1.3 trillion that was spent on digital transformation in 2018, it was estimated that more than $900 billion went to waste.” And that is only banks and only in 2018 – an eye-watering amount of money if you also factor in other industries and assume similar spend in other years.
So instead of wondering if you are Cloud-Based or Cloud-Native, the first question you need to ask is:
What are you Digitally Transforming to?
The term transformation describes a change. Many Digital Transformations do not clearly articulate the value they hope to achieve and how the business model will change to realise that. Instead they think digital transformation consist only of creating a better website, doing Agile or and getting good at IT.
What your organisation actually needs is to be digital at the core and not wasting time and money trying to disguise a big dinosaur by putting a snazzy digital hat on. As Chris says:
“The fact that so many banks are committing to cloud and working from home during this pandemic convinces them that they’re doing digital. But they’re not. It reminds me of the surveys I’ve seen where C-level bankers claim they’ve done digital because they’ve got a mobile app and that it does not require any change of their core business model.”Chris Skinner
Start with Why?
As Simon Sinek says “Start with Why?”.
If you don’t know the why, then don’t waste your money. If you want to save money, then you are probably better off adopting Lean.
Successful tech companies, such as Netflix, AirBnB and Uber understand their value, productise that value via an API and “effectively” create a marketplace.
What’s an API?
I would say that if you need to ask, then you need to hire a CTO (or a new CTO). There’s another post in that question but if you don’t know check this out. Can you derive value from an API? Put it this way, you are not driving value solely from a website or an App. The Netflix API is much more valuable than the Netflix app.
What is Digital?
The term digital is actually not very helpful. We are at an inflection point.
For example, your local newspaper and Facebook are digital – newspapers publish stories on their website too. What you need to focus on is the business model. Your newspaper and Facebook might publish very similar content but that is where the comparison ends.
You must frame your perspective on Cloud in the same way. Amazon and local supermarket’s online shopping are both in the cloud. But you instinctively know that they exist in different paradigms.
The first industrial revolution marked the move away from manually produced to machine manufactured. No company today boasts of their product being “machine manufactured”. However, ‘Cloud’ is being used as a marketing feature to lend brands with the notion that they are innovative and cutting edge.
In actual fact, it is the customer who will make the decision as to whether you are innovative or not based on their experience of interacting with your organisation. I am thinking of booking supermarket delivery slots versus hitting the ‘buy now’ button on Amazon.
The problem with the phrase Cloud-Native is that it’s a functional term that will soon become outdated, like digital. New terms are coined all the time. But unless your business model outlives the technology they are based on then you may not have a future.