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Cloudspotting: gazing at the shape of things to come

iPods may not be the incandescent bulb of cloud-centric computing nor was Steve Jobs their Edison. Google isn’t General Electric, Twitter isn’t Marconi nor is Facebook’s Mark Zuckerberg social media’s Samuel Insull.

Nevertheless, the best way to grasp the future of the cloud is to better appreciate electricity’s past. All the most vital innovation ingredients are there: the rise of utilities; proliferation of novel appliances; contentious debates over global standards; astonishing scientific breakthroughs based on ingenious research; and, of course, a ruthless, relentless and radical entrepreneurship that rapidly overturns established orders.

The cloud virtually reincarnates the critical business and technical dynamics that made electricity post-industrially integral and indispensable. “What happened to the generation of power a century ago is now happening to the processing of information,” Nicholas Carr notes in The Big Switch. “Computing is turning into a utility, and once again the economic equations that determine the way we work and live are being rewritten.”

What’s most important to understand about cloud computing is that it is more a medium of innovation and transformation than a mechanism for digital transmission and storage. The cloud doesn’t merely “repurpose” information processing to make it faster, better and cheaper; it enables new innovation ecosystems to flourish.

The devices clouds inspire are as pervasive as the people it interconnects and vice versa. Clouds create change that empowers individuals and institutions to exert global influence and market presence that did not exist before. There’s arguably never been a better time to be an entrepreneur. The most disruptive innovations increasingly nucleate in the cloud.

More insidiously, perhaps, smart “data-driven” companies recognise that the cloud is now where information gleaned from people reconciles with data harvested from sensors to create analytics and insights. When devices grow as smart – and connected – as their human users, traditional barriers of innovation entry fracture. Interoperability powered by cloud computing invites more innovation. Indeed, the surest way to make a network more valuable is to connect it to another network. That is cloud’s architectural essence.

Cloud computing is more a medium of innovation and transformation than a mechanism for digital transmission and storage

Cloudy economics provocatively reframe the questions opportunistic innovators now ask. Simply meeting client needs or even delighting customers no longer satisfies. Innovators, like Amazon, Apple, Microsoft, Google, Facebook, Netflix and Baidu, increasingly see the cloud as their medium to transform not just their products and their services, but their customers, as well.

How can innovative devices, apps and information enhance the human capital, capabilities and competences of their customers and clients? How can cloud-based innovations make their customers more valuable? These are exactly the questions the most successful cloud companies successfully answer.

As surely as electrical appliances, radio and television transformed their users, the algorithmic alchemy and intelligent interoperability of cloud computing innovation is transforming value creation worldwide. Connecting a robot to the cloud will be as easy as interconnecting a smartphone or a tablet. Instrumenting an automated warehouse will prove as straightforward as conducting a tablet-mediated echocardiogram.

What cannot be known, of course, is how innovations in algorithms and interoperability will change how entrepreneurs and innovators will seek to transform their customers and clients. The internet could not have been predicted from the invention of the dynamo. A phone with an accelerometer couldn’t have been anticipated from the break-up of the Bell System or the privatisation of British Telecom.

Consequently, the surest bet about cloud’s future is that its economics will transform the anachronistic model of R&D – Research & Development – into E&S – Experiment & Scale. The cloud was created to allow local experiments to scale into global impact and allow global experiments to be custom-tailored to individual experience. What will those E&S innovations ask their customers to become? How will they transform tomorrow’s users?

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Michael Schrage is a research fellow at MIT Sloan School’s Center for Digital Business in the United States and Imperial College Business School’s Innovation and Entrepreneurship Group. His first ebook Who Do You Want Your Customers To Become? was recently published by the Harvard Business School Press. He also blogs on the Harvard Business Review website. 

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