Cloud computing , Unbundling towards creation of SpeedBoats

<This is an outline for one of the chapters of my upcoming books.

My idea is to blog skeletal chapters, enrich the core story through subsequent research and interaction with readers.

Feel free to critique / rubbish>

One of the key requirements for a Speed Boat business model is your ability to focus on key aspects of business :

1. Focus on creating best products and Services for your customers - Build a possible mouse trap to let world beat a path to your home .

2. Focus on Providing best possible experience to your customers and hence create a great brand value for you.

Anything apart from the above is a distraction to management bandwidth. 

Anything apart from the above should be dealt by experts preferably outside of your company.

If you really want to focus on the above two , you cannot be focusing your time on building massive server farms, ensuring all of them of updated with right patches and ensuring the cooling work la well.

This leads us rightly into the topic of Cloud Computing. 

Broadly , the cloud is split into three specialised camps (some times they over lap depending upon what we talk about).

Camp A : Infra As A Service

This is where technicians ofter you virtualised / non virtualised servers, desktops , processing powers , storage etc. Key players being Amazon, Microsoft , IBM , RackSpace etc

Camp B : Platform As a Service

These are the guys who provide you platforms which are necessary to compose a business application but stop short of providing one but leave the choice to you.

Key examples are : Google App Engine, Microsoft Azure, SFDC force.com etc

Camp C is a bit sophisticated. They provide , typically multi tenant , business applications that can be integrated / orchestrated into business processes .

Key examples are : SFDC and many many others.

So what are the things that a CIO of a this day don't need to worry about :

1. Servers, Storage and provisioning of these in a virtualised fashion 

2. Operating and maintaining (patches) of these infrastructure 

3. Scaling up and down based on business spikes is taken care

4. Capex of infrastructure has become a OPEX. You don't need to buy costly real estate and build Data Centers

5. Commoditised micro services (logging , metering , provisioning etc) - PaaS

6. Commonly used business functions (CRM) , mainly core functionalities 

7. No need to worry constantly about ever changing technology 

A typical SpeedBoat startup will have more than 90% of their time spent in towards creating newer functionalities while Super Tankers will be visiting remote corners to choose best site for their swanky Data Centers....

Cloud is not a hype anymore. It will help you to unbundle a critical but non core aspect of your business. Like how we don't manufacture electricity ourselves , don't produce water ourselves we will not invest heavily into infrastructure soon.

Cloud relieves time and bandwidth to focus on more important aspects of your business.

What defines a Speed Boat Business Model ?

It is estimated that Apple iPhone has disrupted/killed at least 27 business models. This ranges from flashlights , Nokia style mobiles , CD players and so on.

Amazon has disrupted brick and mortar super markets and book stores heavily.

This list can go on for new few pages. The speed at which business are getting disrupted has increased rapidly. Buoyed by the success of digital models, Entrepreneurs across the world now have even bolder visions. Elon Musk, Jeff Bezos , Peter Thiel etc...

Speed Boat model is a new age digital business model which doesn't have any baggages to carry. Classic examples of this models are Uber, AirBnB , Wonga , Lending club etc.

These business models have a core use case and don't try to do too many things and be everything for everybody. They have customer at the core of everything that they do and are built with latest gizmos of Digital ToolKit.

If we were to borrow political lingo, SpeedBoat business models are extreme right wing of the Digital world. Founders are typically audacious millennials , or slightly there of, who understand technology is business. For them strategy is not fancy power points and complex charts. For them strategy is about problem solving. They move at great speeds and decimate current sluggish models.

So what about regulation ?

Complying to regulation is much more easier to SB2M (SpeedBoat Business Model) because they do few things and do it much more transparently . Their business have consistent and often STPed business processes. Their data is spot clean.

Can't larger corporations and bigger banks become SpeedBoats ?

For a foreseeable future , unless something drastic happens, we believe Bigger companies will remain as Super Tankers. They may pick up speed , may become much more efficient in providing customer services as we are starting to see. However , running a Super Tanker means you may also have Speedboats but cannot become one overnight. It is very counter intuitive for a bigger corporation to become a SpeedBoat.

How will a SpeedBoat Business Model leverage Digital technologies ?

1. They will leverage Hybrid cloud for horizontal and vertical purposes - Lower cost of running 

2. They will have data processing done by Big Data engines creating one or more Data lakes and employ Deep Machine learning techniques - They will be agile to take informed smarter decisions faster 

3. They will not have business processes but Customer Journeys - Everything will be built around Customer 

4. They will believe in Customer Centric, Mobile First , Social savvy, Kick ass UX that will bind customer to the brand - Seamless engaging intelligent experience 

5. Their IT staff will be super productive and spend less than 10% time on operating / maintaining software compared to the time they will spend on adding new functions - DevOps , Gamification etc

From a business perspective , they will focus more on Profit multiplying techniques rather than a perennial fight that bigger corporations wage against cost.

Let's start a Retail Bank from Grounds up using the above 5.

Is your business model a Speed Boat or Super Tanker ? - Banks vs Fintech Startups

I came across Thinkers50 recently and it connected several thoughts with a beautiful metaphor. Speed Boats vs. Super Tankers.

Most of today's Big Banks are akin to Super Tankers not from an efficiency point of view but from a mindset point of view.

Understanding need for a Super Tanker :
Super Tankers are a by product of a spark that innovative entrepreneur Malcolm McClean started. A good starting point to understand is here . Malcolm was a real disrupter who saw things differently from others. From their initial days , Tankers have come a long way. They were one of the principal reasons why Globalisation really took off. From a mere 100 million metric tons , they are responsible for shipping 1.5 Billion million metric tons by 2012.  All of this is good.

So what lies in the core of this and what we can learn.

The heart of Containerisation is standardisation. If you are into jargons, Intermodalism. Malcolm paved the way for carrying goods in safe containers and this got adopted quickly. In 1960s ISO stepped in and standardised the containers into two categories. 20 feet containers termed as Twenty Feet Equivalent (TEU) and 40 Feet Equivalent or 2 TEUs.

This standardisation has its own adverse effects too. An entire thriving industry of Dock workers who made a living loading , unloading , sometimes accused for disappearance of valueables too was made redundant.

Here is a new age Industry which brings us toys from China, Cigars from Cuba, Cheese from France etc etc and makes it available in the next door supermarket. A tanker

Now Super Tankers are the way to move things from A to B in a repeatable , consistent and cost effective way. In our context, they represent Big Banks which have become big elephants.

So what has this got to do with Big Banks ?
Big Banks evolved from their days to be Industrial scale efficient through standardisation. In initial days they had armies of staff talking to people, getting their deposits, giving them loans, processing word documents etc etc. Efficiency was driven mainly by division of labour.
Then it was the dawn of Computer era.

Banks automated their AS-IS process using computers. There was really no innovation at this point because there were lot of efficiency gains through sheer adoption of computers. All was well. Monstrous Core Banking engines were built. When it was difficult to change or add new features, new systems were added out side these core engines. As years passed by layers and layers of systems were added. More personnel were added to keep these running. Banks were happy thinking they have robust standardised ways to doing things.

Banks became Super Tankers with containers for different businesses. There were/are Payment processing containers, Trade Finance containers, Debit Card containers, Credit Card containers. There were containers for everything with Core Banking engine carrying the heavy loads sailing slowly. Containers have a world of their own. Locally Optimised. Risk minimised. Robust etc.

Then came the age of outsourcing. Outsourcing for cost-only reasons delivered results for a period of 10-15 years. Since the guardians of the systems could only focus on keeping the lights on there were no revolutionary innovation that happened. All those who could do stuff become architects priesting what could be , mostly what could not be done.

What about Speed Boats ?
Let's take a pause here and take a look at Speed Boats.
Speed boats are built for agility. Speed boats cannot carry huge loads and travel for long distances.
In our story , they represent businesses which can move at incredibly faster speeds. If speed is your objective, you need powerful engines. Old squeaky steam engines are not going to be of use.

A threat that started with simple and cliched question "If Google, Amazon, Facebook or Apple become a Bank" has become real in the last two years. Interestingly none of these companies have shown keenness to become banks. Rather the Digital revolution started off by these , and other innovative companies, is redefining our very view of what Banking is and what it is not.

You can refer to a good list here. These disruptive innovators are real speed boats. They can travel at the lightening speeds. Since they do not have any legacy baggage, their business models are sleek and focused towards achieving few things. Perhaps this an unfair advantage that they possess over the big banks.

Few key attributes of this "Speed Boat Business Models" :
1. Known only for one or at the maximum 2,3 things
2. Understand the customers instead of just knowing
3. Digital business model and not Digitisation of an existing business model
4. Systems built with data at the core
5. Technology is business. It is no longer just an enabler

This is the age of instant gratification. Speed need to be core of what you do. If your business model cannot promise speed and reliability, there are other SpeedBoats waiting to disrupt you.

Few core arguments of "Super Tanker Business Models"
1. Complexity
2. Too big to fail
3. Too many regulations
4. Important part of the society
5. We have weathered several such storms
6. We will adopt these technologies

Most of the Big Banks have started multi-million pound Digital initiatives. This ranges all the way from Revamping their channels/marketing [all of them] to transforming their core systems [few of them] to starting Digital Banking offshoots [BBVA - Simple].

Many often people confuse between Digitising an existing business model and creating a Digital model. The key is to move to the latter.

Dinosaurs ruled the world from Jurassic to Cretaceous era for about 135 million years. We have not seen one in the last 200 million years.

Lets discuss more about the SpeedBoat Business Models in the next post.

References & Acknowledgements:
http://www.worldshipping.org/about-the-industry/history-of-containerization
http://www.statista.com/topics/1367/container-shipping/
https://www.youtube.com/watch?v=KGAW6NuKdms
https://www.youtube.com/watch?v=-9gfB2N5aN0
http://paleobiology.si.edu/dinosaurs/