Speed and innovation are key to business success in a volatile world
By WP Creative Group
July 20, 2023
From the pandemic and frequent natural disasters and geopolitical shocks to the emergence of groundbreaking technologies like generative AI, it seems like constant disruption is the new norm. For businesses to thrive in such an environment, their leaders must put a priority on speed, agility, resilience and innovation. How can they get there?
In a video presentation at a recent Washington Post Live event devoted to the future of work, we spoke to Amazon Web Services Enterprise Strategist Jake Burns about how moving from economies of scale to economies of speed is the key to this transformation. The following is a transcript of that presentation, edited for clarity.
Washington Post Creative Group: Jake, thank you for joining us. Let’s start by level of setting. What do we mean when we talk about economies of speed? And how does that differ from economies of scale?
Jake Burns: Economies of scale is what we’re used to in traditional IT. Work begins with a business case that justifies the project, and when the project finishes, we return to business as usual. This approach tends to work when the future is predictable, when you can predict months and years out into the future and be right.
But in the modern world, with the rate of change that’s now happening, including evolving customer expectations and rapid advancement in technology, this old way of operating is generally too slow to keep up.
Operating under economies of speed is more of a focus around recognizing that in the modern world, change is constant. To be effective in this environment, we need to have the ability to experiment, to be agile and to be able to change direction quickly. So, instead of investing so much in getting really good at doing the same thing we’ve always been doing, which is kind of the pinnacle of economies of scale, we invest more in developing our ability to adapt to an uncertain future and to being able to operate more quickly in general.
So this means that to operate under economies of speed we need to have the ability to innovate and to run experiments, and the ability to fail quickly and inexpensively so that we can find the right answer without relying on the long planning cycles like we did in the past. And if that answer changes, like it usually does, we’re able to adapt and change direction accordingly.
As you assess the two approaches, what key differences have you observed in organizations that leverage economies of scale, versus those that embrace economies of speed?
First off, I would say that neither method of operating is right or wrong, They’re appropriate for different times. That being said, organizations that operate under economies of scale, more traditional organizations, generally are resistant to change. This isn’t necessarily a bad thing when things are stable and predictable.
The problem is that in that mode of operating, failure can be very expensive. So they tend to be risk averse and they tend to punish failure. In general, they don’t incentivize experimentation, because the way they operate depends on lots of up-front planning and placing very few big bets. So, they really can’t afford to take the risk of being wrong. But what they do very well is that they’re very good at getting very efficient and doing the same thing over and over again, and doing that at scale. So there is merit to that approach.
But companies that are operating in economies of speed, that tend to be more modern, more digitally native, they naturally have this tolerance for change. They can do this because they’ve lowered the cost of experimentation, and the cost of failure. They can do this because the way they operate involves very little up-front planning, and they’ve created an environment where failure is quick and inexpensive. So, for them, being wrong is just another day in the office. They have the ability to change direction very quickly. For them, it’s more important to get ahead of being able to predict what customers are going to need and being able to bring those solutions and products and services to market for those customers when they need them, and at a very rapid pace.
Putting all of this into action, what levers then can leaders pull to ensure successful transformation?
One of the biggest ones is moving from creating friction [such as overly burdensome processes] to reducing friction. And again, friction isn’t necessarily good or bad. It’s really what’s appropriate for the situation. So you may want friction in the form of guardrails to protect you against things going off track.
But it’s important to realize that guardrails are not there to be used every day. They’re there to minimize catastrophic things from happening. We shouldn’t be bumping into those guardrails very often. If you are, it’s a good indicator that a mechanism is needed. A mechanism is a process with inputs and outputs that solve recurring problems in a very streamlined way and that improves over time. So, you focus on creating those mechanisms and enhancing those mechanisms rather than solving these problems over and over again, and you don’t have to rely on guardrails quite so much. Unlike guardrails, mechanisms are, or should be, very low friction. Reducing friction through the use of mechanisms is emblematic of organizations that are really operating at economies of speed.
Let’s zero in on the cloud. What about the cloud enables continuous improvement? What role does it play here?
It’s key. If you look at companies that are operating at the economies of speed, most of them are in the cloud. That’s because the cloud is very much aligned to the economies of speed.
The cloud allows you to try things very quickly. You don’t have to spend time upfront to figure out which services you’re going to need because you know that you have access to hundreds of them instantly. Because it’s pay-for-consumption, you’re able to change direction without having to worry as much about sunk costs. So, if something doesn’t work out like you hoped, you can cut your losses very quickly and inexpensively. And having this capability is one thing. But when organizations really understand and embrace it, it allows them to be bolder in what they try. Just by knowing that you don’t have to get it right the first time makes organizations experiment more. It makes them less likely to accept the status-quo. And this is where the real innovation comes from.
So companies that are in the cloud, they tend to naturally be organizations that continually improve because they have those capabilities. Being aware of those capabilities and what is now possible because of them causes organizations to tend to adopt a culture of continuous improvement. They know that what used to be considered risky bets are now not risky at all. They’ve realized that the real risk is in not experimenting.
For most, this is a new capability that they didn’t have before. I think it’s really hard to overestimate the impact of being in the cloud, being in a pay-per-consumption model with mature services. Because it’s not so much about having those capabilities, although that certainly helps. It’s really about not having to know upfront which capabilities you’re going to need and having the flexibility and the agility to go in whichever direction that your customers do.
Well, as you’ve already alluded to Jake, this disruptive age will certainly require that companies unlock new ways to streamline their operations and create value and they’ll have to do so swiftly. Thank you so much for your time and your insight.
Click here to learn more about how organizations can win by achieving economies of speed.
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