Last month I found myself on a family vacation in northern Montana. Our primary destination for the week was Glacier National Park, a stunning destination that attracts visitors from across the USA. In a totally hip, organic local-roast coffee shop, I struck up a conversation with another park visitor. He told me a story that was both sad and inspirational.
My fellow traveler worked for a company that manufactures mufflers for cars, trucks and other vehicles. Despite the importance of the automotive industry across the globe, he foresaw a bleak future. I leaned forward. Why?
The answer was electric cars.
Most people haven’t given it much thought—but when you think about internal combustion engines, it’s obvious. Electric cars don’t need mufflers. A key car component, invented in 1897, was heading for extinction.
New and disruptive automotive technology, changing customer values, and evolving government regulations were lining up to unwittingly kill a core car component. While still years away, my companion could already see the handwriting on the wall.
Then the UK government made a stunning announcement. By 2040, gasoline and diesel-powered vehicles will no longer be sold in the British Isles. Similar plans are in place for Norway, Germany, the Netherlands and France. Subsequently, The Economist published a related article, “The Death of the Internal Combustion Engine”.
Bang. Another nail in the coffin for the business model of the muffler company.
The evolution of automotive technology from internal combustion engines to electric vehicles has parallels to other disruptive technology changes—including the move from on-premises finance systems to the cloud. Like the internal combustion engine, on-premises applications have performed reliably for decades, and many of the finance processes that we’re all familiar with have been built around them—just as the modern world has been built around cars.
The cloud, like the electric car, runs on a completely different model, and is already starting to up-end the way that finance teams work today. Recent research from the American Institute of CPAs (AICPA) and Oracle indicates that future finance teams will spend much less time on data gathering and routine tasks, and much more on data analysis, strategy and business influence.
Without the support of agile, regularly updated finance systems in the cloud, it's hard to imagine how any finance team will be able to adjust to—let alone maintain—these new ways of working.
There’s also another parallel between the cloud and the new, electric engine: Both have fewer parts than their predecessors.
An electric car has about two dozen moving parts. An internal combustion engine, with its drivetrain and other mechanical systems, has about 1,000. These parts get worn with use, need monitoring and maintenance, and add to total ownership costs.
Other components, like mufflers, are simply no longer needed.
Now consider on-premises systems. The hardware, software, infrastructure and skills—many moving parts—required to own and operate an on-premises system are many. So many, that independent studies consistently determine the TCO of cloud solutions is less than half of similar on-premises systems.
Why? Fewer parts equals less complexity and lower maintenance efforts, which together deliver lower expenses.
It’s easy to blame technology for sudden disruptions. But technology doesn’t work like a light switch—off one day, and then suddenly on the next. Most technologies take years to catch on; consider how the internet took about three decades to go from a government laboratory to ubiquitous public use. Or how the first smartphones have roots in devices from 25 years earlier. In fact, the first production electric car was delivered in 1884—partly in response to the health effects of pollution and smoke in London.
Eventually, though, these technologies achieve critical mass—and when they do, the effect on existing business models is often unforeseen and rapid. Finance organizations, and other lines of business, too often play catch-up when disruption hits critical mass.
By looking ahead, finance teams can be better prepared for disruption when it hits, taking advantage of new opportunities with better operational capabilities. This is what makes working in the cloud exciting and attractive. Once your organization is running on cloud solutions for finance, reporting and other business functions, keeping up with the future becomes a lot easier. The future comes to you with regular updates and new products—all delivered by professionals who spend time and energy keeping up with future trends and technologies.
Looking at disruption differently will give your company new perspectives and put you in a better position to deal with whatever comes next. Too often, organizations are reacting to change rather than preparing for, studying and anticipating it. Sometimes this reaction comes too late, and companies falter or fail.
With the cloud, you enjoy one less thing to worry about and can focus on a proactive approach to your business.
My muffler conversation was certainly thought provoking—and oddly reassuring. Now, every time I see a new electric car in my community, I think about the person I met one morning in a Columbia Falls coffee shop. I feel good knowing that one muffler company is already thinking about its future—two or three decades ahead—to when electric cars, or some other clean fuel technology, dominates our highways.