Have you ever heard of Sam Walton, the founder of Walmart? He opened the first Walmart in 1962 in Bentonville, Arkansas, and now it is the world’s largest retail store. According to Wikipedia, “[a]s of July 31, 2019, Walmart has 11,389 stores and clubs in 27 countries, operating under 55 different names.”
Many other discount stores opened and prospered during that same period, but are now long gone. Remember Turn Style, Ayr-Way, and The Treasury? Me neither. Kmart also opened in 1962; since then it has merged with Sears and is a subsidiary of the Sears Holdings Corporation, which has filed for bankruptcy.
What did Walton do differently than everyone else that allowed his company to survive and thrive? There were many factors that contributed to Walmart’s success — entire books are written about Sam Walton and his empire — but this article focuses on Walton’s response to change, especially disruptive change. In other words, the same sort of change that the cloud has brought to IT infrastructure.
Walton had a firm belief in Walmart’s business goals, and he had a talent for keeping them front and center when making any business decision. Walmart’s primary goal has always been to drive prices ever lower. (Their first mission statement was “The lowest prices anytime, anywhere”; now it is “Save people money so they can live better.”)
Another talent of Walton’s was to keep an analytical eye on everything going on around him. Walmart continuously scans the environment — not only in the retail industry, but also in the larger society — for new technologies and processes. In other words, Walmart is always looking for change, and when they find it, they evaluate the innovation for its potential effect on their business goals.
Importantly, part of Walmart’s evaluation of any innovation is to analyze how their organization will have to evolve to take best advantage of the change, and to decide whether that change’s cost is worth its perceived benefit. Due to Walton’s influence, the company has never been afraid to tackle change head-on, and they have been willing to overhaul key areas of their company when it has made sense to do so.
Through the decades of its existence, there have been many changes, many of them disruptive, that Walmart has evaluated versus their business goals. Part of Walton’s genius is that he understood that there are really only three responses to disruptive change: ignore it (often at your organization’s peril), adapt to it, or exploit it.
Here are several historical examples of innovation that Walmart noticed as potential ways to keep driving down prices, that they evaluated to understand how their organization would have to evolve to take advantage of the changes, and that they ultimately exploited:
- In 1955, the first modern intermodal container (a standardized shipping container that can be transferred between ships, trains, and trucks) was developed. Probably not coincidentally, construction of the U.S. Interstate Highway System began in 1956, shortly after the National Interstate and Defense Highways Act was signed into law by President Dwight D. Eisenhower. As Sam Walton was buying variety stores pre-Walmart, he realized that these mobile units on reliable highways could substitute for warehouse capacity, decreasing the amount of stale inventory at any individual store. As he grew Walmart, he opened distribution centers and stores within strategic distances of each other, standardized loading docks, implemented cross-docking procedures (from Wikipedia, “[c]ross-docking is a practice in logistics of unloading materials from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or rail cars, with little or no storage in between”), and built his own truck fleet to take advantage of these disruptors.
- In the mid-1970s, POS (point-of-sale) systems were introduced into Walmart stores. These systems allowed Walmart to track and maintain inventory more efficiently, and to adjust what was delivered to each store when. However, making the change required that they replace existing cash registers, learn how to deal with electronic inventory data, and train employees — not just cashiers, but also purchasers, stockers, and financial staff. (Note that in the 1980s, these systems were updated to accept barcodes, and in the early 2000s, to use RFID technologies.)
- In the mid-1990s, Walmart made their Retail Link service (a hub for exchanging sales data and reports with suppliers, so they can supply the correct products at the right time to the right place) available via the Internet. This meant that Walmart had to make sure all its stores had Internet access, that its POS systems were interacting correctly with Retail Link, that their employees were trained properly in the new systems — and they had to encourage their suppliers to take the same sorts of steps.
- Now it’s 2020 and the cloud era. A couple of years ago, Walmart joined forces with Microsoft to migrate Walmart’s existing business applications to the Azure cloud and to build new, Azure-native business apps. What sorts of changes did Walmart undergo to launch this initiative? They opened an incubator-style facility in Austin, TX; they hired cloud professionals (or trained existing employees in the new cloud technologies); and they made the bet that the pain points they’ll encounter as they move to and/or change technologies will continue to keep their prices down. In other words, once more they are exploiting a disruptive change.
You might be wondering what any of this retail history or the long-dead Sam Walton’s business practices have to do with the cloud. Again, it is the evaluation of and response to change that is key, and one of the biggest and most disruptive changes in the IT world in recent decades has been the cloud. The public cloud has been around for over ten years now, but it is still evolving and maturing. As it continues to mature, it becomes an even better choice for many companies.
How has your organization responded to this disruption? It bears repeating that there are really only three choices:
- To ignore it: in other words, to stay your course and keep your IT environment the way it’s always been — on-prem or in a datacenter; on a certain number of cleverly named, company-owned and -maintained servers; and without any sort of optimization.
- To adapt to it: for example, by lifting and shifting your IT environment to the cloud without any other changes. You may be able to save a few bucks doing this, especially when you first make the move.
- To exploit it: in other words, by not only moving your IT environment to the cloud, but also by incorporating “cloudy thinking” into your approach toward all aspects of your IT environment. How will your organization have to evolve to truly reap the benefits of being in the cloud?
What is cloudy thinking? It is the process of adopting the principles outlined in our previous article for your IT environment: optimizing for cost; becoming scalable; thinking services, not servers; automating and monitoring everything; and managing your data in a cloudy way.
There are three important questions to ask yourself to make sure you are engaging in cloudy thinking, and thus starting to exploit the cloud:
- “What are my business goals, and how can I achieve them more easily or cheaply by engaging in cloudy thinking?”
- “What systems can I turn off, and when?” After all, why pay for any computing resources when you are not using them to make or save money?
- “Will this system make (or save) more money if I add or delete capacity?” In other words, you can scale your IT resources to optimize your environment and your bottom line.
Of course, you may have to rebuild certain elements of your infrastructure before you can turn IT resources on or off, scale them, or optimize them. You may need to retrain your IT staff; you may need to implement DevOps and/or SRE philosophies. These actions are not easy, quick, or cheap, but they can mean that your organization not only survives in this new era, but thrives in it.
If you can effectively exploit the cloud, you can create new savings, new efficiencies, and new business opportunities for your company. Think about it: isn’t this what Walton did for his stores? He always kept Walmart’s business goals in mind as he scanned the world around him for new technologies and processes that could help him meet those goals, then evaluated those innovations in terms of the changes Walmart would have to undergo to make best use of them, and then he exploited them.
Change happens. Be ready.