Service Innovation in the Cloud: Implications for Strategy Development

Cloud enterprises have shifted from linear to networked business models through a value transformation process centered on the development of multisided service platforms. These platforms facilitate service exchange and value cocreation by enabling three essential transitions: 1. from control to orchestration of enterprise resources, 2. from internal optimization to external interactions, and 3. from customer value to ecosystem value. Innovative service transformation is most in evidence with enterprises that are native cloud companies or companies that have more rapidly and effectively adopted ecosystem-based service platforms such as Netflix, Google, Facebook, Uber, and Airbnb. Service ecosystems enable the critical processes for value cocreation that is foundational to the continuous development of innovative user experiences. However, many developers and adopters of cloud service business models fail to innovate. This is usually blamed on inappropriate business strategy and/or insufficient technological solutions. However, the root cause is often more basic; specifically, it is the lack of service thinking that is necessary for the development of cloud-based service innovation models. This paper explores the service science foundations of cloud computing and the dimensions of service thinking that inform the service transformation process for cloud-based companies. A framework for the development of cloud-based service transformation is proposed with evidence from three case examples.