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What Is Profitable Innovation and How Can Your Business Achieve It?

|December 4, 2020|

In the context of businesses, the ultimate goal of innovation for technology companies is to drive a profit.

This means that even though many software engineering problems can be solved with enough time and budget — just because a business can solve a problem doesn’t mean that they should.

Sometimes, even once a team has figured out how to solve an engineering problem, it doesn’t make sense to deploy the solution — because it costs so much to operate. Other times, the developer time and cloud costs involved with finding the solution don’t make sense given the potential financial payoff.

Profitable innovation means incorporating parameters around cost and profitability into the conversations about innovation — so that when developers find creative ways to meet customer needs, the features and applications they develop are just as exciting for the CFO.

What Is Profitable Innovation?

Engineering teams spend an incredible amount of time thinking about the efficiency in their systems — how to automate builds, reduce manual steps during deployment, and speed up testing.

They also continually iterate on new features and new applications to continually improve them based on metrics ranging from customer feedback to latency and resilience. Ideally, their goal is to get feedback about a range of metrics as quickly as possible and adjust the application accordingly.

Yet discussions about cost rarely happen during the initial development — and developers often don’t have the tools to iterate based on cost. Even if they know how much it should cost to figure out a solution to this problem and how much it should cost to implement and operate that solution, they don’t have any way to act on that information or to easily see if the application’s costs are as expected.

To achieve profitable innovation, engineers need to be empowered with cloud cost intelligence, so they can understand what the trade-offs are between cheaper and more expensive technology choices — and work on building applications that not only work smoothly but also are profitable to build and operate.

What it isn’t, however, is putting pressure on developers to build things as cheaply as possible. Cost should be one of the variables that developers can control, through architectural decisions, configurations and provisioning strategies. When developers understand the business environment in which this feature will live and how much revenue this feature is likely to provide, they are able to make better choices about how to allocate the company’s IT dollars.

Shifting Cloud Cost Left

Nobody expects an application to ship without a single bug — but there is a general expectation that teams are taking steps to catch as many bugs as possible before production, and fixing bugs that are discovered after deployment as soon as possible.

It would be counter-productive to expect developers to build applications as cheaply as possible just as it would be unrealistic to expect an application to be perfectly bug-free in production. Sometimes you can make an application cheaper by limiting its resources — this could also make it slower, and that is not always a good tradeoff.

Just as importantly, developer time is not free, either. There’s a diminishing return on investment for developers to spend too much time in pursuit of the most cost-effective way to accomplish a particular task.

Nonetheless, engineering management should set expectations and non-functional requirements around cost that are derived from the go-to-market strategy. For example, if a product feature is going to be a part of a free trial, operating it will affect customer acquisition costs. Similarly, if it’s only included in very large enterprise deals, there is likely significantly more leeway in the margins.

Developers should be considering these constraints and should have the tools to understand those cost trade-offs.

The Big Picture: How Cost Fits Into the Company Mission

It’s important for engineers to see cost issues not as a hurdle that needs to be cleared or as something that is fundamentally not their problem.

Especially for SaaS products, understanding not only the amount of money it takes (in cloud resources, tool licenses and developer time) to build the application but also how much it costs to operate is essential to building a profitable company.

In our conversations with engineering leaders, we’ve found them repeating one theme about profitable innovation: The engineers who are able to understand how their work fits into the organization’s larger mission and how it contributes to the bottom line are consistently top performers.

Instead of thinking narrowly about how to make a feature work technically, they think about how the feature needs to work for the business. Giving more engineers easier access to information about the cost of their work, as well as educating the team about the importance of including cost information as a data point in their development iterations, increases the general skill level of everyone in the organization.

CloudZero Helps Drive Profitable Innovation

With CloudZero, you can easily give developers the tools to incorporate cost information into the innovation process to make applications not just faster and more reliable but also more profitable.

The best developers already look for ways to connect their work with the larger business picture — CloudZero not only helps those developers dive in deeper but also gives everyone the tools to keep profit in mind as they work.

Try it out now.

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