Customer expectations are constantly evolving in an accelerating race for the most advanced, hyperconnected, seamless experiences. IT functions are under unrelenting pressure to support leading-edge capabilities such as data analytics, cybersecurity, automated processing, and integration with third-party systems.
The life cycle of information technology is becoming shorter every year. New competitors are disrupting industries by leveraging state-of-the-moment digital practices and processes. Customer expectations are constantly evolving in an accelerating race for the most advanced, hyperconnected, seamless experiences. IT functions are under unrelenting pressure to support leading-edge capabilities such as data analytics, cybersecurity, automated processing, and integration with third-party systems. The easiest way to do this is through platforms that connect everyone to the same cloud-based cross-industry digital infrastructure. In this context, your company’s legacy IT system, which seemed so capable a few years ago, is rapidly becoming obsolete. The systems modernization you need today is more than an upgrade; you’re playing a new game with new rules, in which you modernize not just the tools and functions, but the way you do IT. The vendors are largely the same, but the options and principles of the past no longer apply. Hardware no longer stands alone. Sensors and Internet connections are embedded in practically every tool, including those that used to be purely mechanical. Software is no longer sold as a package to install. It is offered as a platform, by subscription from the cloud, is automatically upgraded, and is programmed in new ways.
Plot the Journey before Starting:
Just as successful transformation is a staged journey, so too are systems modernization efforts. In their article “The Four Building Blocks of Transformation,” PwC organizational change experts Al Kent, David Lancefield, and Kevin Reilly describe how iconic companies — the likes of Apple, IKEA, Starbucks, and Honda — have achieved their success through a fully coherent, differentiated, strategic identity. They methodically developed the capabilities and business models they needed to deliver this vision. Your systems modernization can help you do something similar. Having set a direction based on customer value (as in principle number 1), you now plot a systems modernization road map, that is, a sequence of milestones and markers that you can expect along the way. For example, you might introduce cloud-based capabilities early, so they can be used for other initiatives. Or you may need to modernize some legacy systems as a prerequisite for improving time-to-market for product launches.
Organize by Capabilities:
Most large and midsized companies cannot reorganize their legacy IT system all at once. Their efforts must be divided, prioritized, and sequenced, or they will be too large and complex to manage. Most IT modernization efforts are organized by project; they are short-lived efforts, framed by conventional enterprise software categories, and budgeted and delivered through development teams that disband when the project is complete. This leads to a short-term focus that can distract efforts from the most important goal: building the capabilities that deliver value. What if you organized by capabilities instead? Your organization’s most distinctive capabilities are the combinations of systems, processes, and functions that deliver value in a way that no other enterprise can match. Think of your systems modernization initiative as an opportunity to energetically improve these capabilities, drawing on your digital expertise. For example, Inditex (the Spanish apparel company best known for its retail brand Zara) has long had distinctive capabilities in customer insight, fashion-forward product design, rapid-response manufacturing, and globally consistent branding. In recent years, it has enhanced these capabilities with an IT modernization that included, among other things, setting up RFID tags for every item it sells. Now it also has an integrated online–offline inventory capability, so that any clerk in a Zara store can instantly locate a garment in a specified size and color, and arrange for it to be shipped directly to a customer — giving the company strengths in customer satisfaction that few other retailers can match.
Be Agile and User-Centric:
When executing the modernization, look for ways to realize benefits faster. Avoid the “big bang” approach, in which you gradually build toward a single all-encompassing systems release, which can involve many months’ wait before results start to be seen. Divide the modernization road map into discrete delivery increments, releasing usable functions on a frequent release cycle. It’s better to be incomplete and rapid than complete and slow, as long as you obtain system user feedback frequently and let that feedback guide you to shift your direction. (Users of your systems could include customers, employees, and anyone else who interacts with your company, including regulators, suppliers, and community members.)
Invest in Resources That Make the Change Stick:
Before commencing modernization, perform a careful analysis of the breadth and diversity of resources needed for a successful outcome. Project management and transformational leadership capabilities are as important as technical capabilities. Be highly selective in forming the team that oversees the effort. Choose people with a strong bias for change, a strong desire and ability to learn, a high tolerance for complex and uncertain situations, and a solid reputation for collaboration and teamwork. Financial resource allocation is just as important. Align funding to your highest modernization priorities. Be very clear about which areas you will not spend money on. Scrutinize your choices about desired features and technologies to ensure that financial resources are aligned with highest value. Develop a plan for funding to decommission and retire the old system, and to move people to the new one. Include funding for learning and development. Be clear and up-front about the transition plan so that the team with responsibility for maintaining the legacy system understands how important their role is and what options are available to them. Provide incentives to make sure that these people remain highly motivated while doing what may seem to be unglamorous work.
Partner Based on Shared Values and Trust:
The technological systems that you are modernizing are key to your organization’s future. Therefore, do not treat modernization — or the procurement of the goods and services needed to support it — as a transactional event. When selecting long-term partners, invest in special due diligence in excess of your standard evaluation criteria. Your goal is to find companies that can deliver mutual benefits and with which you can develop a working relationship that involves mutual commitment and creative collaboration as well as a fair deal. If you don’t get this right, not only could the project fail, but the switching costs could be substantial. Therefore, use informal as well as formal ways of gathering information. Seek out companies whose values you share and whose leadership has proven trustworthy. Evaluate the credibility of their work by looking at the technology systems they have built for themselves. Think about how well those systems support their own distinctive capabilities, especially those that would benefit you as their customer.
However, those criteria were just table stakes. The right partner also needed to share the values that ATB Financial held, and to verify that it could be trusted. ATB thus conducted site visits for each of the four semifinalists. It tested each company’s flexibility and speed by asking it to complete a proof-of-concept task, with only two days to work on it after receiving the specs. In addition, during the visits, the evaluation team spoke to employees at multiple levels. In modernizing your company’s technology, your goal is an effective and sustainable vehicle for strategic success. The critical issues, as with any organizational IT effort, are not purely technical. They involve learning how to design systems more effectively, engage individuals, and help facilitate constructive change throughout the enterprise.