Until recently, many companies saw technology modernization as a necessary evil, something to postpone as long as possible to avoid the disruption sure to accompany it.
Today, more of them recognize that disruption is part of the attraction.
Modernizing systems can and should serve as an opportunity for companies to reevaluate timeworn and inefficient processes and update them. One way that companies modernize their systems is by updating their enterprise resource planning (ERP) and other integrated management systems. Increasingly, these systems can help companies by providing ways to create more value by delivering improved processes.
- First, these systems help companies develop an end-to-end view of their business processes, not only by facilitating seamless connections, but also by tapping the expertise of industry partners to provide guidance on best practice for each particular industry and segment.
- Second, customers shift from a capex model of purchasing large systems to subscription models, even systems that are not delivered, as Software as a Service (SaaS) can increasingly be purchased with similar financing models.
- Finally, building on both of these points, upgrading systems can provide a platform for investing in more next-generation services, such as analytics and AI, which can help grow the business. Advanced technology can trigger a different level of ambition—for example, the difference between a company that wants to digitize its call center and a company that wants to reimagine its operations without one.
All of this has helped cause the pace of digital transformations to pick up, spurred not only by customer demand and evolving business models, but also increasingly by the sophistication of better technology that can make these transformations simpler, faster, and more rewarding.
Unfortunately, some companies still don’t aim high enough with their digital transformation. They see digitalization mostly as a means to automate existing processes and perhaps achieve better integration with other systems and also tap the benefits of more data and better analytics. But these companies are squandering the real opportunity inherent in digitalization: improving processes by making them more efficient.
For example, a large telecommunications carrier setting out to upgrade its legacy billing and customer relationship management (CRM) systems started out by asking the platform provider to replicate all of the unique processes and workarounds that executives believed were the “secret sauce” for its tremendous growth over the previous 15 years. After analyzing the requirements the provider replied that not only would that require a great deal of expensive customization, but it would also deprive the company of the opportunity to update and improve many of these processes, to take advantage of digitalization and advanced capabilities that improved on the carrier’s outdated processes.
After the provider detailed the full set of business processes that were available “out of the box,” the carrier realized it could keep the competitive advantage it had built into its processes but in a simpler and more efficient form and minimal adaptation. The new billing and CRM systems help the carrier to be more nimble and agile when transforming customer episodes, and that has allowed it to adopt a more customer-centric perspective. The system also incorporated best practices across the entire telecommunications value chain and customer journeys, which were then available to the carrier.
What sets leaders apart
First and foremost, leaders set out to achieve transformational results, rather than single-digit improvements. They spend more time thinking about how to take advantage of future opportunities.
Most adopt Agile methodologies, building up cross-functional teams that are empowered to test and learn, and to make decisions about where to focus investment to move initiatives forward, from the C-suite to the front line.
Leaders also work to ensure they have a clear view of technology spending, so they can track how investment leads to results. Every initiative has a business case, and executives can articulate how a specific technology investment is creating business value.
Finally, these companies are comfortable with technology, elevating it to the same level as other critical business functions. This helps them embrace transformation, which creates an energy that carries the momentum forward. Employee engagement in the transformation is usually pretty high, because the benefits are made clear to all and senior management keeps an unwavering focus on the transformation, offering consistent messaging about the connection between change and value creation. Frequently, employees feel better prepared for the challenges ahead because the company is keeping pace with change.
The elements of a successful transformation
Successful transformations are more likely when senior executives and the board align on the ambition. Leading organizations take a zero-based approach, redesigning processes from scratch, introducing new ways to work, and creating new business models. Critically, they empower the people who actually run a process, who are closest to the market for that process, to make changes to improve it.
In addition, leaders present a clear business case for the transformation, showing which processes will change and how this will improve the business. This case needs to be based on hard data, and should also present the transformation as a portfolio of changes. Budgets need to be flexible—not yearly, but monthly, and senior managers must be willing to change or accelerate investments where necessary to gain advantage.
This business case should reflect the value of adopting a more modular architecture with more standardized components, which can increase the pace of innovation and improvement. For example, moving the technology supporting the supply chain to a more modular architecture allows it to more easily be updated and revised as conditions change, at a pace that would not have been possible on legacy platforms.
Ongoing change management is, of course, essential and needs to be guided by a cross-functional team empowered to design the future state and make the changes necessary to reach it. Change management needs to happen at all levels, from the C-suite to the front line, and must be rooted in a clear understanding of the ways that people and their jobs will have to change.
Of course, successful initiatives deploy technology in ways that simplify and accelerate the transformation. As noted in the telecommunications example, the most effective transformations do not overinvest in customization that would maintain the status quo. Leaders understand which unique processes actually contribute to competitive advantage, and which are mere artifacts of the ways things have always been done—and limit the customizations to the former, in order to take advantage of a new software systems’ capabilities to improve business processes.
Finally, executives leading a technology modernization transformation can help ensure success by following a few tried and tested principles. First, get on with it. The quicker a company engages with the challenges of modernization, the sooner it can begin to see results that will deliver a competitive edge. Second, don’t make the mistake of viewing this only through the eyes of the CIO or IT team. Successful modernization programs keep a laser focus on the customer’s needs and the business goals of serving those. Finally, don’t think of this as a single event. Business and digital transformations are the beginning of a journey that can continue to create positive momentum and beneficial outcomes for years to come.