Insight

How to move from digital experimentation to transforming for tomorrow

By Jiten Kachhela

Jun 26, 2018

The digital future is here. Technology is transforming our lives and no-one is turning back. We’re witnessing a profound shift to a future where everything is hyper-modular, software-controlled, connected and data-rich. This means every company in every sector needs to think of itself as a software, analytics and security company, behaving like a digital-age technology player.

And yet, our survey of 425 incumbent organisations from a broad spectrum of sectors found that almost half of organisations lack the commitment to transform proactively, despite understanding the significance of digital disruption. And this awareness plays out in their overall digital maturity score – just 54%.

So, with digital impacting every type of organisation and others struggling to make inroads in their digital transformation, it’s time to consider how you can ensure your business prospers.

Weighing up your digital options

In a world where established players have legacy constraints, new entrants have the advantage. Unconstrained by highly-coupled monolithic architectures, they build modern digital technology into everything they do. They’re naturally more adaptive, more efficient and in prime position to seize the opportunities of the digital-age.

It’s less straightforward for established players. You know legacy technologies are hindering your competitive advantage, but reshaping your business around a modern digital architecture is daunting. Should you make a single, bold leap, or take it step by step? When should you go for it? And how fast should you move?

The answers depend on many factors, such as your competitive environment, your appetite for risk, your budget and your existing technology. Before you decide how far and how fast to go, it’s useful to understand some key differences between legacy systems and modern digital architectures.

Legacy systems vs total transformation

Modern digital architectures are completely different from monolithic legacy systems. They’re built modularly, from thousands of micro-services, each one fulfilling a specific action, rather than from tightly coupled applications. These modules are connected by software, which can be rewritten quickly to create new configurations.

Such an architecture has a number of advantages. The first is that it’s easier to reconfigure these modules to accommodate new products and services, such as adding order management functionality across your product set.

The second advantage is that you can automate thousands of requests, rather than dozens of processes. By stringing together use cases, and keeping interfaces simple and flexible, you can even create zero-touch processes. These let customers choose a product, generate an order, make a payment and track their order, all without any manual input from your business.

The third benefit is that you have a platform that lets you provide services via an internet connection. You can use this to give customers access to your platform or to deliver services. You can also collect data from your products and services as consumers use them. So you could offer new propositions like helping homeowners manage energy use or airlines optimise fleet maintenance.

Three routes to transforming for tomorrow

While new entrants start from a blank canvas, established players have three routes to digital transformation:

Digital bolt-ons, then major surgery

Firstly, bolt digital components onto the legacy core to achieve new digital functionality. This looks great at the start, but the agility of the enterprise decreases as a whole. The more bolt-ons you have, the less adaptive you become. So eventually you’ll need to start carving modules from your legacy core and deploying them in a new arrangement to create a modular architecture. Then you can transform the bolt-ons into re-usable modules. While this can maximise digital capabilities in the short term, this ‘experimenting at the edge’ approach is a complex route and ultimately leaves money on the table.

A dual universe

Avoid the complexity and expense associated with major surgery to your legacy core by creating a ‘parallel universe’. This involves setting up a new digital platform for new products, services and customers. You then gradually migrate data and applications from old to new until the legacy systems become redundant. This approach can be expensive, but it has the advantage of affording an established player its own blank canvas to develop the required technology architectures.

Major surgery now

Take the leap and embrace reinvention at the root, rethinking your business and reaching out to those in the wider ecosystem. Ironically, the less digitally mature your business is and the fewer bolt-ons you have to contend with, the more attractive this route can be. This approach calls for more than data and technology. It means achieving structural flexibility, modularity and adaptability across your business. Leadership, culture, governance, metrics and new ways of working are just some of the areas that play a big role. Changes here will require vision, courage and the willingness to throw things up in the air and do them in a different way.

How soon do you need to transform for tomorrow?

The urgency of change will vary based on your sector, your competition, your level of ambition and how open your business model is to threats. The winners understand that loading their legacy core with more and more digital bolt-ons is not a long-term answer – they need to be more flexible and adaptive. It’s crucial to take the first steps towards digital transformation and drive it forward on your terms, at your own pace.

Those willing to take bold action now will be well placed to overtake more cautious and more rigid competitors, and be better-equipped to compete with new digital challengers. When it comes to the need to recast your core from a legacy monolith to adaptive, agile architecture, we believe it’s a case of when, not if.

About the authors

Jiten Kachhela PA digital expert

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