The rise of technological advancement has paved the way for business modernization and rapid digital transformation in organizations across the globe. In our previous articles we have touched upon the business modernization landscape, its key drivers, and impact on the bottom line. Now here we are, outlining the key steps to approach business modernization from a strategic lens. While there are several operational steps associated with modernization, including, adoption of latest technology, upgrading hardware, etc., having clear strategic priorities creates the foundation for sustainable and scalable modernization.
Chief Knowledge OfficerStrategINK
Assess the need for business modernization
Business modernization is not merely adopting a new technology or a solution. It can help shield the organization against business disruptions, optimize operations and drive business growth. To extract the maximum benefit from this exercise, the first step is to identify the need for a transformation. Mindlessly adapting a new technology as a knee-jerk reaction will not serve the purpose unless the modernization efforts solve a business problem. Without knowing the need for a change, organizations will be unable to devise a strategy for its implementation.
There could be many reasons such as losing out on business deals to a competitor due to their technological advancements. Another reason could be that the legacy applications might have reached their end-of-life support. With no vendor support available, using them for critical business operations can lead to high business risk. Out-of-date applications may lead to inadequate performance and pose security concerns. Both of these contribute to poor customer experience leading to churn. Plans of business expansion and diversification can also push the need for modernization.
Once enterprises have identified the need to modernize the current business operations, they can go ahead with exploring the various available solutions. The solution should be in sync with the business needs and objectives.
Involve key stakeholders
However advanced, out-of-the box, solution oriented a new technology or business process might be, it will fail to benefit until it is adopted by the relevant departments within the organization. The success of the business modernization strategy will depend on its acceptance by the people who will be impacted by the change. The key stakeholders should be identified and involved early on in the business modernization journey. There are both internal stakeholders i.e. the employees as well as external stakeholders such as vendors, customers, partners, etc.
The requirement of each department to effectively perform its business function will differ. People are more prone to accept a change when it adds value to them. When business decision makers actively listen to and interact with all the stakeholders it encourages them to be interested in the business change. An open and transparent communication can help build trust and minimize the negative impacts of change. When compared to the upper management, the employees better understand the day-to-day business operations and the improvements needed. Their feedback on the intended changes can be quite insightful in anticipating the risks involved and mitigating them.
Involving key stakeholders can also help in creating Cross Functional Teams (CFTs) which can be valuable in driving the change. Business leaders should listen, understand and analyze the concerns and priorities of each stakeholder group and devise a modernization strategy that is in line with the overall business objective of the organization.
Align the budget to business modernization objectives
When strategy is not aligned with IT initiatives it can lead to accumulation of technology debt. A company with a huge technology debt will be using a majority of its resources and money on maintaining the existing legacy technologies. A huge portion of the budget will be allocated to the maintenance of this aging infrastructure. This money and resources, if freed up, can be used to create business value.
A lot of organizations might be spending a huge amount on tools for different tasks. There are chances that at the time of implementation, there was no analysis carried out to determine whether these tools align with the overall objective of the organization or not. There are instances where extra tools or licenses are bought but remain unutilised. This leads to wastage of money that could have been used for business growth. Enterprises can look at merging the applications and processes to reduce the costs.
IT spends should be aligned to the business objectives. Evaluate the business gains that are likely to be achieved due the proposed shift. Focus on what this change can contribute to the organization in terms of revenue increase, cost reduction, growth, etc. When deciding on spending on a new technology keep in mind the initial investment, switching cost, the maintenance cost over the years, and the end-of-life costs. Allocate the budget for legacy technologies after evaluating the benefit they can bring and focus spending more on solutions that can reduce the organization’s technology debt.
Monitor and optimize
Business modernization is not a one-time process. Enterprises have to constantly monitor and track the progress, identify pitfalls and continuously improve. Modernizing the business and ending up with the same result as before will add no business value. Innovation and automation can help optimize business performance. Organizations have to constantly evaluate and iterate to get the desired results. A technology that is new today might be obsolete tomorrow.
Monitoring will help assess whether the changes are resulting in any measurable business improvement or not. Enterprises can regularly carry a performance check by having well defined KPIs and visibility to actionable insights. Organizations can use this to optimize modernization efforts and devise strategies to continuously improve business operations.
Strategic business modernization: Recipe for success
Here is a quick recap for CXOs and business decision makers on how to view modernization from a strategic lens and ensure high levels of success:
- Be clear on why the enterprise seeks to modernize; the need, objectives and intended outcomes
- Make modernization a collaborative process and involve all key stakeholders
- Align budgets and resources to make business modernization a success
- Make modernization an iterative process; monitor and track progress to optimize results
Creating a strategic foundation for modernization is instrumental for businesses seeking to thrive. These steps can help CXOs and decision makers ensure far reaching impact and results.