Why Business Modernization should be on your Agenda

While it may seem obvious that modernization should be the foundation for creating a digital business, most CIOs say that they go hand in hand and can feed off each other in different, not-so-obvious ways.

Any non-startup or digitally born company has built up a legacy of ‘technology debt’ that limits its success as a digital business. The costs of a brittle architecture are enumerated in higher maintenance dollars, greater risk of failure,
and limited future use. Therefore, organizations need to build a foundation for the future. By doing so, they will eliminate one of the biggest drags on time to market. For these reasons, business modernization is an agenda item for CIOs and their enterprise architects. However, how do you tie modernization to the business agenda and prove the business value of making the investment? This is the question that I asked the #CIOChat.

Drivers for Business Modernization
CIOs are clear that the move to modernize is typically attached to a ‘significant emotional event’. CIOs say that they rarely see aging technology being the driver all by itself. For too many organizations, the motto is if it still works don’t fix it. So, what are the drivers of modernization? According to CIOs, there are four.

CIOs say M&A drive modernization projects when the synergies are large enough to recoup some of the costs incurred in the deal. They also say, however, that way too often traditional CIOs leave systems in place, far past the M&A phase and after the business integration funding has dried up.

“One CIO said I’m going to rank change management somewhere just below air to breath but above food and shelter”

A second driver of business modernization is what a former CIO of Yahoo, Mike Kail, calls the “fear of extinction”. Modernization efforts in many IT departments are started when long standing existential threats are noticed or ego driven change takes place. The problem is that most businesses don’t recognize existential threats until it’s too late for a recovery.

CIOs suggest that nothing drives modernization faster than continued losses to a competitor. It’s much easier to get approval for a modernization project when losing deals due to the competitive technical advantages from a main competitor. For many organizations, a loss revenue or key customers represent the kind of ‘shot across the bow’ that causes the business to provide long needed modernization funding. And yet to be fair for some, the knee-jerk reaction to losing revenue is not to invest. Instead, it can consist of austerity measures and not investment in growth or modernization. CIOs suggest that it is better for executive teams to first cut waste and then invest in the future. Unfortunately, at two former employers austerity and cutting became a way of life.

A third driver of modernization is a vendor dropping support for an ancient version of the product. And while there can often be financial motivations to displace an aging, expensive legacy of tech debt, this is typically not enough to makeit through an investment committee.

The fourth driver is process optimization. Here, the business invests to create business differentiation. This is followed by automation and integration.
This, of course, depends on the company. But it also depends on the business leader. In these cases the drive to modernize is tied to a company’s business strategy. CIOs say growth and expansion opportunities often drive modernization. We sell A, but now we’ll also do B, which requires us to start operating with X, Y, and Z. Smart CIOs partner up with business leaders to get things past the talking phase and into the strategic roadmap and planning/budget stages.

Relate Business Modernization Initiatives to Business Outcomes
CIOs say that IT leaders need to be able to relate modernization initiatives to business outcomes. It is their job as company leaders. In a perfect world, CIOs and IT leaders should come up with initiatives and then partner up to get the highest value completed. Although CIOs say they think IT leaders can facilitate this,
they also suggest that business owners need to be accountable for the measurable outcomes. To be clear, they say that a CIO can’t initiate an update, improvement,
or modernization unless the business agrees it needs it. A CIO can’t sell something when there is no appetite for it in the first place.

That’s one of the reasons why they believe it has always been hard to predict a business outcome, but as one CIO said, “no one said that being a CIO was going to be easy”. CIOs clearly need to be involved early when there are new threats to their organization’s overall business model. The outcome of these conversations may require modernization combined with a new strategic model.

Aside from business outcomes, risks to the business must be conveyed. Legacy systems do not only impact business performance when compared to their more modern counterparts but represent risk points in terms of maintenance and security. The CIO needs to be at the forefront of translating changing business opportunities and risks into opportunities that are assisted by appropriate technical solutions.

Looking at this through a digital lens, CIOs or CDOs must drive a New World Order which is customer focused by integrated systems delivering digital and traditional products and services. So they will need to help executives see the need to modernize now.

The Scope of a Business Modernization Initiative
CIOs say: start by optimizing the underlying business process and practices and then you can look at the technology stack. The first step needs to ensure there is a solid foundation that can evolve with the modernization and transformation initiatives. You can then start focusing on the more tactical areas. It’s like building or remodeling a house.

The scope should be defined to fit each project. Any CIO worth his salt will include modernizing the platform before building more on top of it. Regardless, CIOs suggest that is important to architect modernization projects so they are completed in manageable chunks. One CIO said it is better to build “dolphins instead of whales”. Clearly, where there is a technical debt, there will be burning fires. Systems should first fix the things that are already impacting the business and have a high risk of stopping the presses. CIOs should find and modernize these burning fires.
One CIO suggested a complexity/value/cost matrix to evaluate each of the items. Some might be quick hits or no brainers because of the end of the contract/lifecycle. The rest needs to be evaluated and put into priority waves based upon the matrix. CIOs stress, however, that it is hard to be strategic when your pants are on fire.

The Importance of Change Management
Change management for communication planning and strategy is worth every hour you spend on it. CIOs say modernization can’t be done without it.
Change, says one CIO, is a formal way of ensuring all the right people are involved and know what’s happening.

At the same time, CIOs stress that success isn’t about new technology and modernizing systems. It’s about changing people’s behaviors, workflows, and collaboration. Effective change management ensures that appropriate stakeholders are part of the conversations and that documented procedures including roll back steps are discussed. This serves not only as a record of change but a method for understanding the change and its impact.

One CIO said I’m going to rank change management somewhere just below air to breath but above food and shelter. They said I’ll go with: it is essential. Any change or modernization effort changes people’s jobs. You will fail without well thought out change management. Change management and constant culture management are key to moving forward. Finally, it is important to measure changes against outcomes and adjust the overall modernization priorities as a result.

Modernization as the Foundation
CIOs say that modernization and creating a digital business go hand in hand and can feed off each other in a virtuous (or vicious) cycle. Whether it is the CIO, CTO, or CDO that initiates modernization depends on the organization, but the CIO/IT is probably the fulcrum on which it all turns. CIOs believe that modernization is often linked to digital experience. However, in many cases the cultural and organizational improvements reap the biggest rewards so a full IT upgrade is not critical.

Modernization, however, must be addressed to enable a digital success.
CIOs look at things in terms of time and complexity. For example, modernization is a short-term project such as an application upgrade, while digital transformation is a complex and long-term like move towards a more integrated ERP.
Eliminating technical debts needs to be a component of creating a digital business strategy. And from a management perspective, like any large program can be made up by a number of smaller projects some of these might be pure modernization, but if well architected they can move an organization towards the end goal. CIOs, for this reason, view modernization as one tactic in a transformation. More often you are building something completely new and legacy processes and technology needs to be sunset.

Modernization can be pursued for multiple business reasons. However, without the business, the potential of a modernization initiative is limited. And as well, without the business and business justification, it simply will not take place. Therefore, it is time to take action because the competition is not sitting still.