In the last decade, customer expectations have shifted. They now put a premium on personalized, always-on experiences. Recent surveys show that 80% of consumers are more likely to make a purchase from a brand with personalized experiences and 91% of consumers are more likely to shop with brands that provide offers and recommendations that are relevant to them. On the other side, 32% of all customers will stop doing business with a brand they loved after one bad experience.
Furthermore, companies who are customer-centric are 60% more profitable compared to companies that are not focused on the customer. In order to compete, organizations must invest in technology that meets customer needs. However, many organizations may be blocked from making customer-focused transformation by their own legacy technology systems.
The Challenge to Digital Transformation
Legacy technology systems have served organizations well for the last few decades but are now standing in the way of innovative, customer-driven experiences. In fact, legacy systems are the leading barrier to digital transformation in a survey cited by Information Age.
Unfortunately, organizations struggle to be successful both in removing the legacy technology barrier and in the bigger lift of changing mindsets. Nearly three quarters of organizations (74%) fail at completing their legacy technology modernization projects. Some shocking examples include: a failed enterprise resource planning project by the U.S. Navy with a $1 billion price tag, HCA’s $110 to $130 million millennium accounts receivable system project, a $2 billion abandoned court management system plan by the state of California, and many others.
Why is it so hard? If organizations agree legacy technology modernization needs to happen and they are investing hefty resources to do it, why so many failures?
The Usual Suspects
Technology modernization challenges are usually blamed on the same four issues:
Size/cost: There are tens of millions of lines of code, making it too big and expensive to change.
Risk: Too many critical functions or downstream systems depend on them.
Lack of resources: These legacy systems can be over 40 years old and we don’t have the knowledge to migrate data from them.
Lack of documentation: We don’t know what it does, so we can’t reproduce it and we don’t have resources to review the code.
These arguments aren’t without merit. Take, for example, the system dependency problem. One airline legacy mainframe that we worked with was tied to over 300 productions systems. Think of the challenge and the coordination of reworking all those connections! All these factors conspire to increase the cost and risk of making changes.
Yet, in our experience, these are not the only reasons modernization efforts flounder. In the failed projects listed above, clearly there has been a lot of money allocated for these efforts. Organizations can usually find good approaches to create a viable technical strategy, plan for the cost, and mitigate the risk. Learn more about a front-end approach we implemented.
Instead, we find the biggest obstacles to legacy technology modernization are deeply rooted in leadership and organizational change issues.
The Silent Suspects Undermining Legacy Technology Modernization
So how do leadership and organization issues unknowingly set up modernization efforts to fail? By missing the intentional focus needed in key people areas so your technology investment can be successful.
Leadership Incentives and Reputation
One of the biggest problems facing the C-suite is the misalignment of incentives that prevent the ability to withstand the headwinds of a multi-year technology transformation. Whether pressed to show results in short periods of time or having financial incentives structured to hit tactical measures instead of strategic ones, an alignment issue is a roadblock that leaves some executives unable to stomach this type of long-term technology transformation. And while misalignment may start in the C-suite, these alignment levers also tend to be overlooked throughout the organization.
C-level executives may also be reluctant to bet their reputation on a long transformation program, especially when they may be moving on to their next role within a few years. The Korn Ferry Institute puts the average tenure for chief information officers (CIOs) at just over four years. So rather than achieving recognition for ushering in or progressing a long-term technology transformation program and devising a fluid handoff for the next CIO to further longer-term results, many C-level leaders are resolved to let the next person in the role undertake the challenge. Frame success from a progress mindset, rather than a results mindset.
How Things Get Done
Organizations have inertia and that makes it hard to drive change. The bigger the institution, the more inertia it has. Like leaders, employees often have little desire to change how they operate, so identifying key people and tapping into who has a pulse on influential relationships within the organization becomes critical. Because modernization requires a change in how companies and employees think about developing solutions, flow of interactions will shift.
Historically, technology initiatives are defined by an annual strategy and approved on a yearly budget. However, with a modern approach driven by a customer-centric priority, companies must frequently launch minimal viable products (MVPs), learn from users, and change direction during project progress. This takes a longer view of funding to enable a lean or agile approach.
Legacy systems are designed for internal employees, but most modernization efforts focus on customer self-service solutions (mobile apps, etc.). Rather than internal subject matter experts providing requirements, you may need to do several sprints of user experience design with actual customers. This changes the flow of inputs, the way solutions are defined, and how employees take action.
Traditional project management approaches, status tracking, and other progression management tools are less effective in more dynamic environments. Project teams will need to learn new ways of working to become comfortable using an agile approach to maximize progress.
With customer-focused systems comes a higher need for data privacy and security. This type of governance may not exist within organizations that have never exposed data outside their four walls.
These examples of how things flow illustrate a few of the numerous changes that would need to occur across the organization: from how solutions are defined and budgeted, to the way they are built, tested, and rolled out to customers, and—critically—around the mindset shift that impacts how your employees act. Getting over “we’ve always done it this way” is no easy challenge, but it’s necessary.
Business Process Changes
When modernizing technology to increase interaction with customers, it’s clear that business processes must also change. For example, in an organization centered around a legacy solution, a customer may call, fax, e-mail, or mail in information (i.e. payments, claims, etc.) which must be manually entered. In a customer, self-service environment, these processes will change or may be automated entirely.
Unfortunately, many companies simply try to recreate the same systems and broken processes—just with newer technology. Instead, organizations should go back to the customer data uncovered during design sprints and rethink these processes through the modern lens.
Naturally, with process changes, different or new roles and responsibilities emerge for the employees who previously handled these manual processes. This can incite fear that jobs will go away or they will not be capable to perform them. In actuality, some roles are shifted to work within new systems and processes, while other roles open up around value-added opportunities that previously were unable to be addressed when manual processes consumed an employee’s time. But fear is not so easily vanquished.
The Challenge of Fear
Nothing stops change and creates an enemy of progress like the fear of losing your job. Facing this problem can be uncomfortable, but it doesn’t have to be. Progress creates different, modern options.
In John Kotter’s classic article, “Leading Change: Why Transformation Efforts Fail,” he cites a major error of leading change—the failure to remove obstacles that stand in the way of the new vision. One of those major obstacles is fear. It's the role of the executive to instill hope and lead the organization through fear while undertaking the journey of modernization.
It’s a natural neurological response steeped in safety and self-preservation. Employees are afraid they won’t be as successful with the new technology or that the technology could replace them. David Rock’s book, the Handbook of Neuroleadership, explains that uncertainty brought on by organizational change registers as a tension in the brain that must be resolved. Resolving this tension is no easy task. Focusing on organizational change leadership and behavior change management efforts facilitates hope and understanding for how they fit and will be enabled for success in the new normal. Key to this: Start early with engagement so their fears are heard, create experiences for dialogue and stakeholder buy-in, and train employees on new technology so fears can be demystified.
Legacy Technology Modernization Solutions
Unfortunately, there is no silver bullet to address all these modernization challenges. You’re already taking a first step by reviewing and incorporating best practices into your people strategies. This facilitates organizational change and supports technology modernization.
Leadership Incentives and Reputation
In order to make a legacy technology modernization strategy stick, the C-suite needs to reframe what success looks like. Apply an agile approach to creating an incentive structure based on the progress of efforts versus the completion of the entire modernization effort. Decouple the short-term demands of the market from long-term growth commitment.
Corporate boards need to step in and prioritize this transformation. Boards must make it a priority and hold the C-suite accountable to results. Boards should be focused on the long term when 86% of CEOs admit they are more focused on the short term. They must also incentivize this type of long-term thinking through changes in compensation plans or the metrics that drive them. Given this mandate and air cover, CIOs and other leaders can then drive toward results. For multi-year modernization programs, a leader’s reputation can be tied to the phase of the program they lead. Perhaps they initiate modernization changes, enable the progress in the middle, drive the project to completion, or enhance the ongoing, sustainable modernization.
How Things Get Done
As organizations fight the inertia of change, committing to an agile methodology beyond the technology department is helpful. When an agile approach is applied across the organization, it enhances change capability. Use customer-focused practices like design sprints, customer listening sessions, and key stakeholder events to create a culture shift toward a model that is constantly learning and engaging in dialogue.
In order to move to an agile way of getting things done, organizations need to reorganize the way they are structured, who they involve, when they engage with others, and how they do work. Start with inputs from customers and then flow through a development process or create different working teams to get the job done.
Then to sustain the new method, governance changes will manage risk and leverage key areas that enable your technology modernization. These can include organization-wide changes to incentives, structure, and processes and are imperative for alignment and sustainability of the transformation.
Business Process Changes
As you undertake the move to a more customer-centric, personalized relationship with the customer base, the supporting processes will be redefined, optimized, and changed to match the customer journey. To support this new customer experience, employees will engage in a new definition of role expectations and performance standards. It would be naïve to ignore the synergies that take place when organizations modernize. However, there are opportunities for employees to perform new roles.
For example, employees who previously entered payments into the legacy system could be retrained to provide customer care when using the app. This often works better than traditional outsourcing of support because employees intimately know the business.
Retraining or “up-skilling” takes valuable people who know your organization and business and refocuses them to:
Learn new technology, such as shaping an automated response, necessary for the modernization effort.
Explore emerging technologies that might be valuable in the future.
Add value by contributing their company knowledge into the modern direction of the transforming company.
In addition to some employees “up-skilling,” other may have newly available capacity. This capacity can be used on valuable and strategic efforts which likely have been sitting dormant when priority was placed on the repetitive, revenue generating and supporting functions.
The Challenge of Fear
Engage employees with “experience sessions” to reduce fear. This gives employees a behind the scenes look, an opportunity to surface fears and resistance, and involves them in a process where they feel they have no control over what is happening to them. This allows them to feel heard. Additionally, the feedback fielded through dialogue can bubble up as data points that help tweak decision-making, timing, and shaping of strategic messaging to be more influential. Ultimately, this stakeholder experience approach influences accelerated adoption to the point it becomes an anticipated change that creates internal demand often before the modernization effort is completed.
Whatever your metaphor of choice is (e.g., eating the whole elephant, boiling the ocean, etc.) the fact remains that trying to change everything at once usually isn’t necessary. Finding quick wins to validate the approach, generate excitement, and show measurable results encourages more investment in adoption. It also requires change leadership from executives and senior leaders over a longer period of time. Our friends at the Feld Group use the term “escape velocity.” We think this is a very apt analogy. If you don’t get going fast enough, the gravity of the organization pulls you back down to old behaviors.
You Need a Strategy for Change
The goal here was not to try to convince you why modernization is important or that it’s technically hard. We recognize both those points are obvious. Having a sense of urgency and a sound technical approach are necessary—but also not sufficient. To effectively modernize your legacy solutions, start with change leadership and change strategy to lay a foundation to accelerate change. Align leadership incentives and board-level support to create an environment for executives to drive the long-term investment into modernization.