The world is currently experiencing 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.
Weighing up your digital options
In a world in which established players have legacy constraints, new entrants have the advantage. Unconstrained by highly-coupled monolithic architectures, they put modern digital technology into everything they do. So they’re naturally more adaptive, more efficient and in a great position to seize the opportunities flowing from the digital-age.
If you’re an established player, it’s less straightforward. 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 Digital
Legacy architectures are typically built around a few large monolithic systems, each made of tightly coupled applications. There’s one system for CRM processes, one for billing, and so on. You can’t easily and affordably change these systems or the way they’re connected to each other. It’s easier in the short term to push more functionality through them, but this creates complexity and further rigidity.
Modern digital architectures are completely different. They’re built modularly, from thousands of micro-services, each one fulfilling a specific action. 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 one is agility. It’s easy to reconfigure these modules to accommodate new products and services. If you want to add order management functionality for a new product, for example, you can simply link a new order management module to the whole.
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 – think Airbnb or Asos - or to deliver services – like Netflix and Spotify. 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 Total Digital
Wherever you are now in terms of technology, at some point your business will need these modular capabilities. Without them, you’ll be unable to deliver the digital services customers want and increasingly expect.
If you’re a new entrant, you can start with a blank canvas to create Total Digital business and technology architectures. For established players who have to contend with legacy constraints, we see three key routes to become Total Digital:
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. This path is complex, but it can be a way to maximise digital capabilities in the short term.
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, which you use 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, thus accelerating the execution of Total Digital business and technology architectures.
Major surgery now
Take the leap and embrace Total Digital in a single step.Ironically, the less digitally mature your business is, the more attractive this route can be. Why? Because you would have fewer bolt-ons in this scenario. It takes vision, courage and the right support, but you’ll overtake more cautious and more rigid competitors and be better-equipped to compete with new digital challengers.
Total Digital is much more than just technology
Becoming Total Digital means achieving structural flexibility, modularity and adaptability across your business – not just data and technology. Leadership, culture, governance, metrics and new ways of working are just some of the areas that play a big role.
How soon do you need to become Total Digital?
We caution against views that say that you must become Total Digital immediately. The urgency varies based on your sector, your competition, your level of ambition and how open your business model is to threats.
However, while some established players can hold their forts for a bit longer, we believe the need to recast your core from a legacy monolith systems to an adaptive Total Digital architecture is a matter of when, not of if. 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 becoming Total Digital and drive your transformation on your terms, at your own pace. The magnitude of this change is significant, and so are the challenges.
Find out what it means to be a Total Digital organisation in the first blog of our series.