In this Leadership Perspectives series, we ask different industry leaders to share their thoughts on trending business tech topics. Shivani Agarwal is Head of IT Infrastructure, Security, and Enterprise Services at McLane Company, a supply chain leader. She is responsible for IT Infrastructure across all McLane distribution centers, data centers, and facilities, Information Security, Enterprise architecture and IT operations & services. Shivani is driving modernization through evolving practices, architecture principles, and systems that enable McLane’s vision for the future. In this post, she's shared her perspectives on how businesses can choose the right modernization projects and keep them on the path toward success.
In your experience, what are the key considerations for companies when deciding whether to modernize their legacy systems or replace them entirely during digital transformation?
Any change must be driven by the value statement. What is the reason a business wants to digitize or modernize, and what will be the value, and to whom, after the modernization is complete?
Let's get to the basics first, and instead of looking at the question from a technology perspective, let’s inspect it from the angle of business economics. Peter Drucker, who wrote the ultimate guide about management and business, said "The purpose of business is to create a customer." Business exists because it provides goods and/or services to people that make their lives better. According to Drucker, "The want a business satisfies may have been felt by the customer before he was offered the means of satisfying it…The want may have been unfelt by the customer; no one knew that he wanted a Xerox machine or a computer until these became available. There may have been no want at all until business action created it—by innovation, by credit, by advertising, or by salesmanship."
Why does a business want to modernize or replace legacy stacks? For the simple reason that it needs to create more customers so the business itself can continue to exist and thrive. A business makes customers' lives better and customers then ensure that the business survives. To stand out from the competition and to show up as the business of choice to their customers, leaders must see if they can innovate, accelerate, and create more value.
In order to do that, business leaders must decide if and what needs to change first and foremost about the capability, which then would decide what technology functionality must modernize. This will then drive the strategy for what must be modernized. Is it the front-end or customer experience only, with the back end staying on legacy? Or do you need to take the entire customer journey and move it off the legacy stack one experience at a time? Should you build a services layer around the legacy systems that then feeds the front-end experience, or do you need to rationalize the data and build microservices?
Quite often business leaders incorrectly decide that all legacy systems must be retired or replaced with modern architecture of microservices and serverless. As an example of resisting this temptation, I read that Amazon Prime Video has gone back to Monolith architecture for the performance and cost advantages.
To summarize, here are the important factors to consider:
∙ Business Objective: What is the goal, and what technology stack and architecture enables and accelerates that goal? What user experience needs to be built or changed, and how will the business attract or retain customers?
∙ MVP or Priority Order: If replacing the legacy stack is required, what is the order in which the most value can be derived for the business objective, while keeping the current business running? What will bring the most value and reflect the best understanding of the urgency for time-to-market?
∙ System Complexity: Are we adding to the complexity of the technology landscape by making hurried decisions? Consider the tech debt that is getting built as complexity gets added for this modernization. The plan to retire or "turn lights out" must be an important part of the journey and given priority. Building new without removing old adds to cost and maintenance, and leaves more room for failure of systems.
∙ Organizational & Culture Change: Unless the impact of the change is understood and addressed, even the best of business objectives will not result in the desired outcome. This is our Achilles heel as humans: we embrace change most easily if the change is not impacting us directly. Assess the willingness and readiness of the workforce for the new technology and process, then decide how to address it.
How can companies address potential regulatory and compliance risks that may arise from digital transformation efforts, especially in industries with strict regulations or data governance requirements?
It is crucial to understand the specific regulations and compliance requirements that apply to the industry sector and organization. Use "Compliance by Design" as an architecture principle, so the requirements and product builds take compliance into account. Ensure that compliance requirements are addressed in the architecture, processes, and workflows of the new systems and technologies.
Make sure that the controls for these regulatory requirements are clearly documented and check for them throughout the Software Lifecycle (SDLC). It is important that besides testing for functionality, NFRs (non-functional requirements) tests must be done for the controls for regulatory and compliance requirements. Companies generally have a practice of relying on internal and/or external auditors to assess and find the gaps to close. During major upheaval or change of business and technology (aka transformation), business must take proactive steps to ensure compliance. There are several software tools through which a business can automate the checks for these controls. Training should be done for the employees, so everyone involved is aware of what they need to do. This is the time to implement continuous compliance monitoring and improvement—embedded as a part of change management.
By taking a proactive and holistic approach to regulatory and compliance risks, companies can navigate the digital transformation journey while maintaining compliance with regulations and data governance requirements specific to their industry.
What are some best practices for companies looking to embark on a digital transformation journey, and how can they ensure success?
I talked about this at Zoho Leadership Live also. I have built this framework over the years through my experience in participating in, and leading, business and technology transformation. This is my opinion of the best practices that lead to a successful outcome.
Build a culture of innovation: Innovation requires a culture that encourages creativity, experimentation, and risk-taking. Leaders can foster this culture by empowering their employees to think outside the box, rewarding and recognizing innovative ideas, and creating a safe space for failure and learning.
Communicate the vision: Leaders need to clearly communicate the vision and purpose behind the innovation initiative to the organization. This includes explaining why the legacy systems need to be replaced or improved and what benefits the organization will gain from the change. This will help employees understand the importance of the initiative and feel invested in its success.
Start small: Innovation can be overwhelming, especially when it involves a significant change to legacy systems. Leaders can start by identifying small areas of the organization where innovation can be tested and scaled up over time. This approach can help build momentum and gain buy-in from employees.
Engage employees in the process: Employees who are directly impacted by the change should be involved in the innovation process. Leaders can encourage employee participation by creating cross-functional teams that include members from different parts of the organization, soliciting feedback and ideas, and providing training and support to help employees adapt to the new systems.
Measure success: Leaders should establish metrics to measure the success of the innovation initiative. This includes tracking progress towards the goals of the initiative, measuring employee engagement and satisfaction, and assessing the impact on the organization's performance. This will help leaders make data-driven decisions and demonstrate the value of the innovation initiative to stakeholders. Identify and publish the success measures or objectives and key results (OKRs)—even for the initial stages. People want to know what to aim for. Then make sure you celebrate successes and even the "fail-fast" experiments.
Build to last: Starting something new is easier than sustaining it. Make sure you understand this and have created a plan for supportability and scalability. When you are building a team for this initiative to move beyond legacy systems, don’t pick only the builders. Your team must include the fire-fighters and the translators or interpreters who can bridge between the current state and the future.
How do you measure the success and progress of digital transformation initiatives in an enterprise-level company, and what metrics or indicators are typically used to track the transformation journey?
Let's go back to the foundational question: why did the business undertake this transformation? At a macro level, the metrics and success indicators are always the same. The target numbers or timeline will be different for each business, but need to be documented and shared with the employees.
∙ Improved sales/revenue growth/profitability
∙ Better retention of customers
∙ Market reputation (which will result in more sales)
∙ Impact on community
∙ Value to shareholders
∙ Time to Market
However, businesses cannot afford to wait until all digitization is complete for the end-to-end customer journey, or until modernization of tech stack is complete, to know if the goals can or have been achieved. We must have more incremental targets. To do so, businesses utilize the framework of creating OKRs (objectives & key results) to understand if our trajectory is right or if there is some course correction to be made. These OKRs must be tied to the macro-objectives or targets.
Example: Improve customer retention via:
∙ Enhanced customer experience through digital channels
Key Result 1: Increase mobile app user engagement by 30% through the introduction of new features and enhanced user interface within four months.
Key Result 2: Reduce customer onboarding time by 25% by streamlining digital processes and automation within six months.
Key Result 3: Achieve an average customer satisfaction score (CSAT) of 90% for digital touchpoints within the next quarter.
∙ Building a loyalty program that provides rewards or discounts
Key Result 1: Increase customer participation in the loyalty program by 20% within three months.
Key Result 2: Achieve a 10% increase in customer retention rates within six months of launching the loyalty program.
Key Result 3: Increase the average customer lifetime value (CLTV) by 15% within one year through loyalty program engagement.
Example: Improve time to market by:
∙ Enabling seamless integration and Interoperability between systems
Key Result 1: Implement an enterprise service bus (ESB) to facilitate seamless integration among core systems and applications within four months.
Key Result 2: Establish standardized APIs for key systems to enable interoperability and third-party integrations within six months.
Key Result 3: Reduce manual data entry and improve data accuracy by integrating two major systems through automated data synchronization within three months.
Now we have created SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) goals for the employees to create and execute on projects. The success criteria for the projects are clear and it is also clear how their effort ties into the overarching company goals and transformation results. Now, there is alignment, there is involvement, and people know how their daily tasks are enabling the company's success.
BONUS - If you could only use one tech device for the rest of your life, what would it be and why?
Interestingly, this question was harder than the ones above! Among the currently available tech devices, like most other people on this planet, I choose the "phone." I put phone in quotes because the only thing we don't use it for is to call other people. It is more of an all-in-one device that serves as a personal assistant, map/GPS/finder, social connection manager, mood adjuster via music or video streaming, educator via podcasts, etc. This is a must-have for me, however not in its current form. Carrying this delicate, slippery device is a nuisance and wearing the huge watch is an even bigger nuisance. I would like this "phone” to be a plug-and-play SIM-card-size device that can be inserted into any wearable based on personal preference. I could have it attached/inserted into my eye-glass frame, or my AirPods, or a glamor bracelet or something else. The device can give me information via sound or have a holographic screen of the size and fonts I prefer to show my emails, social media, and everything else.
So, my tech device is a personalized wearable "phone."
