How legacy systems can be mobilised to innovate
3 mins read
‘Innovation’ has become a loaded word, one that can send a shiver down the spine of even the most forward-thinking CEO.
And that’s because in many organisations – especially legacy businesses with shareholders wedded to their dividends - it feels like a big gamble. There’s no right way to ‘innovate’, no guaranteed returns, and no way back once you’ve started. It’s all or nothing.
All of these issues colour decision-making and create a risk-averse culture stifled by nervousness and a need to protect the status quo. In other words, a culture of failure.
We have seen this happen increasingly in the business community in recent years. New, more agile competitors enter the race, and the established businesses seem to freeze. This paralysis is driven by a contradiction – they know that they need to be disruptive, indeed they want to disrupt the market, but they don’t want to disrupt themselves at the same time. Whether that is caused by fear of change or by arrogance – and we’ve seen examples of both – the outcome is becoming all too predictable.
The irony, of course, is that legacy organisations are in a far stronger position to take action, to respond, even to lead, than many realise. They have the weight of data, insight, brand exposure and sales machines behind them that could enable them to disrupt and even dominate.
But they aren’t using that weight to manage their market effectively. And this is where legacy businesses need to start thinking a lot more radically.
Because the market has changed. Online bazaar-style marketplaces such as Amazon and eBay are the dominant channels for both product and service sales, and they’re proving extremely profitable. Their ability to unite buyer and seller as well as provide reviews and feedback in seconds has seen consumer adoption skyrocket. And for vendors, the ability to accelerate go-to-market for their new products, as well as diversify their offering, has made these marketplaces a leading channel for everyone from SMEs to multinationals. And because these marketplaces are built on platforms, they can both innovate and execute at an unprecedented scale.
This, then, is the opportunity that many legacy businesses are missing – integrating platforms into their business systems.
Platform-based businesses have emerged as the most powerful and disruptive forces in global business. The reason for their success is clear: platforms allow others to build businesses on top of them, sharing innovation, creating customer value and delivering profit. In fact, they’re an entire economic ecosystem – and they are thriving.
Today, we see an abundance of platform-based businesses, all devastating – not just disrupting – their markets.
Customer satisfaction and loyalty has been profoundly affected by simple transaction platforms, such as eBay, Airbnb or Uber, which have created a gold standard in personalised, frictionless, easily repeatable customer experiences that legacy businesses have struggled to compete against.
From an operational perspective, innovation platforms – such as SalesForce - have redefined and democratised access to complex IT infrastructure, leading to an influx of highly advanced technology start-ups able to compete effectively against long-established alternatives.
In short, the use of platforms has in a very short space of time become a defining competitive advantage.
So where does this leave legacy businesses?
Well, firstly in need to a change of perspective. The starting point is to realise that evolving towards a platform-based model does not require an ‘all or nothing’ strategy – far from it. This is not about wholesale rip and replace of existing IT systems and infrastructure, nor is it about launching your own version of Amazon’s infamous API manifesto. Platforms can and do integrate easily as part of a broader business model.
Nor does the platform have to be proprietary or a one-size-fits-all – nested platforms are becoming increasingly common as businesses seek the right tools and applications for their needs.
And while marketplaces are by far the most common and simplest form of platform businesses, the possibilities are endless. Almost any organisation can take on elements of a platform if it determines what parts of its business can be shared, resold or repurposed.
A final thought. Platforms are just that – a platform. They enable innovation, not create it. Companies must invest in developing a workplace culture that’s open and receptive to different ideas, that thrives on the weird and wonderful, where random encounters and conversations and ideas are part of daily life. Innovation relies heavily on the right workplace culture. Achieving that in a post-Covid-19 world is perhaps the biggest innovation challenge of all.
Chief Growth Officer, Capita
Ismail is leading business development, sales and marketing to support our transformation and organic growth plans. In 2018 he was named as one of the top 100 most influential Black, Asian minority ethnic (BAME) leaders in the UK tech sector by Inclusive Boards. He previously led IBM's Global Business Services division in North America.