by Mary Branscombe

Legacy processes are holding back your digital business

Jun 01, 2017
CRM SystemsERP SystemsIT Leadership

Having a digital business model isn't about online sales, and it’s not just about technology; it’s about using technology to support a flexible, connected operating model. But in many organizations, technology has outpaced process.

Businesses like Netflix and Uber are often touted as ‘cloud native’ businesses, without the disadvantages of legacy enterprise IT to hold them back from taking advantage of SaaS and PaaS, microservices and mobile apps. And Aaron Levie, CEO of file sharing service Box, says that Netflix “had time to become an end-to-end business and to create its own content, because it was digital from the ground up.”

Getting your own sustainable digital business model, though, takes far more than just having a web site for customers or some mobile apps for employees. “An app is just a manifestation of the digital process and if the underlying process hasn’t been digitized an app doesn’t change that,” Levie says. “Your whole company has to operate like a digital business. The only way you can deliver a digital business model is by having a digital operating model. That doesn’t mean that everything goes digital but it does mean that the operating model goes digital.”

That might mean faster product cycles and quicker delivery to customers, or moving from the traditional command and control model to having decisions made up and down your company hierarchy. You might even flatten the business hierarchy. “You can’t stay in a silo model where marketing is just the responsibility of marketing; you have to share that throughout the business,” Levie says.

But it definitely means viewing IT as a tool to drive growth and innovation rather than a cost center — a shift in mindset that many organizations have at least started. “You need to have IT as growth driver. It’s not just that cloud lets you scale up and scale down, but you can have workflows and business processes that are more agile. When you think about IT driving most of this change in the organization, you have to think about IT in a different way.”

Levie also predicts a move to data-driven decision making (with or without the AI buzzword). “Many companies are held back by their tools and processes for managing information. Most enterprise software is relatively dumb; most software really can’t do anything you don’t tell it to. It’s just one giant database. But what we know now, from the consumer market and tools like Siri and Alexa and the Facebook news feed, is that computers can be incredibly capable at connecting the dots between information silos and at presenting information in a timely manner.”

Lift and transform

Lifting and shifting existing enterprise apps into IaaS doesn’t make your business model digital either; you need to move them and modernize them too. This is, for example, where Microsoft is pitching new features in the Azure Service Fabric PaaS.

As Scott Guthrie, executive vice president of Microsoft’s cloud and enterprise group explained at the Build conference, Service Fabric was designed for building new, cloud-native microservice-based apps on, but you can now use it to containerize existing .NET apps, deploying them with Docker Compose. “Now you can take applications, including ones with existing code that you already have, update them to be a micro-service-based architecture, add additional micro services maybe with .NET Core or even with other different languages or frameworks, and run them all seamlessly inside a single cluster.”

Record and engage

Another key part of going digital is integrating new tools with the embedded systems that power your business processes.

That doesn’t mean your system of record goes away, but it needs to integrate with the ‘system of engagement’ that CRM has become. That’s what’s behind Microsoft offering both ERP and CRM as modules in its Dynamics 365 cloud service, for instance.

“ERP is going to live forever,” jokes Levie. “We aren’t even close to disrupting anything in that space. But so much of it is focused on these systems of record and what we’ve seen is all this innovation in the past five to ten years has been more about these systems of engagement.” The next step is getting both systems to work better together, which helps create a digital business model that can better deal with the complexity businesses face.

“With all these systems of record, the data was relatively straightforward to manage, because it was essentially rows in a database.” But that hasn’t covered the large amount of information in your business that doesn’t have that clear structure. “Things like machine learning and AI may allow us to make sense of all that, to a point where you can get the structure of a system of record but for your unstructured information,” Levie suggests.

That’s a similar bet to the one Microsoft is making with its Common Data Model and the Microsoft Graph, which partners like Adobe, Mastercard, ZenDesk and Dun & Bradstreet are adopting. Adobe Marketing Cloud is using the CDM as a common, consistent language for sales, marketing and service data, as a way of connecting those ephemeral customer interactions with more structured records about products and invoices.

Levie predicts that the systems of engagement and record for unstructured content will be conflated. “That’s a lot of what the digital operating model is about. It relies on the fact that we have to be more agile, that there is a little bit more chaos, that there is more unsupervised collaboration…. It’s not going to go away that you’re going to want structured systems for inventory or financial data, but we think you have to use the two together in tandem.”

“What if I can have a single place to control and manage and govern data, and get all the benefits of a system of record — which really you have only had for the most fringe parts of your business? The most regulated documents are the only ones you’ve typically had a system of record around.”

“We think business content flows between those two states frequently but it’s so unpredictable that you don’t want to have these things in different systems. Maybe I want to pull up a marketing asset from five years ago in my workflow where I’m able to collaborate with people; I don’t want to have systems that can’t understand each other when I’m doing that.”

Time to unfreeze

Some Box customers are already building those integrations, connecting Box to SAP or using it for content management in Oracle ERP systems.  But the biggest problem in becoming digital and taking advantage of cloud may not be the technology, warns Box CIO Paul Chapman. Ironically, it’s the fact that your processes already work, and they dictate the way your business works.

He uses the term ‘frozen middle’ for the part of your business that’s hard to change. “It’s this entrenched inertia, this entrenched way of operating that’s been optimized to support the organization. It’s hard to inject enough tension into it to create change. This has nothing to do with technology; in fact technology has outstripped and outpaced the ability of the organization to keep up.”

Instead of just expecting a digital business model to fall out of technology changes you make, he advises, “You have to really think through what that future state operating model looks like, because companies have been in a stepwise, linear way optimised around the same operating model — and that’s a dead end.”

Those are business changes; but they’re changes that IT has to be flexible enough to enable.