Monday, August 3, 2015

Enterprise Modernization - The Next Big Thing!

“We tend to think the strong will survive, but a virus is a very small thing that kills big things.” Horace Dediu, Clayton Christensen Institute, speaking about the fall of Nokia.

All enterprises, be they large or small, national or multinational, commercial or government agency, American or Chinese, Japanese or European, are carrying the dead weight of their history and almost certainly continuing to add unnecessary complexity and excessive cost that will progressively reduce effectiveness, with the potential to trigger existential crises. Newer enterprises including Internet platform and Cloud based companies are not immune from this effect. As Horace Dediu has commented, Nokia is a classic case of a large enterprise brought from market leadership to irrelevance and zero value in an extremely short space of time.

In the past, modernization has become synonymous with technically related "application modernization" The term "modernization" is commonly used to refer to information systems, applications and technologies. And it is very common for systems or applications to be "modernized" because a technology has come to the end of its life, or an application is so antiquated that it cannot support newer business process patterns such as multi-channel and mobile. More generally organizations clearly implement modernizing programs without necessarily using the modernizing name. For example transformation programs or projects will often involve considerable elements of modernization. Similarly adoption of Agile methods may be considered a form of process modernization. Or the introduction of DevOps practices, enterprise architecture, master data management, life cycle management etc. But it is notable that each of these forms of modernization are discipline centric. It is very rare for an enterprise to undertake concerted effort to understand what modernization really means for a specific enterprise and to plan and execute modernization that delivers inter-discipline collaboration in support of specific modernization objectives and goals.

Each enterprise has unique modernization needs. A bank may see a primary modernization goal to establish core banking systems that reduce the risk of negative customer impact, such as delays or errors in transaction processing. Also to be able to introduce price and product change in days or weeks. A healthcare company may similarly see the requirement to change prices rapidly but equally the need to rapidly implement new legislation. A retail enterprise may see the ability to interact with customers using processes that span multiple technology, shopping and delivery channels, and to be able to influence the customer decision making process to achieve maximum customer satisfaction.  A key element apparent in all these modernizing goals is that modernization is not about achieving a new plateau of capability and functionality. Rather it is about enabling continuous, short cycle time response to change, targeted at the very specific areas that are mission critical for the individual enterprise.

The problem with modernization is that it is widely perceived as slow, very expensive and high risk because the core business legacy systems are hugely complex as a result of decades of tactical change projects that inevitably compromise any original architecture. But modernization activity must not be limited to the old, core systems; I observe all enterprises old and new, traditional and internet based delivering what I call “instant legacy” [Note 1] generally as outcomes of Agile projects that prioritize speed of delivery over compliance with a well-defined reference architecture that enables ongoing agility and continuous modernization.

What’s required is a modernization approach and strategy that progressively breaks out business and technology components that establish highly independent units of business capability that comply with a reference model and architecture that ensures architecture agility and implements clear fire breaks between the components.
But as discussed, enterprises are extremely reluctant to undertake modernization as they see it as all cost and risk. Transformation projects are widely viewed in the same way. And anyway immediate business priorities always trump housekeeping!

There are various aspects to a successful modernization approach. But the most important are:
1. Define Agility Vectors. Identify the top priorities for business agility and integrate relevant actions into all business projects. Here are some examples:
a. Radical improvement (time and cost) in response to legislative change
b. Generalization of existing capabilities to support new products and services
c. Dramatic reduction in new product time to market
d. Integration of existing capabilities to leverage disparate channels
e. Separation of common and customer/channel specific capabilities
I refer to these as “vectors”. Mission critical goals that will require actions and change right across the organization. Single projects are generally not going to cut it. Therefore the vectors provide a mechanism to exert influence (demand shaping) over the incoming application demand management pipeline and to select and coordinate multiple project actions.
2. Mandate Reference Architecture for Agility. Establish a reference architecture for business agility that defines the minimum necessary architecture compliance to ensure continuous business evolution. Mandate that all core business capabilities are implemented as software services and components.
3. Integrate Agile Architecture AND methods. Implement Agile practices that give equal weight to agile architecture and agile project delivery. Demonstrate small, incremental delivery steps, business capability by capability, service by service.
4. Govern business agility. Automate governance by establishing model driven architecture and development tooling that ensures compliance with the reference architecture.
5. Integrate Business and IT. Practice conceptual business modelling to establish common business and IT vocabulary independent of existing applications, align business and software services and reengineer the organization around business capabilities and services.
6. Get top level sponsorship for the Enterprise Modernization Roadmap. Recognize enterprise modernization as a major business priority and elevate to the highest levels of the enterprise to make it happen.

The enormous, disruptive creativity of Silicon Valley is transforming how companies make decisions, store data, reach potential customers, outsource activities, processes and capabilities, and how people communicate, make friends, protest and shop. No enterprise is immune from this effect.

Accordingly, modernization today means reinventing the way enterprises work, the business model and systems, and being genuinely agile. You only do this by ripping up today’s world and turning it into a genuinely flexible structure of independent components that can flex and morph continuously.

Application Modernization should be long dead and buried. Enterprise Modernization is an existential priority for all enterprises, not just those with mainframes and COBOL!

Note 1: Understanding Agile Adoption Failure

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