The Enterprise Systems That Companies Need to Create

The swiftness of technology’s progress in the past decade has convinced legions of companies that their survival depends on jettisoning their legacy systems as soon as budgets permit such an overhaul. Computing power has surged, storage costs have plummeted, and networking speeds have approached theoretical limits. All the while, companies and consumers are generating ever-growing floods of data packed with clues on how individuals behave and how products perform. Many companies thus risk upgrading technology purely for its own sake. In doing so, they overlook what may be the greatest opportunity presented by the modern technology stack: the chance to mobilize new tools in a way that empowers managers and technologists alike to make fundamentally better business decisions.

To illustrate, consider the curiously old-fashioned approach companies typically take to upgrading their legacy systems. It starts when something old stops working. Perhaps an aging mainframe fails often, resulting in seemingly never-ending maintenance costs, or an outage destroys transaction data. A decade ago, the natural response was to check for an updated version of yesterday’s software that could stamp out the bugs — particularly if paired with newer hardware. Now, companies look to the cloud for the latest collection of computing services, storage technologies, and performance guarantees.

Both scenarios share the same mentality and prevailing aim: to replicate yesterday’s functionality at today’s prices. “I want what I have today, only faster, or cheaper, or simpler.” The habit of colossal, periodic technology projects persists, justified by often-strained business cases that hinge on cost improvements or risk reductions spread across a wide swath of deeply entrenched systems.

There is a better way. Tech upgrades can be revenue generators, not just cost sinks, and they need not saddle you with soon-to-be legacy burdens. Our experience suggests that three strategies can position companies to carry out technology transformations that can create value and enable continuous innovation.

Redefine success. Companies that reap the greatest rewards from technical improvements recognize that it’s not only technology that changes: It’s also their leaders’ minds, priorities, and circumstances. Legacy systems aren’t bad because they’re outmoded — they’re bad because they’re almost invariably hard to deprecate.

To skillfully keep pace with technology, companies therefore need to develop what we call second derivative thinking: They must work to increase the rate of change of change.