Platt Perspective on Business and Technology

Balancing a focus on your competition with one on your innovation 5: building into a legacy systems context

Posted in strategy and planning by Timothy Platt on September 26, 2013

This is my fifth posting in a short series on understanding the nature and scale of change, here very specifically focusing on the nature and quality of innovation (see Business Strategy and Operations – 3, postings 422 and loosely following for Parts 1-4.)

I have been discussing innovation in its various forms: cosmetic, evolutionary or disruptively new and novel throughout the course of this series, and strategically and operationally developing the right mix of them so as to reach and maintain competitive strength and position in targeted marketplaces and consumer demographics. But I have been primarily discussing this from the perspective of building systems as if from scratch and from the ground up. That might fully and reliably apply in new business contexts, but cannot be expected to do so, at least as a complete model-systems approach for businesses already in place that seek to develop new efficiencies while dealing with ongoing legacy systems. My goal for this posting is to add the complexity of corporate history and its momentum, and legacy systems into this series’ discussion. And I begin this by clarifying what I mean when I write of legacy systems per se, citing how I have previously defined them in my posting: The Hidden Costs of Legacy Systems – some thoughts on the larger picture:

• A legacy system is whatever is currently, actively in place and functioning right now, whether of long standing use or recent addition. In this, a business’ legacy system is the complete context of whatever vintage that any new technology or other system elements would have to fit into or replace.
• Legacy is often thought of much more restrictively and strictly in terms of older systems and systems no longer under manufacturer support. It is often thought of strictly in terms of technology obsolescence. Older technologies are often key components to this but they are generally only one portion of any system. Any valid definition of legacy should be free from what might be considered arbitrary cut-offs as to commonness of current use throughout a business’ industry.
• Legacy is the current state and context that any next has to be developed and incorporated into and supported in terms of and in response to.

I would predicate my approach here, on more effectively balancing a mix of the three basic categories of innovation that a business might pursue so as to more effectively work in this wider legacy context, while developing and maximizing the benefits achievable from introduced New.

• Begin that with consideration of the legacy processes, resources and systems already in place and by analyzing how they would set a balance point as to how much the business would focus on cosmetic, evolutionary and break-away revolutionary change and innovation – and at what price points.
• Here, the combination of what is offered and at what price points largely determine the competitive position and market strength that a business can achieve from its product and service offerings, as well as determining precisely where in its overall market it seeks to compete.

As a working example, consider a business that has been operating in a mature, or at least innovatively stagnant industry where change and innovation have been primarily cosmetic and legacy systems in place are geared to more cost-effectively developing and bringing to market, new largely cosmetically distinctive offerings. Now consider the new systems and processes, and the innovative offerings that would come from them that this business would have to embrace if it is to retune and update itself to address changing circumstances. Let’s assume here that this is an industry that is in the process of shaking itself out of this lethargy with new and novel offerings coming from key competitors.

• New systems that are introduced have to smoothly integrate in to work with pre-existing legacy systems, or replace them or both.
• Sometimes a business has to even fundamentally change within a very tight timeframe if it is to remain competitive or regain competitive strength. But whatever the timeframe requirements faced, it is important that any shift in this be smooth and that cash flow or at the very least cash reserves remain positive throughout.
• Developing a new balance in what fundamental types of innovation to pursue, begins with knowing precisely where you would begin in this process and your legacy systems starting position, and mapping out a path forward from there towards a set of goals and priorities that would create new competitive strength.

Now let’s consider a very different example: a business that is seemingly perpetually seeking to develop and offer a next great thing – but that lacks consistency or risk/benefits reliability in doing so and that is always on the edge for reserves and cash flow. Here, a rebalancing would most likely serve to shift this business towards offering a more stable balance of evolutionary change with a more reasoned and prudent focus on break-away innovation. Product and service lines that were succeeding in the marketplace would be maintained and built upon as mainstay offerings, and efforts to develop more dramatic marketplace offerings would be selected for their potential for creating new forms of competitive strength. One way to look at this example is to view it as a case in which a business comes to take a longer term strategic and operational position in how long it is willing to pursue opportunity in any given business line, where this rebalancing is one of lengthening the timeframes competitively worked within.

In both of these examples, the goal is to rebalance short and long-term risks and benefits and with an eye toward both current markets and customers, and anticipatable emerging market and consumer preferences. And in both examples, a goal is to develop for flexible strength in the face of inevitable uncertainties.

I am going to finish this series at least for now at this point. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 3 and also see the first page and second page listings to that directory.

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