Companies born in the pre-Internet age are often criticized for responding too slowly to industry disruption brought by ‘digital native’ firms like Google, Uber, Airbnb, and Amazon. It is commonly believed that the non-digital companies are inhibited by their legacy infrastructure: existing products and services, archaic and inefficient business processes, hard-to-update and aging information systems, old ways of thinking, and cultural values.
An ‘out with the old, in with the new’ mindset can push these companies to believe they need a total overhaul to compete with the born-digital competition.
We take a different view.
Instead we recognize that certain pieces of a company’s legacy infrastructure may actually be highly valuable assets for digital transformation. By looking at how established companies have used their unique qualities and capabilities, we see important lessons on how to achieve successful transformation.
The data they possess can be a huge advantage
In the digital era data is king. A bank of data collected over a sustained period of time from a large pool of customers can be a hugely valuable asset.
New digital startups don’t begin life with such a rich trove of customer data. By applying new technologies, experimenting with new business models, and thinking of data as an asset, companies can extract value from an existing, but under-utilized capability.
Power generation company Mitsubishi Hitachi Power Systems took a data-driven approach. Since 1999 the company has been tracking its customers’ turbine operations in its remote monitoring centers and has now accumulated almost two decades of historical operating data. This is a valuable advantage that few other companies can match. By combining this pool of data with IoT sensors and machine-learning algorithms, the company began providing predictive maintenance alerts and intelligence as a new service to customers.
They have valuable distribution network assets
Watching many established retailers struggle in the face of Amazon’s meteoric rise and the efficiencies of online retailers, it’s easy to think that brick-and-mortar stores are now a liability. Banks are facing the same predicament. They worry that their vast branch networks will become an unwanted financial burden as customers embrace mobile banking.
But let’s note that not all retailers, banks, and other companies with vast distribution networks are letting go of their physical footprints. Some have found that their stores, branches, and offices are actually an advantage in an online world. They view this network not as a burden, but an asset and a competitive edge. Retailer Best Buy could have easily collapsed following the advent of digital commerce. But it made a savvy move. It placed its 1,000-plus stores at the heart of its digital strategy and promoted customer service. The company is now thriving. By using its retail stores as mini warehouses, it can quickly deliver competitively priced goods to its customers and successfully compete in the online space.
There can be immense hidden value in legacy infrastructure. Many observers have viewed these assets as liabilities. But companies that can incorporate existing products and services, data banks, and brick-and-mortar operations into their digital transformation agendas can gain an advantage that’s hiding in plain sight.
About the author(s)
As Vice President & Global Head of Enterprise Application Services, Akhilesh ensures TCS’ global customers achieve rapid value from their business applications investments. He oversees the strategy and growth of the organization’s global application portfolio—ranging from long-standing enterprise application vendors, such as SAP, Oracle and Salesforce, to best of breed applications focused on specific business needs and/or industries.
Akhilesh and his team of business and technology consultants focus on designing and delivering technology solutions that harness the optimal digital capabilities to create new business models and to fuel opportunities with customer experience, finance and HR transformations and strategic IT initiatives.
With over 25 years of international and multi-faceted leadership experience, Akhilesh focuses on identifying strategic opportunities to truly build and grow businesses. Under his leadership, the practice has received a number of partner awards and leadership rankings from leading industry analysts.