1. Making a considered decision when choosing a transformation approach

There are three major archetypes for approaching core-technology transformations: “repaint” by making the minimum investment required to maintain existing operations and digital channels; “renovate” through gradual but persistent upgrades of the core and more substantial improvements when necessary; and “rebuild and replace,” by building or buying a completely new IT stack (or large portions of it) and migrating the existing business to it (exhibit). As companies progress on their transformation journey, they may switch from one archetype to another.

Which approach or archetype is right for a company depends on its particular circumstances. Companies under significant financial pressure may need to repaint, with targeted investment to maintain the technology stack and preserve the ability to play in the future. Companies too often default to a repaint approach simply “to do something,” because it is far easier to put off a strategic decision on technology spend for another budget cycle. This approach, however, has the effect of treading water, which leads to falling further behind the competition and ultimately increasing investment costs when tactical improvements must be replaced by more holistic solutions.

At the other end of the spectrum, companies that have significant levels of technology complexity and technology debt and sufficient financial resources or capabilities on hand can choose a greenfield rebuild approach. This allows incumbent companies to free themselves from legacy technology constraints and compete with digital natives that have substantially lower operating costs. This approach is particularly attractive where speed to market is critical for capturing value, or delivering a new offering requires a significant departure from the current operating model. The difficulty with this approach is that it requires considerable capital outlay; a depth of technical knowledge to build the new stack, migrate applications to it, and decommission the old; and a cultural shift in the organization to ensure the new IT capabilities are leveraged in the most effective way. These need to be planned and executed carefully, as, unfortunately, many of these transformations have ended up with high levels of spend and questionable returns.

In our experience, most large companies tend to be best served with a renovation approach. To be successful, leaders need to define a reference end state. They can then outline a detailed plan for achieving it over time that balances available funding, flexibility to adapt to changing circumstances, and front-loading return on investment (ROI). In most cases, renovation also requires changes in team structure, operations, and dynamics—for example, leveraging next-generation infrastructure services, driving agile ways of working at scale, or building engineering excellence.

One global pharmaceutical company used a renovation approach to radically transform its technology. It set a desired end state of migrating 85 percent of applications to the cloud, accelerating time to market by a factor of three, and decommissioning 25 percent of applications. Over the course of its transformation, the company worked systematically across the key pillars of its approach: sharpening the company’s technology vision, increasing the level of business and IT collaboration, launching new capabilities, increasing agility, and turbocharging the technology core. Notably, as part of this journey, the company ring-fenced an engineering team to develop a repeatable method for migrating applications to the cloud (the digital-factory model) that allowed teams to ramp up and streamline the cloud journey at pace. A continuous process of test, learn, and improve helped the company achieve its stated goals within five years.

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