Modernization, according to Webster dictionary, is the act of making something modern in taste, style or usage. In the context of a Business, this translates to making the business modern for better customer experience (taste), improve the agility – faster and better (style) and reduce the strain on employees and investors (usage).
Business Modernization is the process of laying a path to future state from present state, leveraging past experience.
The complexity in this process is not as much as finding the future state. Market trends and research reports greatly help visionary leaders in this endeavor. However, the complexity actually lies in accurate objective assessment of the present state and leveraging the past experience to build that bridge to future.
Now, what does it take to modernize a business? Let us use a savings bank account as an example. For this, let us assume that we travel back a few decades.
Back then, the process of opening a savings account started with a teller creating a ledger sheet with a new account number. It ends with handing a booklet to the customer with the new account details. This booklet is usually called a “Passbook” as it establishes the identity of the account.
For every transaction, customer had to go to the same branch of the bank during its business hours. The process involved in withdrawal included – customer filling a withdrawal slip, and handing it over along with the passbook to a teller. Based on the account number teller then opened the ledger, checked the balance, and made an entry in the ledger for withdrawal amount, updated the passbook and handed over the passbook and cash to customer while keeping the withdrawal slip to cross check during the end of day closing process. The process is somewhat similar for any other transaction for any account.
Fetching the ledger from ledger room, locating and verifying the account, making necessary entries and placing back the ledger in the correct location took time. As a result the Customers ended up waiting in line for a teller to be available. The problem exponentially increased with increase in number of customers. This process also limited the customer geographical spread. This necessitated opening more branches in different locations to reach more customers. Because, the barrier to doing business with the bank was directly proportional to the distance a customer traveled to reach it. Which greatly increased the cost of doing business for the banks.
The above problems can be addressed by Modernizing the business. In order to achieve that, one needs to understand the process for each type of transaction. Many businesses have little to no documentation on their business processes. Therefore, “Process Mining” becomes essential. This starts with discovering the business process and creating a Process Model by reverse engineering. If the business has sufficient documentation on the process, one can skip to next step of Process Mining called Validation. This is achieved by thorough Analysis and checking for conformance and any potential bottlenecks. This step is followed by the final step that aims at fine-tuning the process.
The low hanging fruit is to improve and fine-tune the process without actually acquiring new tools. But in majority of the cases, it becomes necessary to upgrade the technology platform and/or the business application – known as IT Upgrade.
In our particular example, one way to modernize the business is to make the ledger accessible quickly (for faster response). This can be achieved, to some extent, by using creative techniques in using the ledger. For instance, instead of accessing the ledger a teller can use a running log of the day and enter these details in the ledgers at the end of the day. This may result in additional employee cost. However, if we are also interested in expanding the business, a good solution is to make the ledger accessible by any branch any time. This involves IT Upgrade (like computerization). The current day Banking System evolution includes several such Business Modernizations.
The fundamental idea behind the Business Modernization is Business Process improvement. This in turn may or may not result in IT Modernization. Hence, IT Modernization (or IT Upgrade) is not essential for Business Modernization. Relatively small and inexpensive process improvements can provide significant business boosts. The belief that expensive IT Upgrade is essential is one of the fundamental tripping blocks for Business Modernization. In fact, in many cases Business Modernization is all about Business Analysis, Business Validation and managing the Change.
In summary, Business Modernization is the process of improving the business that involves upgradation of the underlying Business Processes and/or Business Critical Systems, Business Support Systems and Tools, so as to meet the business objectives and delight the business ecosystem (customers, associates, and stakeholders).