How a Short-Term Focus Stifles Innovation and Growth

Strategy and operations meeting
Legacy software can stifle innovation when software companies prioritise short-term revenue over long-term growth. What are the strategies to maintain proven products while still fostering innovation, and influencing positive change to ensure continued relevance in a competitive market?

Lessons from Legacy Software Challenges

I come from both the speciality chemicals and software industry, and over the years I have had my fair share of involvement with products that were once market leaders gradually fall into a state of inertia. These legacy products, cherished by long-standing customers for their reliability and proven track record, become central to an organisation’s identity. Yet, over time, the focus on short-term metrics like revenue and operational efficiency can overshadow the need for innovation, creating a precarious situation. For example, in the software industry, companies find themselves maintaining aging codebases that are costly and cumbersome to update, while simultaneously watching competitors edge closer with more modern solutions. 

This article explores how prioritising short-term goals can stifle innovation and growth, particularly in the context of software companies managing legacy products. It examines the symptoms, challenges, and potential strategies for revitalising growth, with an emphasis on influencing positive change even if you’re not in a decision-making role.

The Symptoms of Stifled Growth in Legacy Software Companies

Recognising the symptoms of stagnation is the first step toward addressing it. Many software companies grappling with legacy products share a strikingly similar set of challenges:

1. Rising Costs of Maintenance

Legacy software often becomes a double-edged sword. While it serves an established and loyal customer base, maintaining the aging code becomes expensive. Adding new features or integrating with modern platforms requires extensive, disruptive development cycles. This not only inflates costs but also creates significant risks of introducing bugs or compromising quality.

For example:

  • Incremental Updates: Even small changes can take disproportionately long due to outdated architecture.
  • Quality Issues: Each update risks introducing new bugs, damaging customer confidence.
  • Unsupported Platform: The cost of a fundamental platform upgrade is too expensive and the decision to upgrade has been deferred for years, raising the risk of obsolescence.
  • Customer Satisfaction: Customers using the product are themselves subject to disruptive change. Over time new people enter the business, with new ideas, challenging the long-standing status quo which they perceive to be detrimental to their organisation.
 

2. Skill Shortages and Consultant Retention

As technologies age, finding skilled personnel to work on legacy systems becomes increasingly difficult. Younger developers often prefer working on cutting-edge technologies, leaving companies dependent on a shrinking pool of experienced consultants. Over time, retaining this talent becomes an uphill battle, leading to longer implementation cycles and delayed customer projects.

3. Internal Focus at the Expense of Innovation

Companies often turn inward to manage challenges, implementing initiatives like restructuring and process optimisation. While these steps can improve process efficiency, this feeling of productivity can rarely lead to new revenue streams or innovative breakthroughs. Instead, the best resources are consumed by internal optimisation, leaving little room for outward-facing initiatives. I have had many conversations over recent years with employees in this situation privately expressing frustration at the inward looking focus and the resulting opportunity cost. Customers care little for your internal structures and processes, until it affects them directly; and then it might be too late.

4. Revenue-Centric Growth

In the absence of substantial new product offerings, companies resort to raising prices on existing products. While this tactic may theoretically yield short-term revenue growth without the need to win new business, it risks alienating customers, particularly in a competitive market where new players can replicate and improve on legacy functionality using modern platforms at a lower price and far more efficiently.

5. Lack of Vision in Long-Term Strategy

When strategies focus on 3-to-5-year horizons without addressing foundational innovation, the company risks losing relevance. This is especially true in software, where the technology environment evolves rapidly, and customers expect continual improvements. Only three years ago, generative AI was virtually unheard of and most strategic plans formulated then are likely now obsolete. The scary part, is that Executives that should be focused on the medium to long term success are themselves blissfully unaware of the scale of the disruption around them, because they are so focused on the next quarterly earnings report.

The Hidden Risks of Status Quo Thinking

For companies entrenched in maintaining their legacy products, the risks of continuing with the status quo are very real:

  • Customer Attrition: Established customers value stability but also expect evolution. As competitors develop modern alternatives, some customers will inevitably leave.
  • Competitive Disruption: Startups and agile competitors can replicate core functionality of legacy systems quickly, gaining ground with innovative features and modern architecture.
  • Erosion of Talent Pool: A lack of investment in modern tools and projects can deter talented individuals from joining or staying in the company.
  • Revenue Plateau: Over-reliance on price increases instead of new product offerings creates diminishing returns, especially if customer loyalty begins to waver.
 

These risks aren’t always immediately apparent, but over time, they compound, leaving the company vulnerable to external shocks.

Strategies for Revitalising Innovation and Growth

If these symptoms feel uncomfortably familiar, it’s worth exploring strategies to break the cycle. Here are some approaches to consider, whether you’re in a decision-making role or seeking to influence those who are.

1. Reframe the Story Around Legacy Products

Legacy products often feel like a burden, but they also represent significant assets: a proven customer base, established trust, and deep domain knowledge. Instead of seeing these products as liabilities, companies can reposition them as “platforms for innovation”. For example:

  • Modular Upgrades: Introduce modular components that can be modernised incrementally, reducing disruption and costs.
  • Customer-Centric Enhancements: Engage with customers to identify high-value features or integrations that could rejuvenate their interest in the product.
  • Adjacent Component-based Innovation: Break down legacy software into components, and focus innovative efforts to replace those components that can easily take advantage of new technology platforms. Examples of such “decoupled” components might be separate mobile versions or separate reporting and dashboards. Eventually you will be able to ring fence the core legacy system altogether and assemble a completely new solution adjacent to this that replaces the old functionality. The advantage of this approach is that you still leverage your experience and relationships with customers to grow into the new spaces.
 

2. Invest in a Multi-Track Strategy

Rather than forcing innovation to compete directly with operational initiatives, create parallel paths for certain functions:

  • Core Maintenance: Organise the team to ensure continued maintenance and optimisation of legacy products.
  • Innovation Group: Establish a separate team in parallel focused on experimenting with and introducing modern technologies, new product ideas, or pilot programs with existing customers.
  • Strategic Resources. Ensure there is a capability within your business that can do relevant market research, trend analysis and competitor monitoring. This function would normally reside in product marketing, but sometimes when an organisation has many different products, each individual product may be too small or marginal to justify the cost of a dedicated product marketing resource; making some consolidation and sharing of this capability across product lines a better alternative. 
 

3. Encourage a Culture of Incremental Innovation

Innovation doesn’t always mean sweeping, transformative changes. This will in any case be a bridge too far for overloaded Executives. Small, consistent improvements can still build momentum and reinvigorate customer loyalty:

  • Experimentation: Give teams the space and mandate to test ideas without requiring full-scale business cases.
  • Customer Feedback Loops: Use customer input to guide low-cost, incremental updates that demonstrate ongoing value. User conferences or special interest groups can provide valuable collaborative platforms in this regard.
 

4. Make Long-Term Thinking a Priority

Executives must set aside mind-space to move beyond short-term revenue goals to adopt a more balanced perspective. At the most senior level, the role should be primarily strategic and outwardly focused. This not only means spending lots of time with customers (which is of course a big part of the job), but also getting exposed to the wider ecosystem of technology innovators operating in adjacent markets.

Longer term thinking might require adjustments and new processes, for example:

  • Broader Metrics: Incorporate innovation metrics, customer satisfaction, and talent retention into growth assessments.
  • Scenario Planning: Consider competitive risks and market trends over a 5-10 year horizon to guide strategic decisions.
 

5. Empower Advocates for Change

Executives need to realise their shortcomings when being too inwardly focused due to short term necessity. But this does not mean the organisation should stagnate. Good quality managers that are inwardly focused can meet quotas and short term financial targets. They need not think far beyond the next quarter to succeed. But they then need to be paired with complementary skillsets with a longer term perspective. If your leadership is being dragged into a short term managerial focus, then other suitably skilled senior executives with clear mandates to fulfil the role of business transformation and change need to be put in place.

In turn, if you’re not in a decision-making role, influencing the executives to develop a more visionary growth strategy might require tact and persistence. Here’s how you can start:

  • Build Your Internal Network: Connect with colleagues who share your perspective and ideas for improvement.
  • Present Data: Use evidence from competitors, customer feedback, or market analysis to make a compelling case.
  • Start Small: Propose low-risk high impact projects that demonstrate the value of innovation without significant investment and risk.
 

6. Redefine the Role of Revenue Growth

Instead of relying on price increases, companies can explore other ways to grow organically:

  • Upselling: Identify complementary features or services that leverage and enhance the value of the legacy product.
  • Adjacent Markets: Leverage the company’s expertise to explore new customer segments or industries.
  • Partnerships: Collaborate with startups or smaller companies to bring fresh ideas and energy into the business.
 

Growth by acquisition can also result in an injection of new ideas. The criteria for acquisition are sometimes seen with a financial ROI lens. However there are other factors that could be considered. A barely profitable yet talented acquisition can be turned around while at the same time being empowered with the autonomy and tools to continue innovating and growing.  

To Reflect On

  • How does your organisation measure success? Are these metrics aligned with fostering innovation, or do they prioritise short-term gains?
  • Are you leveraging your customer base effectively? Could existing customers be a source of insights or collaboration for new opportunities?
  • What barriers or obstacles exist for innovation in your company? How might these be addressed incrementally rather than through sweeping reforms?
  • Is your company’s long-term vision clear and compelling? If not, how can you help shape a narrative that inspires both customers and employees?
  • Leadership: How is the leadership contributing (or not) towards reaching the balance between short term priorities and longer term innovation that will ensure the sustained viability of the business? Do you have enough outwardly customer focused and future oriented leaders in the organisation that can articulate a compelling vision?
 

Conclusion: Balancing Legacy and Innovation

The tension between maintaining legacy products and pursuing innovation is a common challenge for software companies. While the pressures of short-term revenue goals and internal efficiency are real, they cannot come at the expense of long-term growth and relevance. By reframing how legacy products are viewed, fostering a culture of incremental improvement, and creating pathways for innovation, these companies can still  position themselves for sustained success.

For those without direct decision-making power, the key lies in influencing from within—building coalitions, presenting factual market data, and starting with manageable changes. The question isn’t whether change is necessary, but how to begin making it happen.

Does your company face similar challenges? If so, what steps can you take today to start steering toward a more innovative and sustainable future?

Share this:

Related Articles

Strategic thinking

The Importance of Practicing Strategic Thinking

Strategic thinking is essential for aligning efforts with long-term goals in an uncertain environment. By dedicating time to reflection, capturing insights, and prioritising impactful actions, technical leaders can move beyond reactive habits, ensuring their work drives meaningful progress and positions their teams for sustained success.

Read More