LOS ANGELES, CA / ACCESS Newswire / February 2, 2026 / In the race toward digital transformation, established financial institutions face a paradox that startup competitors don't: success itself becomes the biggest obstacle to innovation. Kotaro Shimogori, whose experience spans both traditional financial infrastructure and cutting-edge technology implementation, offers a valuable perspective on why legacy system modernization proves so challenging for industry leaders.

"It's the same analogy as AT&T," Shimogori explains. "The US has always been the pioneer of all this, but the airports are old, infrastructure is old because the US was the first one to come up with all that stuff, but it's all 50 years old."

The First-Mover Disadvantage

The technology industry often celebrates first-mover advantages, but Shimogori's observation reveals the hidden costs of pioneering innovation. Organizations that built early systems now find themselves constrained by the very infrastructure that once provided competitive advantage.

This challenge extends beyond simple technology upgrades. Legacy systems represent enormous investments in both capital and human expertise. "We're working with all the banks and they just can't move out of their legacy mainframe systems because they've got tons of investment in it," Shimogori notes, highlighting the economic reality that keeps institutions tied to outdated technology.

The situation creates a strategic dilemma: abandon systems that still function (and represent significant investment) or accept competitive disadvantages against organizations building from scratch. This decision becomes more complex when considering the infrastructure-first development principles that Shimogori has advocated throughout his career.

The Greenfield Advantage

While established institutions struggle with legacy constraints, new market entrants operate without these limitations. "Countries like Argentina, they're all starting from scratch. They don't have infrastructure. They don't have legacy systems that they're dealing with. So, it's easier for them to go fully digital," Shimogori observes.

This greenfield advantage appears across industries and geographies. New banking companies can implement modern cloud-based systems while established banks remain tied to mainframe architectures. Emerging market financial institutions can adopt blockchain technology while developed market players navigate regulatory frameworks built around older paradigms.

The pattern extends to Shimogori's own experience with cross-border system complexity, where newer markets often prove more adaptable to innovative approaches than established ones with entrenched processes and regulatory structures.

The Investment Trap

Perhaps most challenging is what Shimogori identifies as the investment trap-the tendency for past investments to constrain future decisions. "It is difficult when you have so much investment in it," he notes, explaining why rational organizations continue operating systems that limit their competitive potential.

This trap manifests in multiple ways beyond simple technology costs. Employee expertise becomes tied to specific systems, creating human capital investments that resist change. Regulatory compliance often requires maintaining certain system capabilities, adding another layer of complexity to modernization decisions.

Customer relationships also create constraints. When clients integrate deeply with existing systems, institutions must balance modernization benefits against the risk of disrupting established business relationships.

Strategic Approaches to Legacy Modernization

Despite these challenges, Shimogori's experience suggests practical approaches for navigating legacy system modernization. His approach to timing technology adoption emphasizes understanding when infrastructure investment reaches optimal replacement timing rather than rushing toward new technology for its own sake.

"They've got to kind of give it up and then do something different," Shimogori notes, acknowledging that successful modernization often requires fundamental decisions about system architecture rather than incremental upgrades.

This approach aligns with his broader philosophy of building resilient systems that can adapt to changing requirements while maintaining operational stability. The key lies in identifying which legacy components provide genuine value versus those that simply represent sunk costs.

The Competitive Reality

The competitive implications of legacy system constraints are becoming more severe as digital-native companies gain market share. "A new banking company like Revolut in the UK will come out fully digital and then they're taking over the banking space," Shimogori observes.

These new entrants don't just offer superior user experiences-they operate with fundamentally different cost structures and operational capabilities. Without legacy system maintenance costs, they can invest more heavily in innovation and customer acquisition.

For established institutions, this creates urgency around modernization decisions. The question shifts from whether to modernize to how quickly modernization can occur without disrupting ongoing operations.

Innovation Within Constraints

Shimogori's perspective suggests that successful legacy modernization requires accepting constraints while finding innovative approaches within those boundaries. His experience with compliance as competitive advantage demonstrates how regulatory requirements-often seen as constraints-can become strategic assets when approached systematically.

The same principle applies to legacy modernization. Rather than viewing existing systems purely as obstacles, organizations can identify ways to leverage existing capabilities while gradually introducing modern components.

This approach requires patience and systematic thinking-qualities that align with Shimogori's emphasis on execution over innovation in building sustainable competitive advantages.

Looking Forward: The Modernization Imperative

As technology accelerates, the cost of maintaining legacy systems continues to rise, while the case for modernization grows stronger. Shimogori argues that organizations that succeed will make intentional, strategic modernization decisions rather than allowing outdated systems to dictate their future. He warns that legacy constraints put established players at a competitive disadvantage, noting that "undeveloped nations are going to leap and bound over the U.S." At the same time, he acknowledges that breakthrough innovations can occasionally bypass systemic barriers, pointing to Starlink as an example.

Ultimately, Shimogori emphasizes that effective modernization requires balancing innovation with operational stability. Organizations that approach modernization as an ongoing strategic capability, combining technical expertise with clear-eyed planning, are better positioned to compete with digital-native challengers.

CONTACT:

Andrew Mitchell
media@cambridgeglobal.com

SOURCE: Cambridge Global