In this series we will look at where financial institutions stumble on the path to building high-performing change organizations, which limits their ability to deliver meaningful strategic transformation
Part 1: Three Pillars of Successful Change Organizations
The most successful transformation organizations are those that realize very quickly that the secret to sustained success is not delivering any single, large scale, strategic transformation. Rather, they focus on creating a culture that fosters and rewards finding new ways to work, learning on the fly, and dealing with setbacks as a part of their everyday working ethos.
Over time, these organizations significantly reduce risk of failure, increase return on transformation investments, and make agility and continuous innovation a part of their corporate DNA.
Most financial institutions allocate significant amounts – as much as 30% by some industry estimates – of their technology budgets to transformative initiatives. When you factor in success rates for delivering standalone, strategic transformation – 30% according to a BCG survey in 20201 – it means most organizations are spending as much as 20% of their annual investment budgets on failed transformation efforts. Betting on successfully landing large scale, strategic transformation initiatives just doesn’t pay off enough to justify the risk.
To improve their odds of success, financial institutions are beginning to invest in dedicated transformation functions, albeit with varying degrees of effectiveness. Given the challenge of creating a successful transformation organization, and the odds stacked against most institutions, it is critical to identify the factors that set apart a mature and optimized change organization from their less functional counterparts.
In our experience these success factors revolve around three main pillars that can all be found in any successful change organization’s culture:
- First, and arguably most critically, is the ability to effectively identify the right priorities –“are we building the right things?” Once an organization can align strategic objectives to its transformation agenda and cascade that alignment down to lower level OKRs and KPIs, the change organization has a solid foundation from which to execute.
- Once we’ve been able to identify the right things to build, it is critical to be able to effectively deploy technology and change within organizational constraints –“are we building things right?” This capability does not come overnight and should be the focus of its own continuous improvement journey.
Cultivating empowered teams with cross functional expertise and meaningful control over their own destinies will help alleviate growing pains but is not the final answer. True change organizations are aligning business, technology, and delivery functions in a way that gives their people a target operating model towards which to strive and career opportunities to boost retention.
- However, knowing the right direction and having the technical wherewithal to get there doesn’t mean we know what the destination looks like – “are the things we are building, delivering the outcomes we expected?” In many organizations there is confusion around the definition of success and a conflation of backwards looking business performance metrics to forward facing indicators of positive business outcomes.
Those institutions that are most effective at flexibly defining and monitoring the performance of their transformation agenda in real time massively increase their ability to react to market changes and deliver the right outcomes for the organization.
Successful transformation organizations have all invested in – and attained – varying levels of success across these three pillars. If you think your organization can be successful without them, think again. It is only through balanced and continuous investment across the three pillars that organizations are able to drive successful culture change in adopting a true transformation mentality.
Cultivating that mentality takes time and hard work, but in the words of Martin Luther King Jr.: “If you can’t fly, then run. If you can’t run, then walk. If you can’t walk, then crawl. But whatever you do, you have to keep moving forward”.