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Maintaining transformation momentum during a downturn – lessons for Financial Services leaders. 

Written by Airwalk Reply Partner Alex Hammond

The financial services (FS) industry is in the midst of a period of substantial transformation, driven by technology, consumer expectations and, to a greater or lesser extent, new entrants (as well as the enduring spectre of the likes of Amazon, Google and Apple making more and more substantial forays into the market). 

The challenges are many - legacy systems, processes, teams, skills, not to mention the vast budgets that are consumed keeping the lights on. But there is a pathway to a much more efficient, effective, technology-driven and optimised version of your organisation, if you can drive the right transformational activities. It might take a year – it’ll probably take 5-10 years, but hopefully you’re already well on the journey. 

However, transformation is always easier to invest in when times are good. Excess cash is more plentiful, shareholder sentiment allows for broader speculation. The challenge we have today is that we’re not in one of those periods. 2022 brought with it significant disruption, and this has translated into belt-tightening across the FS industry in 2023. In some cases quite significantly so. 

The standard approach we often see is to press the pause button, pull back on the reins and slow the journey down – to kick the can down the road. Technology is too often seen as a support service that consumes budgets, rather than a critical strategic foundation that enables your business – and as such, it is too easily seen as a place from which to drive out cost. 

This is a mistake.  

Not only will you be pushing things back potentially 18-24 months by the time you regain momentum. But it’ll cost more, the world will have moved on, the skills you need will have changed, and things get more complex all the time. Not to mention, perhaps most fundamentally, the opportunity cost versus where you could be in 3 years time (and where you will be, having not invested) is massive. It could be the difference between remaining competitive and losing ground you’ll never recover. 

However, this friction between the management (and ultimately cutting) of costs and your transformation agenda doesn't need to be quite so significant. In reality, a massive proportion of transformation spend is wasted - some estimates put this wastage as high as 70%, to the tune of $900bn or more in 2018 (source:  

In the context of cutting costs, this statistic should be seen as a real positive. If you were able to spend money on the right things, in the right way, and deliver the value you had hoped, you could cut over 50% of your transformation spend, without losing any of the momentum or value. 

The trick is, obviously, where do you focus? How do you know where to fold and where to double down? 

In March, Airwalk Reply hosted our second FS breakfast briefing in London, and our panel explored this fundamental challenge, and discussed the way forward through three main lenses: 

  • Focusing on value creation 
  • Optimising delivery 
  • Seeing the big picture 

Focusing on value 

Organisations focus on cost, but very rarely on value. But reality is that ultimately all that matters to most organisations in the FS sector (and arguably any private sector for that matter) is financial value - either a reduction in costs or an enhancement in revenues. Nothing else really matters, and so any change initiative needs to be positioned in these terms. 

What this means is that it is imperative that you are being clear about the business case for change. What value will the initiative generate? How will this value be measured (and even can it be measured today)? How will this be tracked in the future? Converting sentiment into KPIs and metrics is crucial – as the first initiatives to be cut will always be those that have not landed this fundamental message. What value will you be delivering, and what does this mean to the business in pounds and pence? 

Related to the above but taking this further, make sure that everyone involved, from the top down, is clear on the why, and what success looks like. Make sure that ‘success’ doesn't become about delivering the project for the project's sake, but about the value case. And if this no longer stands up, then the project shouldn't exist. 

Articulating this value case is not something technology people are generally good at - converting technology change, improvements, efficiencies, innovation, into monetary benefits. But it is a critical part of an effective and value generating technology organisation, and is a skill you should cultivate (or buy in, if necessary). 

The big picture 

Too often change initiatives are seen as endeavours in isolation. If we invest in that platform, things might get a bit quicker or easier. But the current one works, so why bother? 

Ultimately what we see too often is a big disconnect between the business and technology. A lack of understanding of the key business drivers on the part of technologists, and a lack of vision on the part of the business, when it comes to the potential strategic power of technology. This potent mix of unconscious incompetence leads to a lack of ambition when it comes to transformation in financial services, in stark contrast to technology organisations, where the business and technology teams work hand in hand, and in many cases are one and the same. 

A new generation of FS leaders with greater tech affinity may change this over time, with more senior leaders having come through the ranks having experienced the benefits of technology, both in their lives and their work. But this journey will not be a rapid one – it will take a generation or two. 

Smaller and more modern organisations are better at this because they tend to sit together with the business, within product-oriented teams. FSIs are on this journey, but there remains a level of immaturity when it comes to how delivery and operational teams are structure, so there’s plenty more room to reap the rewards of this approach. 

One of the biggest challenges is the inherent transient nature of senior leadership within major FSIs, with 2-4 year cycles of leadership pretty common, particularly in publicly traded organisations. With the best will in the world, transformation requires long term commitment to the cause, particularly with organisations that hold so much legacy. These cycles do not promote this approach, and can stand in the way of progress if not managed accordingly. 

This makes it really important to focus on delivering value in smaller chunks, but also driving forward with the change agenda as part of more tactical initiatives - small incremental cost on top of the tactical project that allows some enduring strategic improvements, which over time add up to potentially substantial progress. These are examples of how teams on the ground can drive change forward, even when those above them may have other objectives. 

Being better at delivery 

We’ve touched on the concept of being product-oriented already, but the value of this really cannot be understated. Being organised around value streams and products, bringing technology and the business closer together, as well as creating much more empowered and effective teams, is so crucial to being a more efficient and effective technology organisation. 

One of the most potent principles that was discussed by the panel - make decisions quickly. Don't pontificate. Whilst it may not sound intuitive, it is far better to make a decision that turns out to be wrong, than not make a decision at all and burn time, energy and money achieving nothing.  

One of Amazon’s values centres around ‘a bias to action’, alongside the concepts of one way door and two-way door decisions. What can we move forward with no regrets with limited information? Generally speaking, the answer is plenty. Get on with it! 

Another mechanism that can be a powerful way of more closely aligning your delivery and operations with the business is to move the budget and cost of running platforms to them. Your teams still do the work needed to run and (if allowed) evolve them. But this approach gives your internal customers much more visibility of the costs associated with the provision of those services, in many cases driving the incentive to invest for improvements and efficiencies down the line. 

Other elements include investing more in better estimating. Poor and lacklustre estimating drives a level of inaccuracy that is endemic in technology teams, and leads to a lack of trust, and challenges down the line, not to mention real difficulty in sizing a sensible business case. No matter what happens, poor estimating leads to money being wasted. It doesn’t mean we need to go back to the 1990s approach of spending months building a picture, but something more than 10 minutes of t-shirt sizing is probably also worth considering. 

The list goes on – having appropriate governance, breaking delivery up into more manageable chunks, promoting a culture that is more incentivised to succeed than they are scared to fail. 

Ultimately, whatever happens, it is the role of leaders to protect those who actually do the work that moves things forward. Fight for these teams and you have a much greater chance of success.  

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