For some, true innovation means moving fast and breaking things, but the financial services sector doesn’t have that luxury. Instead, firms must find ways to innovate in a controlled environment, with minimal disruption to customers and the wider market – and in line with operational resilience requirements. High-profile outages and increased regulatory scrutiny have brought much-needed transformation projects under the microscope, with little room for error.
Transformation activity is nothing new, but too many poorly performing projects have established a sense of inevitability around unrealistic timelines, scope creep and escalating costs. This is supported by research from the Harvard Business Review and management consultants Bain & Company, which found that 88% of business transformation initiatives fail to achieve their original ambitions, and just 12% of major change programmes produce lasting results.
However, firms can’t stay still and simply opt out of transformation projects. Customers and employees now expect frictionless, real-time services – and it’s important to meet those expectations to stay competitive. This is no mean feat for the financial sector, where many firms are hampered by years of legacy infrastructure. This challenge is exacerbated by the increasing pace of new technology, with generative artificial intelligence (GenAI) hype being a good example.
Firms that are slow to act may have an exponentially larger gap to bridge over time. There’s also geopolitical uncertainty to consider, including economic fluctuations, and the changing internal organisational politics, which often compound delivery delays.
Therefore, it's essential to make sure that all initiatives are streamlined, focused and targeted, while minimising business disruption.
It doesn’t have to be this way. The high failure rate for transformation programmes is often down to unrealistic goals, driven by the excitement of the next big thing. Many of the underlying projects within these programmes are not unique and often fail in similar ways, with nine key success levers outlined below.
Ideally, every firm wants to align its transformation programmes with its broader strategic goals. That said, many initiatives are tactical moves designed to meet short-term commitments and maintain current income streams. This is a perfectly valid business decision but it’s important to check that it is, in fact, a business decision, rather than an unconscious drift, clouded by short-term thinking and lack of visibility. For many organisations, tactical change projects are the default, which can have a significant, sometimes negative, impact on strategic goals.
It's worth noting that transformation programmes can often sit across both camps. In these instances, it’s important to identify which parts are tactical and which are strategic, and the timeframe that will apply to each. This has been the case in multiple Consumer Duty programmes, where firms made changes to meet the regulatory deadline but didn't fully assess what their strategic response should be, leading to gaps in their delivery scope to meet broader compliance expectations.
A range of initiatives are often underway at the same time – sometimes too many to manage effectively. It can be tempting to give too many projects the go-ahead without thinking about the firm’s overall change capacity, and the costs involved. Firms that don’t make the tough decisions to maintain a sharp focus on budget and monitoring could inadvertently set themselves up for a fall.
The lowest cost point to identify and resolve problems is at the start of a new initiative, and early decisions have an exponential impact on the later stages of the programme.
Many firms stumble over inaccurate assumptions or estimates, which affect the project’s trajectory. It’s essential to invest adequate time into these assumptions to make sure they’re credible and to fully understand the opportunities and downsides involved. Comparing the expected time frame to similar enterprises, both internal and external to the organisation, provides a much-needed sense check on what’s doable with the available resources.
On the flip side, some firms are struck with a fear of failure and take too long in the planning stages. Early inaction puts pressure on the later stages of delivery, and increases the potential to miss short delivery-windows.
It’s a careful balance, but ultimately firms need to set realistic (but inspiring) expectations, with sustainable milestones.
This is a critical component of any transformation project, as it lays the foundation for success by ensuring that the overall approach is robust and cohesive. Ongoing alignment with the initial programme design, from concept through to final implementation, will streamline processes and help the project stay on track.
Clear design outcomes, supported by effective communication, gives everyone a better understanding of key activities, priorities and key testing requirements. It breaks potentially overwhelming goals into manageable targets, simplifying resources and aligning workflows.
Transformation is a social business, so it’s important to pay attention to the people and personalities involved, especially those whose influence can negatively affect a project’s outcome.
Taking the time to define and implement appropriate governance forums will boost strong relationships with all key influencers. But good governance doesn't stop at programme steering committees. Defined ownership with clear roles, responsibilities, approvals and escalation mechanisms will improve oversight encourage a greater dialogue when the inevitable issues do arise.
It’s also important to remember that teams will change over time, and effective succession planning is a must. This includes identifying key resources and skills, rotating individuals throughout the delivery lifecycle and managing key person dependencies.
Looking at people topics more broadly, transformation is particularly challenging for firms where individual recognition or performance is valued over the wider project success. This encourages individuals to focus on their own responsibilities, with limited consideration for wider organisational goals. These kinds of behavioural norms can be difficult to spot, but it’s important to identify them and mitigate their impact, recognising the importance of both technical and soft skills.
Regular communication and clarity over why a specific transformation programme is underway, why it’s been prioritised and how it relates to other change initiatives, goes a long way to build engagement at all levels.
Many financial organisations use third parties to help deliver change, especially when it involves new technology. However, it can be all too easy to outsource an activity, without fully understanding the level of knowledge needed to retain accountability and offer robust challenge. This is particularly important for the financial sector, where regulatory responsibility for an outsourced service always remains with the user organisation and senior management function holders can be held personally accountable under the Senior Managers and Certification Regime (SMCR).
Unambiguous contracts are a must, but firms need to build strong ongoing relationships with third parties, continuing to set expectations throughout.
Some larger organisations practice risk business partnering, where project teams can call on additional expertise from wider shared risk services, as needed. Tools like these can be highly effective to tackle specific risk areas and overcome key roadblocks. Similarly, firms that involve second and third line assurance teams as part of their project plan can identify any issues early and prevent further escalation.
A transparent risk culture also plays an important role, encouraging anyone in the team to speak up when they identify a problem, speeding up resolution and helping the transformation project stay on track.
There are lots of opportunities to optimise working methods by automating some elements of delivery and to track headway using trigger alerts, warning systems and centralised visual dashboards. This provides a common view of progress, giving greater oversight over key areas of focus, and improving data quality across multiple fronts.
Successful transformations don’t happen by chance. They’re built on a culture of continuous improvement, and nurtured by effective planning, strong governance, investment and transparency. Embracing cutting-edge methodologies and data analysis helps to deliver these changes consistently and effectively, helping firms to differentiate themselves in the commercial environment.
Your next steps:
Addressing the above will help complete transformation programmes, with minimal business disruption and the greatest potential for success. This will help firms meet the growth needs of the organisation, while maintaining operational resilience and continuing to meet regulatory expectations.
For insight and guidance on optimising your transformation programme to maximise value, contact Neil Furnivall.
