By Thomas Brevik, PA financial services expert
Why financial service providers need to adopt organisation-wide Agile ways of working.
Markets are globalising, eco-systems are expanding and digitalisation and technological development are increasingly important in securing competitive advantage. Disruptive competitors and new international entrants are challenging traditional players and forcing changes to the market at an incredible speed.
These include Klarna which is establishing itself within previously unexploited areas such as bridge financing. New payments solutions are flourishing and are already having a big influence on our everyday life.
Then there are new pure-breed digital banks such as Atom Bank (UK), Simple (US), and Bank Norwegian (Nordics), with completely different complexities and cost structures and that are threatening to take market shares at a dramatic rate. These are companies that are born and bred in the digital age and speak fluently to the new digital generations.
At the same time, regulatory changes are opening the doors for a flood of new entrants and entrepreneurs who are challenging the large incumbents. In the background, the existing financial service providers are struggling with the burden of legacy systems that create significant barriers to all initiatives, change programmes, and projects.
Almost all traditional organisations are characterised by a large set of organisational layers with high levels of complexity. Their culture is characterised by fear of failure and resistance to change. In addition, geographical differences in the Nordics within regulation and legacy systems are making it harder for the international players to drive initiatives across borders.
These are just a few of the many examples that highlight the increasing difficulty traditional companies face in staying relevant while retaining their current organisation and structure while their existing customer base matures.
Those companies need to respond to the disruptive competitors by reducing basic costs and time to market and by thinking differently about their future capabilities and position in the eco-systems. In a new and more complex environment, there is a need to become more Agile and adaptable to rapid change to ensure profitable growth while managing complexity and driving simplicity in the organisation.
Furthermore, there is a need to become better at predicting and exploiting future opportunities. Simply copying the previous success-formula may not be enough anymore – the organisation must be able to both explore new and exploit current business, and avoid the fear of trial and error.
Over the last couple of years, ‘The Agile organisation’ has become a well-known approach in giving organisations the ability to respond quickly and flexibly. PA has driven successful Agile transformations for some of the world’s largest financial institutions and that experience underlines that it is imperative for existing financial service providers to adopt Agile ways of working across the entire organisation if they are to stay competitive against the new digital leaders.
The background for Agile
Agile approaches for projects have been in use for more than a decade, mainly by software development teams. The Agile approach differs from traditional sequential approaches, commonly known as waterfalls, by using short but regular cycles that deliver results to users.
This allows for lighter, more flexible processes that maximise the time spent on directly value-adding tasks through close cooperation with the customer and continuous improvement through feedback.
Regular iteration and evaluation leads to reduced implementation risk and makes it easier to stop non-profitable projects before incurring large losses.
Having seen the benefits Agile approaches delivered within IT departments, organisations are now starting to adopt Agile at the enterprise level and implement Agile ways of working across their organisation as a way to support wider business agility.
Big Agile – how to adopt organisation-wide Agile ways of working
The Scaled Agile framework (SAFe) provides a way for the whole organisation to apply the culture and flexibility of Agile approaches by working within the realities of large organisations such as corporate governance, business planning, larger teams and programmes, third parties, offshoring, and regulatory compliance.
Another important enabler of Agile transformation is to simplify the business design. Lean thinking shows that many organisations have excessively complex structures with too many layers complicating business. Removing clutter through simplification; reconfiguring critical linkages to simplify the business; and repurposing for the future with a focus on simplicity are the key actions to enable greater agility in the organisation.
In order to get the best from Agile and deliver the full benefits, an Agile culture is needed across the organisation. That culture is significantly influenced by characteristics of the leadership so to roll out an Agile culture, leaders must understand the Agile DNA and become Agile themselves.
In an Agile culture the leader needs to act as a servant leader, asking, ‘what can I do to make my teams successful?’ Without broad leadership support, from both senior and middle management, Agile transformations generally struggle, as leaders play such a big role in driving the change.
That means senior sponsors and executives need to consider both the benefits and challenges involved in large Agile transformations, and assess how it fits with the organisation’s culture and readiness to change.
This means Change management is key to a successful Agile adoption. Management needs a comprehensive plan for managing the expectations of the business, mitigating resistance to change, encouraging motivation, and promoting the skills and behaviours required for Agile.
There are many benefits of a successful adoption of Agile ways of working on an enterprise-scale. Our experience, backed by extensive research, show that Agile organisations rank in the top quartile of organisational fitness, have up to 25 % shorter time-to-market with reduced costs of more than 50 % in deliveries, and have higher morale and engagement within the organisation.
The Agile organisation is characterised by:
- Early value delivery
- Higher degree of transparency
- Self-organising teams
- Customer-centric product fit
- Employee satisfaction
- Light initiation
- Risk mitigation
- Labour and capital efficiency
- Innovation and speed to market
- Greater collaboration
Those benefits underline the importance of existing financial service providers adopting Agile ways of working across the entire organisation if they are to stay competitive against the digital front-runners.
To ensure their competitiveness, organisations need to adopt a future-oriented and holistic way of thinking about their capabilities. The best time to do this, and to evaluate how market changes are affecting your company and what changes you should make to prepare for the future is now.