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Adapt to succeed

The financial services industry is acutely aware that they need to keep adapting to succeed. Disruptors entering the market find it relatively easy to pick up market share, and tech companies are encroaching on the online payment world.

Adapt to succeedThis means big incumbent providers are facing the prospect of substantial shrinkage. In response, all banks have invested in organisational agility programmes of some description. Many digital native companies have shown phenomenal success through this approach, and banks are keen to harness the power of organisational agility for themselves. This year, we surveyed 500 top executives to gather their views on organisational agility. fifty per cent said they believe their future is less bright than their past and the biggest threats to their business are customers and their future demands.

Business leaders in the sector believe they need to increase speed and flexibility to keep pace. More than three-quarters (78 per cent) of those we surveyed said that a company's ability to respond rapidly to change will make the difference between success and failure - higher than in any other sector. The same number also confirmed that improving organisational agility is a top strategic priority for their company’s board.

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But, despite being aware of the need to stay nimble, financial services companies are finding it difficult to put this into practice. The C-Suite realise they have a part to play in this, with more than 60 per cent saying their company’s leadership understands the level of transformational change they need to make to remain competitive but are struggling to act or don’t know what to do.

Despite understanding the changes needed and having a positive mindset towards organisational transformation, financial services companies aren’t showing outstanding performance across the dimensions of organisational agility in our study. The industry doesn’t excel or lag on any factors, which may be a result of the work many organisations have invested in improving their organisational agility so far. But the way in which processes have been adapted and sped up have not yet been as effective as they could be.

Leaders know this and are aware that there are challenges ahead. Seventy-seven per cent are concerned about technology pioneers bringing product or service innovation to the market by 2023, while nearly two-thirds think the pace of change in the business environment will pose a significant threat to the industry by then.

Despite the challenges the sector faces, it already demonstrates plenty of strengths as well. Mobile banking has evolved very quickly. It has been an enormous transformation, made successful because banks seized the opportunity to respond to market needs.

“The industry’s inability to recognise how much organisational agility depends on the right culture is cause for concern.”

In addition, despite the challenges hitting the sector, all the central incumbents have managed to survive. This level of endurance is not true of many other sectors, where large players go out of business relatively regularly. This isn’t because financial services has faced any less disruption, but because it has overcome enormous change over the last decade by successfully anticipating needs.

Although they sense room for improvement, the sector’s leaders are more confident they know what their customers want than other industries.

Banks' ability to anticipate what customers want is helping them survive. But the industry’s inability to recognise how much organisational agility depends on the right culture is cause for concern.

The ability to take risks and change direction quickly is vital for building an effective organisation. In reality, some financial services leaders haven’t had good experiences of agility and may have been introduced to negative and unhelpful versions of the methodology, which can lead to distrust. But accurate understanding and real buy-in from leadership is a decisive factor in whether agile transformations are effective.

The potential risks of not investing in this mindset and cultural change are considerable. Although no large bank has failed yet, it is a more viable scenario for the future. The leaders of the sector agree this is the case, with two thirds expecting prominent companies to fail because they are unable to keep pace with change.

Our 2018 Nordic agile report, Agile, applied. Practical insights from the agile frontline, goes to the core of why agile initiatives may not be yielding the desired returns. Organisations should not underestimate the extent of the cultural transformation required, or the support that people will need to change a mindset that has prevailed for many years. With a passionate and visible figure in the C-Suite leading the way and championing the transformation, companies can ensure they have the best chance of keeping pace and flexing in response to the challenges that lie ahead.

The financial services sector demonstrates particular strength in its ability to pre-empt change and stay ahead of the curve. But it’s abundantly clear that keeping organisations nimble through organisational agility still needs to be a top priority. Crucially, for this to be effective, organisations must ensure that their agile programmes are designed consistently and with strong knowledge transfer to the entire workforce.

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