Overcoming the agile transformation paradox in financial services 

Financial services leaders know that to thrive in today's fast changing digital marketplace, even well established, highly profitable institutions must achieve ever increasing levels of organisational agility. We proved this in our research into agile organisations in 2019 and, since then, the way in which agile organisations excelled in the face of the global pandemic has reinforced the need for agility.  

Yet in our experience, efforts to increase agility often face a monumental challenge - the agile transformation paradox. This occurs when siloed, hierarchical leadership structures and change teams take charge of the switch to a cross-functional, democratised operating model. Using such traditional change governance and delivery models to become agile slows progress, increases costs, and dilutes benefits as people fail to see those at the top modelling the behaviours they're being asked to adopt. 

The only way for financial services organisations to maximise the value of their agile transformation efforts is to embrace an agile approach. Having delivered some of the world's largest agile transformations, we know there are four factors in avoiding the agile transformation paradox:

1. Ensure you have the right experience from the start

In any endeavour, experience improves the chances of success. This is especially true in transformations loaded with complexity from the outset.

Ideally, those leading the journey to greater agility will have done so before in similar contexts, but this is typically not the case. Banking and technology leaders tend to be experts in running their part of the business, not transforming it to operate radically differently. It’s not only top level leaders that benefit from having recent and relevant experience of moving to agile – those responsible for leading the daily delivery are much more effective if they have real and relevant experiences to draw on.  

Assembling an initial team with the right experience should come before anything else. Start by looking in-house, then supplement the existing skills by recruiting new talent and/or partnering with external experts where necessary. Regardless of where the expertise comes from, having it will ensure the strategy driving the change is coherent and coordinated, and the approach to governing and delivering the change is set up for success from the start.  

2. Build an aligned and empowered transformation leadership team

Achieving agility at an organisational level impacts all areas of a business. In our experience, having a compact team of leaders that have the accountability and authority to drive change across the divisions and functions that make up the wider bank is a strong precursor to success.  

Through guiding the largest agile transformations in financial services, we have seen how aspects of the SM&CR regime make some banking leaders inclined to be guarded of adopting a model of shared accountability. However, the SM&CR regulations don’t prevent leaders from having shared objectives and responsibilities providing they are mapped appropriately. Those experienced in agile transformation within financial services are best placed to ensure this doesn’t become a barrier to forming an effective transformation leadership team. It serves as a good example of why having the right experience from the start is so essential to success.

When defining who should be part of the leadership team, there's no set formula, as what's optimal and feasible depends on a range of factors, such as organisational scale and structure. But we've found the most effective leadership teams are small enough to make high quality decisions at pace and have the authority to embed change across the impacted areas. This typically equates to a team of between two and four, consisting of at least one leader from business and one from technology.

Once you’ve appointed the leadership team, you need to align them to a set of shared goals based on the agile transformation. In our experience, it’s common for transformation leaders to have performance objectives specific to them and their part of the organisation. But this exacerbates the transformation paradox, as the existing way of operating adversely impacts the approach to transforming to agile. 

To cascade transformation goals across the bank, it’s vital for the transformation leadership team to have strong relationships across the business. Respect and relationship capital are essential in aligning other leaders to a cohesive set of goals and in removing enterprise level blockers.  

When we helped a Tier 1 global bank move to an agile way of operating, having a team of the General Manager, COO and CIO provide overarching governance and coordination proved invaluable. It ensured the existing siloed structures didn't hamper the efforts to integrate business and technology, and eased tough decisions as, although authority didn’t sit with a single leader, the team was sufficiently senior to act with autonomy when necessary. 

3. Define an overarching vision, transformation strategy and objectives

We’ve found many traditional banks have multiple, often misaligned and sometimes competing, transformation strategies that different parts of the organisation created and own. 

Gaining a competitive edge through greater agility requires resources to be organised in a way that enables the end-to-end delivery of customer value with minimal hand-offs. Achieving this often means multiple silos across the business need to adopt a new way of operating in unison. Aligning to a single vision and coherent strategy will help bring previously discrete parts of the business closer together in the pursuit of being faster, more efficient and more innovative.  

Creating a compelling vision and shaping an executable strategy that resonates across a large institution isn’t something you can do with a template. But in our experience, the most effective transformation strategies have seven attributes in common. They: 

1. embrace simplicity as a guiding principle
2. are flexible on the ‘how’, using data to inform quarterly strategic reviews
3. contain a single, memorable and ambitious vision for the whole organisation
4. contain a set of unambiguous goals that allow for progress measurement
5. describe a coordinated set of actions the organisation is willing to invest resources in
6. have a set of related metrics and leading indicators that allow the tracking of effectiveness
7. can be trickled down through the organisation, aligning strategy to execution.

 4. Use a value stream-based model to govern and deliver the change

In simple terms, a value stream is an enduring, coordinated ‘team of teams’ that contains all the resources needed to deliver a single set of customer or business outcomes. They also describe the high-level steps needed to take a concept or request through to something of measurable value. 

The effectiveness of value stream in delivering customer outcomes is well-known, with established banking institutions increasingly opting to organise their change resources in this way and some even adopting the model in the run side of the business. 

Value streams cut across organisational silos by grouping the resources needed to deliver a single set of outcomes, removing the hand-offs and delays imposed by multiple functional units. This makes them especially powerful when used to govern and deliver agile transformations as they enable clear leadership accountability, focus on outcomes and contain all the resources to deliver the goals. In essence, they provide a working exemplar of the future agile organisation.

Based on how most traditional banks approach delivering change, mobilising a value stream to help govern and deliver the agile transformation may seem like a big step. This is where the first two factors come into play – by building an experienced team at the outset and creating an empowered transformation leadership team, designing, and mobilising the value stream becomes much less of a challenge. 

Financial institutions must use an agile approach to deliver agile transformation 

The need for organisational agility has never been clearer, and many established financial institutions are already attempting to raise their game. Transforming an established, profitable institution is a complex undertaking. To increase the chances of success, financial services leaders must apply proven agile principles when defining how to govern and deliver the transition to agile.