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Reduce costs more effectively with organisational agility

Agile transformed IT delivery. It created iterative change cycles, encouraged collaborative development and ensured the customer was at the centre of everything. In turn, this set the pace of technological change – it was only 10 years ago that Facebook and the iPhone began changing the way we interact. Rapid technological change has put enormous strain on financial services firms as they struggle to respond and deliver what customers now expect.

The consequences are significant. Costs have spiralled as reactive changes have made financial institutions enormously complex, with siloed operations delivering single products and services. To manage this complexity and reduce costs, financial institutions must become agile institutions.

Managing costs with agility

The cost reduction challenges may seem significant and complex, but organisational agility can overcome them. By shifting the perception of cost, it’s easier to manage and lower it. We’ve found the best performing organisations display the following five agile characteristics. Consider for a moment how they can help you manage costs and drive real value:

1. Centre on the customer

Too often we think of cost as an internal metric, broken down by function or department, with cost reduction targets assigned in the same way. But the customer doesn’t see internal functions. The result is a transfer of cost between functions with no change in the cost to the customer.

Instead, focus on what gives the customer value. Then, work back through all the functions and departments that work on delivering that product or services. This will give a much better view of the costs that drive revenue and growth, showing where there could be effective savings.

2. Speed up time to value

With complex regulation and high-value services, financial institutions have traditionally been slow to evolve their offerings. But waiting for the perfect solution won’t work anymore. Things move on, fast. Cost reduction efforts should be organic, on-going and iterative.

So, create an ambitious target, but don’t wait until every part of the solution is ready before acting. Work out what small initiatives will move you closer to your target and launch each as soon as you’re sure it won’t have an adverse effect. You can always go back to improve it, but at least you’ll be reducing costs to some extent while making further improvements.

3. Design for simplicity

Speed doesn’t mean haste. Financial institutions can’t reduce costs in the long term by simply bolting new technology onto legacy systems. Eventually, everything will collapse under the weight of the complexity.

Instead, they should work to untangle technology and design for simplicity. That means moving to modular IT systems that can quickly rearrange to offer new products and services to customers. And it means building cross-functional teams around customer deliverables. Only then can everyone work together to deliver cost reduction solutions and keep costs down as the world changes.

4. Build to evolve

Cost has a habit of reappearing if reduction efforts aren’t sustainable – merely shifted to other areas of the business that then pick up the slack.

To ensure this doesn’t happen, we need to build an organisation that’s able to adjust and adapt to new realities. This means bringing together modern technology that’s easy to reconfigure with people who have adaptable skillsets. Then, when you reduce costs in one part of the business, you’ll have the transferrable capabilities to ensure another part of the business doesn’t pick up the bill.

5. Liberate your people

The best ideas for reducing costs won’t necessarily come from the top. Those closest to the customer will often have the clearest view of bottlenecks and wasted effort.

So, ensure people from all levels have the chance to share their ideas. Engagement surveys and open forums for discussion can uncover opportunities the Board would never be aware of.

Organisational agility is the key

Having worked with financial institutions around the world, we know organisational agility can reduce costs in a sustainable way. We also know it sets businesses up for growth, with the top 10 per cent of organisations by financial performance being 30 per cent more agile. In short, financial sector organisations must become agile organisations or risk being left behind.

Contact the author

Contact the financial services team