A featured contribution from Leadership Perspectives, a curated forum for enterprise technology leaders, nominated by our subscribers and vetted by the CIOApplications Editorial Board.
VP of Product Strategy and Innovation at Broadridge
Beyond the Big Bang: Why Incremental Change is the Key to Digital Transformation
At the heart of these efforts are simplification programs aimed at stamping out complexity. Given the scope of the problem, it might seem like the best way to simplify internal technology infrastructure is to scrap the legacy systems altogether and start over from scratch. However, financial services firms working to upgrade legacy technology platforms should avoid high-risk/high reward change initiatives.Instead they should focus on creating sustainable cultures of incremental transformation.
The “big bang” approach to transformation rarely works and can have disastrous consequences for organizations. McKinsey research estimates that 70% of transformations fail. These programs are too ambitious, too disruptive, and carry too much implementation and business risk. Companies in the past embarked on these sweeping projects because there were no good alternatives. Operationsat the time were so complicated and interconnected that it was difficult, if not impossible, to upgrade specific functions or make real simplification gains without tackling the entire architecture. In many ways, it was all or nothing.
The Power of Componentization
An incremental approach to simplification not only limits operational and implementation risk butalso enables firms to generate immediate benefits.
Technologynow allows companies to modernize individual functions without disrupting the rest of their operational platform. Financial service firms can use componentization and modular designto eliminate their biggest operational pain points and target their most important business goals. They are introducing new systems that are seamlessly interoperable and scalable. Each small win will reduce the footprint of the legacy platform, bringing the firm closer to the day when it is retired altogether.
Broadridge recently worked with a global bank whose expansion plans were being hampered by the limitations of their legacy tech platform. Internal systems were siloed for individual asset classes and geographies. Workflows were disjointed and duplicative.
A Step-by-Step Guide to Incremental Change
Firms that want to pursue incremental change have to prepare their tech stack first. Implement standard APIs that makeentire systems interoperable—both internally and for clients. Next, create a foundation of sound data management and governance. Data must be cleanand able to flow freely across an organization to be effective.
Don’t try to capture everything at once. Determine the data attributes that matter most for business outcomes and build those intothe common model. That step alone will create real benefits. This approach can increase efficiency by minimizing the number of breaks that need to be reconciled manually. Common models will allow the front office to easily access data from the middle and back offices, leading to better insights and business decisions.
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An incremental approach to simplification not only limits operational and implementation risk but also enables firms to generate immediate benefits.
Simplification Best Practices
There are several other best practices firms can follow to make their simplification efforts effective, including:
● Start with the business goals: Establish the business objectives you want to achieve and then build the technology blueprint needed to get there. Better technology is an enabler, not a goal.
● Prioritize: You can’t do everything at once. Identify the projects that will deliver the biggest ROI with the lowest operational and implementation risk.
● Create cross-functional teams for planning and implementation: It doesn’t make sense to keep personnel siloed while you’re trying to break down the siloes in your technology platform. Create working teams that include representatives from the business line, professionals with deep domain expertise in the front-, middle- and back-office systems, and forward-thinking technologists who can help drive innovation.
● Take one step at a time: An incremental approach is the key to success. It minimizes risks, allows for agile pivots when needed, and delivers speedy benefits. Target early wins that will free up resources and establish momentum for the firm’s broader transformation initiative.
● Set expectations early and often:By definition, an incremental approach doesn’t have a big date or shiny object at the end – so it’s easy for teams to lose interest. It’s critical to set clear milestones, articulate business value goals upfront, and demonstrateprogress against them in a disciplined manner.
● Align to the strategic vision:It’s natural to pick specific use cases as a starting point to ensure early demonstrable impact. However, it’s important to ensure that the approach is flexible enough to extend to other use cases. Articulating the strategic vision upfront will help teams makedesign choices for early use cases without compromising the long-term strategy.
Financial service firms who upgrade legacy platforms with new technology are achieving extraordinary gains in efficiency and effectiveness. Those gains will increase exponentially as firms integrate tools like cloud computing, artificial intelligence, machine learning and even distributed ledger technology into their operating models. As firms race to keep up, they should resist the temptation of big bang projects. Those high-risk/high reward initiatives are becoming obsolete themselves as innovations in componentization and modular design allow firms to create sustainable cultures of incremental transformation.
