Read The Introduction To “The Digital Tipping Point” Series HERE!

The digital technologies underlying the best practices are remarkably pedestrian: databases, social media, high-definition video. But the need for even the limited investments required to implement these best practices highlights a painful conundrum facing industry leaders. The traditional “installed base” of branches and technology requires massive, ongoing capital expenditures just to maintain the status quo. That burden, combined with the still-mounting bill for compliance and risk management, leaves insufficient investment to fund any digital transformation.

Shifting adequate resources from replenishing our past to reinventing our future will require clear strategic direction rooted in painful choices to not do some worthy things. But comprehensive strategic planning is time consuming and distracting. Banks facing urgent earnings pressure and stringent capital constraints forgo the difficult work of developing clear strategic priorities and anchoring technology plans around strategic imperatives and instead approve projects with the highest short-term ROI. It is far easier to build a compelling ROI-based business case for a small project than for a strategic transformation. As a result, most banks approve hundreds of small projects every year that will have no direct strategic impact.

The myriad of small ROI-seeking technology projects cause the work to take too long and produce too little (Figure 12). Each tiny initiative interfaces with every other project and with dozens of channel systems, product systems, and support areas such as HR and Legal. Managing that complexity requires hundreds of project managers, analysts, vendor managers, compliance specialists, department liaisons, user representatives, risk experts, UAT specialists, and testing managers. But all of those people attending all of those meetings, coordinating all of those moving parts dramatically delay project teams waiting on the next round of decisions. Even worse, the “overhead” devoted to those meetings consumes the majority of the IT budget. At the typical bank, less than one-quarter of IT staff actually write code. Such limited programming resources further hampers progress.


Figure 12

Figure 12

The proliferation of small projects not only slows every project but also ensures that when those projects finally finish that they do not produce the necessary change. As one head of Retail noted, “Our projects may give us some earnings lift. But if we add up the impact of everything we now have underway, it won’t come close to achieving the transformation we need to survive in five years.”

Challenge 5: Complete the most strategically important technology projects in the shortest possible time.

Response: Strategy-seeking project prioritization

A response from a member, Oscar Bank1 (Figure 13), shows how senior leadership can quickly and effectively exit that lose-lose box. Because Oscar, like most banks, had prioritized projects for short-term ROI, it was running hundreds of smaller projects with some work plans spanning five years. To focus its investment on achieving the transformation needed for survival, Oscar threw out the conventional business cases and reprioritized projects based on strategic imperatives such as transforming delivery or harnessing customer data. Only 78 of 216 Tier A projects underway served any strategic imperative. The bank’s data showed that projects planned to take less than one year enjoyed dramatically higher on-time completion than projects scheduled to take longer, regardless of project size. So Oscar restaffed projects in priority order with the cross-functional resources required to finish in 12 months.


Figure 13

Figure 13

The 28 most strategically important projects absorbed every programmer and analyst, forcing Oscar to defer the remaining 50 strategic initiatives. However, reducing from 216 interdependent projects to 28 so dramatically reduced the need for liaising, coordinating, and interfacing that 40% of the IT staff were left with nothing to do. Oscar reallocated those overhead dollars to additional programmers. Although it took time to hire them, the bank was able to staff 17 more projects in the initial 12-month plan.

Ruthlessly focusing on strategically vital projects effectively doubled programming hours under the same IT budget. Instead of finishing four strategically important capabilities in 2015 and needing over five years to complete all 78, Oscar finished 45 in 2015 and will finish all 78 within two years.

One senior executive observed, “We had an IT morass. We blamed legacy systems, IT bureaucracy, org structure, vendor management, compliance. You name it. Turns out, the problem was lack of business leadership. Instead of making the hard calls, we threw too much unconnected stuff at IT and made them sort it out. Now we set a strategy and use technology to deliver it.”

This Concludes Final Installment Of “The Digital Tipping Point” Series! Let Us Know Your Thoughts On The Digital Tipping Point!