In his historic ‘We choose the moon’ speech, US President John F. Kennedy stated: “I believe that this nation should commit itself to achieving the goal, before the decade is out, to send a man to the Moon and return him safely to the Earth”.
The goal set was specific, attainable and measurable. It was executive leadership of the highest order. NASA’s experts took over and, a little over 8 years later, all the parameters set in the original mission statement were met, resulting in one of the most iconic moments in human history.
The moon landing demonstrates how a thoughtful and well-articulated strategy, underpinned by a set of measurable and incremental objectives, can provide direction and belief – the kind that can drive organizations to achieve the unthinkable.
Six decades on, this remains a case study that most organizations can learn from. Financial institutions (FIs) in particular are often guilty of failing to turn strategy into true value creation, either for their customers or their bottom lines.
In our experience, this is primarily driven by an inability to effectively connect the organization’s strategic vision to a portfolio of business and technology change initiatives. In other words, many FIs cannot answer the simple question: “Are we building the right things?”
In this third article in our series, we look at a two-pronged approach that allows organizations both to build confidence in their response to that most fundamental question and also lay a foundation for the culture and operating model changes necessary to sustain this new way of working.
1. Where are We Going and Why Does it Matter?
In his best-selling book, ‘Start with Why’, Simon Sinek calls out the importance of anchoring an organization’s strategy and change agenda to a clear and universally shared reason for being. However, this is not easy. In fact, it is far from straightforward to outline an ideal transformation strategy – plus that transformation has to start from the top.
For an organization to attain success here, there are several factors to be considered, each sharing a common theme:
Clarity of Vision. We are often lulled into thinking a great strategy is one that inspires awe. A very human tendency, and it is easy to swept up by plans and promises on shareholder calls and at board meetings. In response, we often see organizations announce a litany of transformative initiatives – code named, with catchy titles – without any real explanation of how they are going to come to life or what tangible value they will create.
By contrast, establishing no more than two to three central tenets for why an organization is embarking on a transformation will create a north star for articulating achievable, measurable objectives and keeps the organization oriented towards the ultimate goal.
Definition of Success. Organizations often articulate goals via outcomes – such as achieving ‘industry leadership’ or ‘enhanced resiliency’ – without defining what success actually looks like. Successful change organizations can differentiate business performance (backward looking) from business outcomes (forward facing).
This enables the entire organization to ensure alignment to common targets instead of investing on the basis of gut feel or in pet projects that can only be properly evaluated by looking back at business performance metrics (be they good or bad) upon completion. Connecting proposed initiatives and the vision in a clear and quantifiable way up front is how an organization will build sustainable continuous planning and prioritization capabilities.
Timescale. Goals are often driven by real market events that demand organizational focus: an upcoming regulation, the launch of a new industry-wide product or technology, disruption by new market entrants, among many others. In some organizations, the timescale for evaluating project effectiveness is a five year revenue or cost cutting forecast. In others, it is simply the time until the next regulatory examination or audit.
Successful change organizations understand how to define their strategy incrementally to gauge efficacy and ROI in real time. The goal of an initiative should not simply be to finish’, but rather to create value. This changes how organizations must think about timelines and planning to focus on real-time value creation and benefits realization instead of merely the next milestone or project activity.
2. How in the Heck do We Get There, and How do We Know We’ve Arrived?
While strategy definition and dissemination can suffer due to a lack of focus, the articulation and prioritization of transformation initiatives are typically overcomplicated and hyper-politicized. In our experience, the primary reason lies in a lack of clear differentiation and poor connectivity between business outcomes and business performance. Business outcomes are rarely well understood, even if business performance is well known.
In strategic planning it is important to understand the difference between correlation and causation. Completing a high priority initiative may correlate with improved business performance, but it is hardly ever the sole cause. However, a particular initiative may be the driving force behind increased digital adoption, improved digital differentiation, geographic expansion, and other high value business outcomes.
Strong transformation organizations understand this and are able to incorporate the following constructs:
Understanding Performance. Identifying, documenting, and managing performance indicators is a must for any organization seeking to understand the long-term health of their business. They are, however, very poor tools for prioritizing change initiatives and investment because of their inherently rearward facing nature (e.g. Revenue Growth Over Time).
Successful transformation organizations recognize this and use business performance metrics as a way to shape strategy and communicate long-term viability of the business – but not to drive change portfolio planning and prioritization.
Linking Outcomes to Performance. Once measures of performance are understood, effective change organizations identify interim outcomes we believe will drive long-term improvements to business performance metrics. For example, improving STP in trade booking can lead to a reduction in costs, but can also generate increased customer satisfaction through reduced confirmation times and settlement failures.
Outcomes based on business strategy need to be linked to performance indicators to create a map of the outcome-to-performance relationship. This will enable the organization to identify outright, with no ambiguity, which levers to pull in order to achieve the vision.
Prioritizing with a Plan. Many finance and budgetary decisions are made based on emotion. Loud voices garner attention, whether internal or external. Without a repeatable, transparent, and objective method to understand the right areas towards which investments should be steered, significant time and resources can be wasted in search of true value.
The best change organizations mitigate the role of politics and emotion in continuous planning by requiring a clear linkage between proposed initiatives, the business outcomes they will produce, and those business outcomes’ impact on performance metrics. Continuous prioritization – and reprioritization in the event an initiative is found not to be delivering against expected outcomes – is a key attribute of successful change organizations.
Creating connectivity between strategic vision and tactical planning is key to an organization’s success – no less critical than as a gyroscope and a navigation computer to a spacecraft. While the former enables it to position itself correctly, the latter enables changes in direction to reach the desired destination. Boosters might be great, communication with the ground might be faultless – but remove one of the navigational tools and the mission will fail.
In the next instalment of our series, we will look at the second pillar of successful transformation organizations and dive into the detail of how delivery of initiatives can falter, and what steps are required to optimize execution.