Preparing for the emerging upturn

Posted on : 31-07-2014 | By : jo.rose | In : Innovation

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In this article, we consider the timing of the upturn and the implications for the type of change activity to be planned for and some key principles that help ensure success.

I thought I would start with a few sobering statistical observations: Post the 2007-2008 crash, the Gross Value Added by Financial Services and Insurance to the UK economy fell to below that of manufacturing and retail. Further, since GDP bottomed out in 2009, Financial Services output has generally failed to keep track with both GDP growth and other services output. Unsurprisingly, as the crash unfolded, participants in the industry decimated their change budgets as part of wider belt tightening measures.

More recently, official statistics point to the downturn being well and truly over.  However, are the effects of the crash still in evidence in respect of change investment confidence?

We would assert that many companies within the Financial Services industry remain uncertain about their medium term economic prospects as evidenced by a focus on investment in non-discretionary change, such as regulatory requirements, M&A integration, Business-As-Usual maintenance and on smaller scale efficiency or client improvements.

We appear to be sauntering, tentatively up to a turning point in the industry. The latest CBI / PwC Financial Services survey clearly shows optimism, employment and business volumes up across the sector, despite headwinds regarding banking capacity, regulatory and risk management investment, consumer distrust of debt and increased competition from new entrants and as a result of the internet.

As a result there will likely be some relaxation of change budgets, but from a much shrunken base. In the face of increased demand but probably only modestly increased budget, the requirement to invest wisely is more pressing than ever. This means doing only the right things and doing them well.

With a view to the future and a likely phase of modest economic growth, what additional considerations are there for change investment?

With reference to the latest CBI / PwC Financial Services survey, competition has emerged as the primary expected constraint on business growth over the next year. The business environment remains uncertain and so revenue growth will be both difficult to quantify and near impossible to ensure. This suggests investment priorities should be towards reducing the cost base where the impact upon the P&L will be easier to quantify and more realistic to achieve.

Nevertheless, the upturn means that investment in new sources of revenue will need to be made. However, given the business case uncertainty involved, it will be essential that any investments have measurable targets, are aligned with clear strategic goals and have strong sponsorship and accountability.

We would always advocate two broad principles to underpin any organisation’s change programme:

(1)       Sort out the macro agenda first. There is no point ensuring you are super efficient if you’re actually doing the wrong thing. It’s critical that the strategic agenda of the organisation can be traced down to every aspect of the change portfolio, however technical the change may appear at first glance.

(2)       Every aspect of the change portfolio should be owned by an internal customer. Those responsible for delivery aren’t great sponsors because they inevitably have to second-guess the needs of the business or function they are serving. Even overtly technical changes such as network resilience or data architecture improvements really should be owned by the business functions that rely on them.

In our experience, most of the good behaviours you need from an organisation derive from these two principles of operation, but few organisations fully observe them. Taking the time to consider business ambitions over, say, 3 years and to gain the buy-in to every aspect of the change portfolio really pays dividends in the longer term.

In summary, an inoculation plan for uncertain times should include:

  1. Define Strategic Plan: Ensuring the organisation has a clear sense of growth ambitions and business targets to act as focus for all organisational activity. This means having a clear understanding of how strategic targets will be achieved within every department and ensuring those departments have the process and infrastructure capacity to meet anticipated demand.
  2. Go for efficiency: Targeting operational efficiency as a means to maximising profitability. Given increased competition, asset growth by organic means might be difficult to achieve, so operational efficiency, whether it be through outsourcing, industry collaboration, reducing the product mix or process improvement should be on the agenda.
  3. Ensure delivery effectiveness: Having determined what market segments to target, speed to market, as determined by product development processes and infrastructure implementation needs to be optimal. Are contributing departments integrated and working as required?

Although easier said than done, these things can all be achieved through a combination of strategic planning, capability improvement and robust policy implementation.

Thanks to Graham Dash at Luminosity Services for this viewpoint.

If you would like to debate or add to any of the points raised in this article, feel free to get in touch through any of the communications channels below.


LinkedIn: graham dash


Graham is a Director of Luminosity Services Ltd, founded in 2009 to provide specialist consulting services to asset and wealth management companies, investment banks and the organisations that service them. Our leadership team, comprised of Graham Dash and Syd Wilkinson, have more than five decades collective experience in change management, most of it in leadership positions in tier 1 banks, asset managers and consultancies. Our specialisation is “change” – the ability to plan, manage and deliver business improvements. Please visit our website for more details.