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Five Steps to Speed Innovation in Financial Services

Firms must implement strategies capable of achieving fast and lasting digital transformation.

Financial services firms seeking faster digital transformation should supplement growing technology budgets with strategies that can speed the pace of innovation, such as rallying the organization around a challenge like the move to a T+1 settlement cycle.

Most financial services firms plan to increase their budget for artificial intelligence and distributed ledger technology by 20 to 30% over the next two years, according to the 2023 Broadridge Digital Transformation and Next-Gen Tech Study. As the budget starts flowing, it will be the job of internal technology teams to ensure that these investments pay off in the form of increased innovation and faster digital transformation. Picking up the pace of change might be a challenge, but there are several tested tactics that can help.

In my work helping scores of financial services firms advance in their transformation journeys, I have found several practices that have proven highly effective in speeding innovation. As IT departments determine how best to deploy new budget, they should consider the following five strategies:

1. Never Let a Crisis go to Waste

Financial services firms face several challenges that can spark organizational change: the pending move to T+1, regulatory reforms, and volatile market conditions. Technology teams should view these challenges as opportunities to enact comprehensive change. For example, rather than making one-off changes to data collection and reporting, the firm should aim to establish an organizational data governance and management capability. Rather than throwing new technology at existing operational systems, the firm should accelerate its transition to the cloud and seek SaaS replacements. By focusing on the broader goals like data consolidation and cloud migration, the firm will be building the foundation required for the integration of AI, ML and other next-gen solutions that will shift innovation and digital transformation into overdrive. 

2. Create Change Agents

Technology does not drive organizational change, people do. Your company may have entrenched thoughts about workflows and project governance that can hamstring transformation projects. You can overcome that resistance by identifying change agents. These are individuals with a deep understanding of business goals, workflows, technology, and a new solution’s potential benefits.

It’s not enough to send champions out into the organization to try to explain the strategy. These change agents need to be embedded in technology departments and business units as well. It is these visionaries, from the C-suite to the line workers, who will educate their peers, break down internal resistance, and drive rapid change.

3. Keep Innovative Employees Agile

Your smartest, most talented individuals don’t want to spend their days maintaining legacy systems. These employees want to work on new systems, technologies, and projects that define your firm’s future. Agile teams help address these issues while also speeding up the innovation process. They include representatives of the technology teams and the business units, as well as any other key stakeholders.

A bimodal model can help you manage business-as-usual activities with next-gen projects. Some teams can be assigned to day-to-day operations while other are deployed to innovate. Rotating technology professionals between the two assignments can keep them engaged while also ensuring that operations and innovation communicate with each other. Plus, you’ll be able to teach innovation teams how legacy platforms operate, which can help influence thinking and build operational resilience.

4. Keep Close to the Business

Fast, successful innovation isn’t possible without strong partnerships between teams building new solutions and their business-side owners. Technology teams can’t deliver efficient, effective results without continuous input from business about needs and goals.

Almost half of technology leaders want business leaders to explain their firm’s long-term strategy, and IT’s role in it, more effectively. On the flip side, half of business leaders want greater clarity from tech leaders on IT’s role in driving business transformation. This communication barrier can stall innovation projects that both groups want.

It’s important for technology professionals to solicit feedback and engagement. Reach out to your business teams to educate them about next-gen technology’s benefits. Focus on how innovation can make their lives easier, solve their problems, and improve business results.

5. Get a Boost From External Partners

External technology providers can help speed innovation in ways that go well beyond simply delivering specific technology systems. These professionals provide an outsider’s perspective for your company. They can also jump-start your business’ knowledge about next-gen technologies, and help share what’s worked at other organizations. Because external providers are hired for their expertise, they can sometimes use their influence with management to win support for ambitious innovation projects as well. 

Beyond Bigger Budgets

Throwing money at innovation certainly helps, but bigger budgets do not necessarily deliver better results. To achieve fast and lasting digital transformation, financial service firm will have to link their increasing technology investments to strategies capable of rallying organizational support, breaking down internal barriers, and solving real business problems.

Originally Featured in Traders Magazine

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