The Time is Now: Moving Towards a Better Financial Solution Design

Much has been written about the onslaught of disruption facing the financial services industry. A few years ago, this was often taken as speculation and sensationalism. I think most now agree that this is a reality and a sign that the new normal will be quite unlike the past. What is not often discussed is the unsustainable backdrop from which financial organizations are facing this challenge and how they might address it.

The financial services industry is under increasing pressure to continually add new services, keep up with the competition, and deliver fresh technology. For years, the industry has been adding new services and making incremental changes to their systems in order to adapt to the market, fix problems, and make updates. Now, they are left with highly complex systems that are:

• Unable to support fast-paced change.
• Highly complex with many interdependencies.
• Insufficiently supported with few people knowing the inner-workings of the complete system.
• Brittle and nearing the end of life.

These problems should not be news to anyone, but knowing the problems versus knowing how to solve them are two completely different things. Ignoring the need to change is becoming less of an option as financial organizations are spending millions of their IT dollars each year on complexity driven spend; money that could be better spent on innovation and modern technology. However, making changes to the infrastructure system is a lengthy and expensive process, and for many organizations, the tangled mess of their systems makes it difficult to know where to begin making such changes.

For starters, organizations must understand the complexity of their systems and from there they can decide what changes will make the biggest impact. The focus should then be on continuous changes that reduce the complexity within the system, rather than using short-term solutions that increase complexity and bog down the system over time. After a reduction in complexity is achieved, there must be a shift in the way that we think about financial services systems, otherwise the same complexity issues will continue to prevent organizations from swiftly adopting new technologies and drain IT budgets.

A new way of thinking

The importance of design and innovation has become clear in developing value for consumer electronics and increasingly for business processes (think Uber), but there is little advocacy for beauty in the design of the things behind the scenes. Without making end to end design a priority complexity will continue to flourish as great ideas give way to immediate fixes.

In order to achieve this shift in financial solution design, C-level executives must work with the design team to better understand where complexity exists and to set targets for reduction. At this stage, the business strategy must be aligned with the IT strategy, and emphasis should be put on rewarding simplicity and quality in solution design, rather than making incremental changes that solve only short-term problems.

This shift in the financial solution design requires an increase in IT and operational flexibility, meaning that IT teams need a broader range of choices when changes are required and should have an agile mindset that allows for ongoing improvements to the system as a whole, rather than siloed components.

There must be a reduction in operational risk and operational cost. Organizations cannot rely on legacy systems that are in jeopardy of failing and having costly outages. Investing proactively in the system now will minimize costs down the road when maintaining and updating a system that was built to handle such changes.

IT teams also need to be rethought; having experts in separate areas leads to siloed decisions and a lack of knowledge in the understanding of the system in its entirety. This results in design by committee, which is expensive and ineffective. Emphasis must be put on having teams work together across architecture types so that impacts to the system are realized upfront, rather than making patchwork fixes after the fact to make the system function. Any changes must be well documented so that the organization understands how and why changes were made and how each change affects the system. Documenting the system also makes turnover within the team easier to handle, so that if someone leaves, they are not taking all of their knowledge with them and leaving future team members to guess at the inner-workings of the system.

None of these changes will be implemented quickly, and they will surely be costly; however, the cost and risk of staying with a legacy system that has not been working for years is not an option. It is time to move forward and break free of the legacy systems and outdated ways of operating in order to stay competitive in the present financial services landscape.

A Way Forward

The best way to tackle the hubris of financial services systems complexity is to address it head on in a focused manner. The approach that I advocate involves making complexity a key consideration in all major decisions and attacking complexity head on with a four stage approach:

Upcoming posts will explore these four stages further and look at how complexity can be addressed head on by creating a solid financial services platform from which innovation can be embraced and extended rather than merely responded to.