Enterprise agility is a must-have in today’s financial services industry. Why is it so rare?

A New Digital Age in financial services 

Call it the Fourth Industrial Revolution. Call it a time of singular change and disruption. Call it the birth of a New Digital Age, or the dawn of a new era in financial services, or a fundamental rewiring of the way this entire industry works. 

Whatever name you give it (my personal favorite is “New Digital Age”), there can be no doubt that financial services is in the midst of some big changes. This illustration maps the technological angle of this:

Technologies like artificial intelligence, cloud computing, quantum computing and blockchain are hitting the market in rapid succession, causing knock-on effects that no one can predict. And the changes don’t stop here. 

Serious new competitors of all kinds are jumping into the industry. These run the gamut from nimble fintechs like Klarna and Avant to true tech giants like Facebook and Amazon. 

There’s also growing diversity among the workforce, with five generations—each with its own set of expectations and behaviors—soon to be working together alongside one another in many organizations. 

The nature of work itself is changing, too, with “digital commuting” increasingly common and freelancing and other forms of the “gig economy” moving from a niche model of employment into the mainstream. 

The combined impact of these trends will fundamentally transform the industry. This is a moment of tremendous opportunity for some organizations—and one of challenge for others.

Enterprise agility: valuable and elusive in equal measure 

 

Research from Accenture adds crucial detail to this point.  

This exciting study, built from two robust surveys and Accenture’s advanced analytics toolsconfirms that enterprise agility delivers better financial results and long-term competitive advantage 

The headline takeaway? Truly agile firms are over twice as likely as the average financial services firm to achieve top-quartile financial performance. For instance, firms categorized as “truly agile” in the study achieved 16 percent EBITDA growth between 2007 and 2017, compared to 6 percent for the average firm and 3 percent for “at risk” organizations. 

The study also found that true enterprise agility is quite rare in financial services.

This chart illustrates findings from the Transformation GPS analytics tools. It shows that the median sampled organizations in capital markets, banking, insurance, and financial services as a whole were all classified as “at risk” in terms of their enterprise agility.  

The study’s findings about the value of agility in times of change are corroborated by two decades of research into how markets and competition work.  

For instance, research published in the Strategic Management Journal in 2000 found that organizations in the New Digital Age increasingly need to be agile to respond and adapt to unforeseen market challenges and opportunities. 2001 paper in the Journal of Management found the ability to adapt quickly to changing conditions is an abiding source of competitive advantage in dynamic markets.

Why is this so hard?

This raises an important question. If the benefits of enterprise agility have been known for almost 20 years, and the advantage of being agile at this exact moment is so pronounced, then why is true enterprise agility so rare in financial services? 

Accenture’s report identifies three factors that make achieving enterprise agility a challenge for many financial services organizations. 

  1. In general, the industry is highly regulated. This makes it harder for financial services firms to achieve agility than organizations in less regulated industries. 
  2. Most incumbent firms are using legacy systems. Many of the indusry’s established players have histories that stretch back over 100 years. The systems they depend on for crucial business fucitons, in some cases, were built before the dawn of the Internet. Adapting these systems to the needs of the New Digital Age is a significant challenge. 
  3. Finally, financial services leaders report that the workforce isn’t equipped to deal with big changeNew research from Accenture reveals that high levels of fear and anxiety in the workforce are undermining change programs within financial services firms.   

It all adds up to huge obstacles preventing the workforce from achieving “flow” while learning. Championed by the groundbreaking psychologist Mihaly Csikszentmihalyi, “flow” is the intense experiential involvement of a learner in a learning activity. In some ways, it is the opposite of distraction. A learner in a state of “flow” is completely immersed in their task and learning at their highest capacity. 

The first two barriers to “flow” are big-picture structural barriers that can take years to address.  

But the third one—the workforce’s inability to deal with change—that one can be addressed right now. There are proven tools and systems available that can help organizations quickly and efficiently boost their workforce’s ability to deal with change.  

Come back for my next blog post, which will analyze the connection between workforce learning and enterprise agility.

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