How to accelerate past the roadblocks on the route to a hyper-agile lending business model

Posted on: May 4, 2018 by Kuldip Chiheru

In one of my previous posts on the impact of the Digital Business Continuum, I presented the nine ways you can tell you have a hyper-agile lending business. It followed an earlier post in which I set out the rationale for the shift to hyper-agility in lending. Yet there was a gap.

What happens when the business knows it needs to transform and knows what the outcome should look like but cannot kick-start the change? Or to put it another way, what are the organizational accelerators that will unblock the road towards assembling a hyper-agile lending target operating model?

As the Digital Business Continuum proposes, businesses must continually transform to keep up with (let alone stay ahead of) the market. For lending, this translates into the ability to focus on minimum viable product and then rapidly iterate. In my experience, this means aligning the organization for innovation in two ways:

  • Transformation alignment

As the Leadership chapter of the Digital Business Continuum explains, change must come from CXO commitment. Whether the leadership’s strategic focus is growth or cost transformation, it’s clear that change is required in the way the upper echelons of the organization think:

Leaders must serve the people of the organization rather than seeking to control them. They will take an experimental approach to evolving the company, making organizational change safe-to-fail (rather than just avoiding risk). And they will recognize that before expecting change in others, they must first model the change themselves.’

At the same time, enterprise transformation to hyper-agility must be grounded in day-to-day business. To ensure that each area of the organization is pulling in the right direction and to avoid a siloed operational or pure IT approach, the enterprise must be managed in the right way too:

Firstly, it suggests that, although it may be tempting to divide an organization up into business units and then try to optimize each one, in practice this may not produce a result that is optimal for the organization as a whole (and will almost certainly stifle innovation).

Secondly, it means that you cannot “design” the perfect organization; rather you have to “evolve it”. This means managers must have a clear idea of what the true objectives of the company are, and a way of measuring how well these objectives are being met.’

In my view, selecting a lead business unit to champion the change or even investing in a greenfield, digital-first business unit are practical ways for leaders to sponsor and operationalize the lending transformation program.

  • Disruptive business case alignment

I would also argue that transformation must deliver results. This may require a disruptive business case and, in some cases, market leading, competitive KPIs and payback targets. These need a clear transformation focus—whether that is new product origination, better servicing of existing business lines, full lending lifecycle reinvention or targeting growth in new channels or markets.

To gain buy-in, a hyper-agile model will need a proof of concept. Instead of trying to transform everything at once, the organization should limit the scope to an individual product or business unit first.

It is also worth understanding the impact of focusing on new products through hyper-agility. What is the run-off strategy on legacy? How can you minimize legacy data migration?

Finally, transformation should not introduce new complexities into the business. I would suggest the simplest approach should be to create the technology platform first and then do the business re-engineering. This avoids the scenario where two concurrent transformations are taking place—one at the platform level and the other at the business process or organizational level. In fact, a hyper-agile technology platform is likely to provide the tool for simplifying the business re-engineering. (And this last point is what I will cover in my final blog in this series on the Digital Business Continuum.)

In conclusion, any roadblocks that prevent the organization moving towards a hyper-agile lending business model must be removed at the outset. This will ensure the organization can secure market leadership by innovating at a speed that is greater than that specific competitors or the market in general. By providing leadership and operationalization for the shift-change, transformation and disruptive business case alignment are the obvious accelerators.

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About Kuldip Chiheru
Global FS S&BD Head
Kuldip Singh Chiheru is Head of strategy in Global Financial Services at Atos. Kuldip has been with Atos since 2008 and his particular area of focus is in the lending and loans division looking at how technology can improve this function for our commercial banking customers and for the sector more generally. Prior to this he worked in the Financial Sector advisory team at KPMG and has also worked for ICAP and HSBC Midland International Banking.