Why do so many projects to improve corporate operations produce unsatisfactory results? Too often, so-called transformation efforts end up siloed and unambitious, achieving incremental improvements. Based on our experience with financial institutions across the globe, true operational transformation requires firms to rethink their services from end to end, while effectively balancing customer needs, resilience requirements, and efficiency expectations.
In most cases, organizations focus on a single issue or addressing a single objective, such as efficiency, customer experience, or resilience. Rarely do organizations look across their business and consider all three objectives together, often driven by executives and teams involved having narrowly defined goals and little incentive to go deeper. While organizations may succeed in meeting a single, short-term objective, they miss an opportunity to optimize their business and create more effective, longer-lasting outcomes.
Key market shifts demanding transformational change in financial institutions
Institutions that struggle to balance competing pressures of efficiency, effectiveness, and resilience — even in favorable market conditions — often experience deficiencies across all three dimensions.
Among financial institutions with less mature or less disciplined operational practices, we consistently see higher non-interest expense growth — in some cases exceeding 20% over a five-year span. These institutions also experience higher customer complaint volumes, longer and more frequent technology disruptions, and higher operational losses.
Below we outline several market forces that are converging, making this a critical juncture for financial institutions to take a systemic approach to fostering innovation. This is not merely a strategic choice, but an urgent necessity.
Accelerating adoption of artificial intelligence: The rapid integration of AI across financial services is redefining customer engagement, risk management, and operations, offering opportunities to make simultaneous enhancements to efficiency, customer effectiveness, and resilience that were previously not available.
Rising cost pressures: Persistent inflation, margin compression, and recession fears create uncertainty, requiring new levels of operational efficiency to protect profitability without disrupting service or stability.
Increasing financial services merger and acquisition activity: A surge in M&A is expected as financial institutions seek scale, efficiency, and to bolster digital capabilities. Acquirers and targets are making enhancements around service quality, resilience, and efficiency to integrate quickly and capture deal value.
Shifting customer experience expectations: Consumers expect seamless, 24/7 services. Financial technology companies and digital-forward financial institutions are differentiating themselves on agility, availability, and user-friendly experiences.
Evolving cyber threats: Cyberattacks are growing in sophistication, volume, and impact, demanding a modern approach to cyber resilience, without incurring excessive costs or compromising user experience.
Our step-by-step approach to operational transformation
Even in cases where organizations intend to embark on a holistic transformation initiative, these efforts often fall short for a variety of reasons. We have developed the CARE methodology (customer-aligned, resilient, and efficient) to address directly the most common issues seen in transformation efforts today, empowering organizations to tackle issues holistically.
Before launching a transformation, securing senior sponsorship is crucial, along with establishing a budget and governance structure that breaks down silos across functions. This collaborative approach ensures the transformation aligns with strategic goals and directs investment toward services most ready for change, avoiding a narrow focus on isolated processes. In this regard, CARE may not be ideal for organizations seeking quick, low-cost solutions.
Once the groundwork is laid, organizations can begin the challenging but rewarding task of transformation.
