When you build a house in most parts of the country, you start by leveling the dirt where the house is going to stand, place many long, brown cords of rebar that runs in both directions at 90 degree angles where the rebar overlaps itself. It is this rebar that holds the cement foundation together over the years and keeps the cement foundation from cracking in the middle. Now imagine, building that same house with that same foundation, but making the conscious decision to wait for twelve months to add the rebar that keeps the foundation together. Waiting to install the rebar is obviously not something a home builder would ever consider doing, but I see banks do this all the time with regard to their technology strategy and digital roadmap. Some thoughtful planning today will remove the cost of bloated FTE counts and underutilized technology stacks down the road.
The Problem: Delaying the Development of a Technology Roadmap
The cost of delaying the development of a technology roadmap for an organization will likely be a costly one to fix down the road. As banks grow, everything gets more complex from an operational, risk management and regulatory perspective. Banks that grow over the course of several years will look at the FTE profile of the organization and say to themselves, "where did all these FTE's come from and how did we get here?" or "how did we end up with all these technology vendors and point solutions to problems that seemed so big at the time?"
Status Quo
Anyone who has run an organization or been in a leadership role can relate to the concept that not making a decision on something or delaying that decision to a later date is actually a form of making a decision. The same concept rings true as it relates to the development of a technology roadmap. Kicking the can down the road or delaying the development of a roadmap is actually making a decision, which causes problems down the road in the form of more FTE's than necessary, lower efficiency ratios and bloated and underutilized technology stacks.
The Impact: When We Don't Plan Early
Plan, refine the plan and execute. The failure to establish a plan, or at least a framework of a plan or thought process around how decisions related to technology strategy will make a significant impact on an organization that is hard to recover from. When we end up with more FTE's than are necessary and underutilized technology stacks it is very hard to recover quickly because we are in multi-year contracts that are expensive to unwind and we are committed to FTE's that are dragging down our efficiency ratios.
Too Many FTE's
The impact of having too many FTE's is pretty obvious and pretty straight forward. Without a clearly defined roadmap and thought process around technology we end up throwing FTE's at manual processes when often those manual processes can be solved in less expensive ways. This is a common problem and the impact is significant because the impact to the organization of going through FTE rationalization is often expensive and distracting.
Underutilized Technology Stacks
As we are trying to run banks that have both commercial and consumer products and services we often end up running several different lines of business at once. While this is part of the banking delivery model, each line of business has specific needs, which are often fixed through point technology solutions that are necessary to fix today's problems. However, "tomorrow" we end up with technology stacks that are bloated and underutilized to the extent we don't have a well thought out technology roadmap.
Lessons Learned: Early Planning
Having seen both sides of this argument, I'd argue that early planning will save money and time through lower FTE counts and fewer technology vendors to negotiate contracts with, pay for and manage.
Understand the Business Model
Having clarity on the business model (ex. commercial vs. consumer for example) provides clarity on the needs of the organization from a technology roadmap perspective. The more you can understand about the needs of the client in the establishment of the lines of business you want to run will contribute to more clarity with regard to the technology roadmap.
Understand the Outcomes Before Starting
It's easier said than done, but starting with the end in mind with regard to digital strategy is definitely the move. The business side needs clarity on the outcomes with as much clarity on the different aspects of monetization as possible. Otherwise, the technical side will not be able to operate effectively with regard to data strategy, infrastructure strategy, and one-day AI strategy.
Actionable Advice: Where to Start
Based on personal experience, here are a few practical steps to begin understanding and addressing the best practices in early planning related to the establishment of digital strategy:
Start With An Understanding of What You Have
Spend the necessary time to understand what the capabilities of the existing vendors can provide you both today and down the road. Being in communication with your vendors as to the needs of the client (ex. business or consumer or both) helps everyone be on the same page with regard to what to plan for from a technology roadmap perspective.
Identify Key Opportunities
Banks that have a keen understanding of where the opportunities to grow exist will have more clarity on the areas and lines of business to focus on. Whether it's a certain business segment or industry focus, having instincts on where those opportunities exist provides insight as to what people, skillsets and technology the bank will need to execute well in that chosen area.
Balance the Right Skillsets on the Business Side and the Technical Side
Finding a balance between the business and technical sides is important to executing the digital strategy successfully. Further, to achieve the best outcomes, bring this team together early in the journey.
Recognize the Roadmap Will Evolve
Any good plan will need to adapt and evolve as more information is gathered. Developing a well thought out technology roadmap is no different. As the needs of the individual lines of business evolve the technology roadmap needs to evolve alongside those needs.
Final Thoughts: Start Early
It should be pretty clear at this point, but I am definitely an advocate of starting early with regard to the development of a technology roadmap. The FTE savings alone plus the idea of not having to exit or renegotiate technology contracts early is incentive to do some planning in this context early instead of waiting until is often much harder to adjust.
About Finov8r
Finov8r is a leading embedded advisory consultancy that supports banks, fintechs, and corporations. Bridging finance and technology, Finov8r provides tailored solutions that foster profitable growth, simplify technology complexities, and deliver 5x ROI through fintech innovations. With hands-on advisory, Finov8r works within teams to achieve long-term results, unlock new revenue streams, and modernize operations. For more information, visit finov8r.com and follow on LinkedIn.
Get In Touch
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Bank executive, fintech founder or business owner and want to get in touch regarding Finov8r advisory? Email me at allan@finov8r.com.
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