3 tips for getting the most out of your operational excellence journey

Let’s cut to the chase. Every banker knows the importance of operational excellence, and they’re all looking for the fastest route to achieve it. 

Unfortunately, very few banks are positioned to succeed in this area, and often through no fault of their own. And constantly maintaining their legacy architecture and point solutions costs upwards of 70% of their IT budget, making innovation difficult and eliminating the potential for scalability. And that means cost-to-income ratios will continue to rise, spelling disaster in the long and short term. It’s a bad situation — one that’s getting worse all the time — and that means you need to act now.

But knowing what you have to do is only a small part of the battle. Actually figuring out how to get started and pulling it off? That’s significantly harder.

During my time as a Strategy Consultant, I’ve identified three key tips to help your bank prioritize operational excellence, allowing you to boost return on equity, slash cost of ownership/maintenance, drive revenue through improved sales effectiveness, and more. We recently covered this topic in our in-depth guide, but let’s take a quick look here so you can kick off your operational excellence initiative.

1. De-risk your digital transformation journey

Let’s get the bad news out of the way — your bank will never be able to achieve true operational excellence if you’re constantly maintaining legacy systems and outdated tech infrastructures. It’s all but impossible to deliver true value for your customers and business if you’re stuck with convoluted internal processes, siloed teams, and bespoke point solutions. That’s why the first step of your operational excellence journey must be a progressive modernization of your tech.

There’s a ton of options for digital transformation, and they’re all viable, depending on your bank’s needs, resources, etc. But for the average bank, our money’s on modernizing progressively — the middle-of-the-pack option that gives you medium speed and cost, but significantly lower risk, allowing you to pursue operational excellence without reservations. 

You start by identifying your areas of greatest friction and transform one journey at a time. It’s an end-to-end, modular process that saves you time and money, reduces complexity, and accelerates delivery. And at the end of the day, you’ll have checked off a ton of operational excellence must-haves, particularly reduced technical complexity. Better yet, you’ll be left with a solid foundation for innovation, as well as driving customer and business value.

2. Adopt a platform model

Of course, to conduct a progressive modernization, you’ll first need to adopt a platform strategy, but with the power of the “buy plus build” approach, this is a lot less daunting than you’d expect. You start by purchasing a foundational backbone with ready-to-implement, API-led, easy integration functionality to get to market quickly. After that, you’re free to bring your tech vision to life, building tailored solutions on top to best fit your bank’s needs. Or, as we say, buy for speed, build for differentiation.

By reimagining your operating model, you’ll be able to capitalize on your underlying capabilities, which will be made reusable and even interoperable. In the process, you’ll achieve a few more operational excellence milestones, including the elimination of silos and the creation of a single source of truth. Better yet, you’ll be able to harness the power of automation, empowering your bank to scale and handle increased transaction volumes efficiently. And when you’re chasing true operational excellence, this will be absolutely essential to your success.

3. Build a scalable digital factory to accelerate innovation

Once you’ve put all the underlying platform capabilities into place, you’ll finally have the tools you need to build a digital factory for innovation. This factory will be composed of smaller, more skilled teams, all working together on a standardized architecture and automated infrastructure. That means they’ll be able to dedicate their time to projects that will truly transform your bank, using modular building blocks to build tailored journeys and differentiating value props for your key client segments.

And be sure to set up a dedicated team to monitor and steer your bank’s operational excellence journey. By uniting both tech and business leaders, you’ll get a full view of your bank’s priorities and areas for growth, allowing you to systematically reduce operational complexity across all products, processes, and departments. It’s a massive task, no mistake. But just like with progressive modernization, you can start small and expand over time. Just meet regularly and often, and don’t get complacent. The journey towards operational excellence is ever-changing — and so is your bank.

Want to determine your current level of operational excellence? Download our KPI masterlist to check off the KPIs you’re nailing — and make a plan to achieve the rest.