Financial institutions excel at building and maintaining systems— organized procedures and standards for executing and monitoring important tasks and outcomes. Audit systems, asset/liability management systems, compliance systems, credit quality systems, procurement systems, IT systems, human resource management systems, and so on.
Systems are good. Especially in a highly regulated environment and with a highly leveraged business model where small deviations can have an outsized negative impact. Good systems are built on requiring clear repeatable inputs to get to clear repeatable outputs. We have recently been reminded of what happens when systems fail.
Given the desirable benefits of stable, predictable results in financial services, it is not a surprise to see heavy reliance upon systems as management tools.
Here’s where systems can get in the way when trying to drive growth: By and large systems are designed to maintain a desired state. Deviations from the norm typically require corrective action to get back to meeting established standards.
Growth requires doing something different to generate different results. The exact outcome and the exact course needed to get there cannot always be clearly defined.
“Insanity is doing the same thing over and over again and expecting different results.” – Albert Einstein (supposedly)
Changing the State
Programs are designed to change the state. Innovation programs, reorganization programs, merger integration programs, marketing programs, onboarding programs, sales programs. All are designed to encourage or mandate new sets of activities or inputs to deliver different outcomes.
“If systems lay down the tracks upon which the performance engine runs, programs provide the fuel.” – Geoffrey Moore, Zone to Win: Organizing to Compete in an Age of Disruption (definitely)
For programs to create the desired results, they must be managed just as rigorously by leaders, but they must be managed differently. What programs have in common with systems is that good ones are focused on good outputs, but what makes programs different is that they require much more flexibility on the inputs and process.
Inputs and process need to be evaluated not by whether participants are following well-established standards, but by whether they are achieving the desired outcomes. For systems, it is generally accepted that input X will deliver output Y. For programs, the relationship between inputs and outputs can be anywhere from a strong hypothesis to a mildly educated guess.
The uncertainty of the current competitive and economic environment means that leaders need to be competent and managing both systems and programs.
Turning Programs into Systems
The second imperative for today’s leaders is knowing when and how to turn programs into systems. Once the current state has been changed to a desired future state, the challenge becomes maintaining the new state. This means understanding the new inputs and processes that need to be written into operating procedures and management standards.
Creating capacity for growth requires allocating time, money, and managerial attention to establishing and managing programs to change the state, then institutionalizing successes into new systems. It also requires building and leveraging organizational flexibility, more on that next time.
________________________________________________ The corporate and executive growth programs from the Alloy Labs Institute are the industry leader in helping financial institutions build and leverage their innovative capacity to create competitive advantage and drive growth. We have taught these principles in boardrooms and classrooms around the world, including at leading graduate schools of banking. Unleash exponential growth potential, build internal innovation capacity to "unbreak the bank", and quickly forge ideas into results.
You can also learn and apply some of our industry-leading tools and frameworks and learn best practices from peers on operationalizing innovation in our open (co)Lab sessions. Both are open to non-Alloy Labs member financial institutions.