Master Thesis Agile Organizations - CORE SE · leading to a potential increase in flexibility and...

Agile Organizations

How can financial service institutions embrace agility in their organizations?

September 2016 Master Thesis – Novancia Business School Paris Copyright © COREtransform GmbH

Nico Malena

Master Thesis Nico Malena © CORE 2016 II

Abstract

The financial service industry is facing significant structural change. Digitalization, as one major

driver, offers almost endless opportunities to existing players and new market entrants, as given

entry barriers are challenged. The changes in consumer behavior can be leveraged by an

established financial institution to maintain or even improve its current position, if its organization

is capable to adopt accordingly. New market entrants have the advantage of being flexible,

whereas existing institutions are bound to their rigid structures. Agile, created as a project

management methodology, could be a possible solution for existing institutions in establishing the

required capabilities throughout an entire organization and making up for a lack of flexibility.

Thus, this study is motivated by the following research question: How can financial service

institutions embrace agility in their organizations? Based on one-to-one interviews with

experienced professionals, differentiating case examples are discussed and the challenges

leading to a potential increase in flexibility and speed are addressed. Additionally, the common

principles of Agile will be expanded upon and placed into the perspective of an organization driven

by technology.

Master Thesis Nico Malena © CORE 2016 III

Table of Contents

Abstract ........................................................................................................................................II

List of Figures .............................................................................................................................. V

List of Tables ............................................................................................................................... V

List of Abbreviations ................................................................................................................... VI

1 Introduction ..............................................................................................................................1

2 Structural Change ....................................................................................................................3

2.1 Technological Developments and Customer Behavior....................................................3

2.2 Regulatory Changes and Market Liberalization ..............................................................6

2.3 Industry Disruption and Competitive Landscape .............................................................8

2.4 Conclusion: The Need to Adapt .................................................................................... 10

3 Can Agile be a Solution?........................................................................................................ 12

3.1 Brief Historical Overview ............................................................................................... 12

3.2 Agile Methodologies and Practices ............................................................................... 12 3.2.1 The SCRUM Methodology ................................................................................. 14 3.2.2 The Agility within Agile ....................................................................................... 15

3.3 Cultural Aspects of Organizational Agility ..................................................................... 16 3.3.1 Values and Principles ........................................................................................ 17 3.3.2 Prerequisites ...................................................................................................... 18

3.4 Expected Improvements from Agile .............................................................................. 20 3.4.1 Time = Time-to-market & Bouncebackability ..................................................... 21 3.4.2 Costs = Budget & ROI ....................................................................................... 22 3.4.3 Scope = Outcome & Continuity .......................................................................... 23 3.4.4 Summary: The Project Management Triangle ................................................... 23

3.5 Keys for Success .......................................................................................................... 24 3.5.1 Agile Starts on Top ............................................................................................ 24 3.5.2 Agile is more than a Process ............................................................................. 25 3.5.3 Agile Challenges Organizational Velocity .......................................................... 25 3.5.4 Agile’s Architectural Requirements .................................................................... 26

3.6 Author’s Thoughts on Literature .................................................................................... 27

4 Primary Research Design ...................................................................................................... 28

4.1 Research Aim ............................................................................................................... 28

4.2 Data Collection .............................................................................................................. 29 4.2.1 Research Participants ........................................................................................ 30

4.3 Reliability and Validity ................................................................................................... 31

4.4 Data Evaluation ............................................................................................................. 32 4.4.1 Data Preparation ................................................................................................ 32 4.4.2 Data Analysis ..................................................................................................... 32

5 Case Studies .......................................................................................................................... 34

5.1 Case Study: Financial Service Institution A ................................................................... 34

Master Thesis Nico Malena © CORE 2016 IV

5.2 Case Study: Financial Service Institution B ................................................................... 35

5.3 Case Study: Financial Service Institution C .................................................................. 37

5.4 Case Study: Financial Service Institution D .................................................................. 38

6 Concluding Statements .......................................................................................................... 40

6.1 Agile – The Drive for Speed .......................................................................................... 40

6.2 Agile – In Need for a Specific Mindset .......................................................................... 41

6.3 Agile – Unleashing Technology ..................................................................................... 42

6.4 Agile – Useful to a certain Degree................................................................................. 43

6.5 Agile – Requires Discipline ........................................................................................... 44

7 Recommendations & Open Topics ........................................................................................ 45

Bibliography ................................................................................................................................ 47

Author ......................................................................................................................................... 51

About Novancia Business School Paris ...................................................................................... 52

About COREinstitute .................................................................................................................. 53

Master Thesis Nico Malena © CORE 2016 V

List of Figures

FIGURE 1 - DEVELOPMENT OF CAPITAL MARKET IN GERMANY .............................................................. 1

FIGURE 2 - DATA TRAFFIC IN CORRELATION WITH PRICE INDEX ............................................................. 4

FIGURE 3 - DEVELOPMENT OF MOBILE ONLINE SERVICES..................................................................... 5

FIGURE 4 - REGULATORY REQUIREMENTS IMPACTING THE CTB BUDGET ............................................... 7

FIGURE 5 - REGULATORY CHANGES TOWARDS MARKET LIBERALIZATION ............................................... 7

FIGURE 6 - INVESTMENTS INTO FINTECHS ......................................................................................... 9

FIGURE 7 - FINTECHS ATTRACTING SMES ........................................................................................ 9

FIGURE 8 - THE SCRUM METHODOLOGY ....................................................................................... 14

FIGURE 9 - THE OPENNESS OF AGILE DELIVERY FRAMEWORKS ........................................................... 16

FIGURE 10 - A COMPARISON OF PROJECT SUCCESS RATES ............................................................... 21

FIGURE 11 - OVERVIEW OF THE SELECTED RESEARCH METHODOLOGY ............................................... 30

List of Tables

TABLE 1 - INTERVIEW CATEGORIES ................................................................................................ 29

TABLE 2 - OVERVIEW RESEARCH PARTICIPANTS .............................................................................. 31

Master Thesis Nico Malena © CORE 2016 VI

List of Abbreviations

Abbreviation Description

AI Artificial Intelligence

API Application programming interface

ATM Automated teller machine

B2B Business to business

B2C Business to business

CBS Core banking system

CtB Change the bank

FDD Feature driven development

HR Human resources

IoT Internet of things

IT Information technology

LOB Line of business

M2M Machine to machine

PSD Payment service directive

SME Small and medium sized enterprises

STEM Science, technology, engineering and mathematics

TDD Test driven development

ROI Return on investment

RtB Run the bank

UAT User acceptance test

VC Venture capital

XP Extreme programming

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Master Thesis Nico Malena © CORE 2016 1

1 Introduction

“Banks are dinosaurs; they can be bypassed.” (Gates, 1994)

More than 20 years ago, Bill Gates predicted the modern development in the financial service

industry. According to him, both, the ways of communication as well as the interaction partners,

were about to change in favor of customer satisfaction. Today at least, extracts of this provocative

statement and its meaning can be validated considering the impact of the digitalization. The

financial services industry is going through a transformation process, mostly driven by the

tremendous technological developments in the digital age.

Anywhere, anytime and possibly at no additional costs; today’s principles are allowing start-ups

to enter the financial services industry and to challenge traditional market leaders. An increasing

number of ‘attackers’ is disturbing existing financial systems by leveraging technological

advantages in order to offer more contemporary and user friendly customer solutions. As of now

a number of industry outsiders established successful business models in several market

segments within the financial service industry, which requires traditional financial institutions to

react. In contrast to new market entrants, large financial institutions have limitations due to their

organizational setting in regard to the necessary flexibility to deal with the rising complexity and

diversity.

As a result, most institutions are introducing major transformation initiatives with the long-term

goal of creating more flexible organizations, which are able to keep up with arising developments

and challenges. This need for change gets even more essential in the light of the pressuring cost

and income trends. The capital requirements are rising, whereas profits generated through the

credit business are decreasing and transaction fees paid by banking customers are about to clear

out due to the competitive situation (Figure 1) (Knippschild, 2014) (Baller, et al., 2015). This also

limits the possibility to pass on mounting costs to customers. In order to sustain the changing

market conditions, financial institutions are required to establish new revenue streams or to

reinforce existing ones through innovative ideas and the successful implementation of such.

Figure 1 - Development of capital market in Germany

(Deutsche Bundesbank, 2016) (EZB; Thomson Reuters, 2015)

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The application of agile methodologies and practices has been identified by industry experts as

one of the key pillars within the targeted transformation (Jauber, et al., 2014). Thus, the intended

objective of an agile organization is to establish a flexibility within an organization, which adopts

to changing conditions and considers them as an opportunity rather than as a threat.

With the following analysis, the aim is to contribute to the ongoing discussion around agile

organizations. First, the concept of ‘Agile’ will be reviewed and discussed based on most recent

literature on the topic. Key success factors mentioned by practitioners will be pointed out and the

results of the primary field research conducted in the German speaking market will be presented,

giving depth to the concept in concrete case studies.

The overall goal is to elaborate and discuss suitable framework conditions for financial institutes

to embrace agility in their organizations in order to master present and future changes in the

market. The objective is not to determine if being agile or if certain agile practices are beneficial

for an organization. This has been extensively discussed in the literature without clearly

measurable results, as we will see. The focus is rather on how an organization in the financial

service industry can embrace agility to make the most out of it. Open questions are: Where are

the boundaries or limitations of agile methodologies and practices? In which circumstances are

they most effective? Particularly the in-depth empirical case studies are designed to shed light on

the interplay between the contextual and organizational phenomena.

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2 Structural Change

Over the past decades the financial service industry has been rather conservative in terms of their

product and service offering as well as the utilization of upcoming communication channels. One

reason for this were the high entry requirements, preventing non-banking organizations to enter

the market. Based on this, large financial institutions were not required to develop or innovate

their business models in order to remain profitable. However, regulatory changes and digital

technology enhancements lowered entry barriers for industry outsiders, which led to a changed

macro-environmental landscape (Baller, et al., 2015). Some financial institutions already took first

visible actions to protect their market share they adapted their branch footprint and / or concept

to meet the evolving needs of customers (Ghose, et al., 2016). Generally, the management teams

of financial institutions are expected to find solutions to strengthen their organization’s position

and potentially grow the business while adapting to the changing market conditions. Three main

drivers initiating the change have been identified as they are broadly discussed in the literature:

Technological enhancements affecting the customer behavior

Regulatory requirements leading to market liberalization

Industry disrupters increasing the competition in the market

Those drivers of change are further examined in the following paragraphs, as they do not only

have an impact on the industry, but also redefine how organizations have to operate going forward

in order to be successful.

2.1 Technological Developments and Customer Behavior

Regardless of the industry, the ongoing digitalization impacts all businesses. Products and

services are demanded at any time, at any place and instantly after their release. The basis for

this development is the rising availability and usage of the online services. In Germany, the

broadband data traffic increased by more than 23-times in between 2004 and 2014. This growth

is negatively correlated to the price development of telephone and internet services during the

same timeframe. The decrease in costs and resulting affordability, supported by the availability

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of technological improvements such as the DSL high speed connection, facilitated the significant

increase of the broadband internet usage in the past decades (Figure 2).

According to the network traffic increase, the amount of data which needs to be processed rises

accordingly. As reported by Stuart Bilick, an IBM industry expert, this is also one of the main

challenges financial intuitions and other business have to overcome in present times. How do we

handle the exponentially increasing amount of data? (Pahuja, 2015). However, the increasing

amount of data can also be a great opportunity for businesses to gain valuable insights into their

customer’s minds. Customer data are considered as a major asset of financial institutions. They

can be extracted from different sources, starting from transaction behavior and channel usage

even to social media. The resulting user profiles can then be leveraged to increase revenue by

providing a personalized customer experience. This opportunity has been identified by many

financial institutions. According to a survey conducted by The Economist Intelligence Unit in 2016,

financial institutions have ranked the technology developments in the field of data analytics as the

greatest potential for success. As a result, the participating organizations are planning to invest

the largest amount of monetary resources into the development of this capability as part of their

digital transformation (The Economist Intelligence Unit, 2016).

The second item on the list of important capabilities according to the same survey is mobile

computing and it is expected to consume a similar amount of resources (The Economist

Intelligence Unit, 2016). Simultaneously to the broadband internet traffic, mobile data traffic is

expected to reach a peak year after year in the near future, leading to an even greater amount of

data in circulation. While an increase, in terms of number of devices and data processed is

projected for all device types such as smartphones, tablets and laptops, the most significant

increase is expected for machine to machine (M2M) modules (Figure 3). M2M describes the

automated data exchange between different types of electronical devices (Wilson, 2016). Those

include devices such as smartphones, cars or even heaters. By the end of 2020, more than 50

billion devices will be connected and will exchange information autonomously. This tremendous

Figure 2 - Data traffic in correlation with price index

(VATM; Dialog Consult, 2016) (Statistisches Bundesamt, 2016) (Böhning, et al., 2015)

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ecosystem of connected devices is referred to as the Internet of Things (IoT) and it will impact all

possible areas of life (Iyer, 2016).

This trend is also creating new opportunities for financial institutions. Banks already started to

utilize the IoT concept, for example in order to optimize the operation of their automated teller

machine (ATM) fleet. Processes are being automated and instant monitoring increases the

efficiency of their ATMs. Proposed next steps are video chats with personals tellers or extended

user analytics with the underlying objectives to increase customer satisfaction, to expand the

service portfolio and to reduce costs ( American Banker, 2015). An important cornerstone for

financial institutions in order to further utilize the IoT is the ability to integrate services and devices

into other platforms without large integration efforts, based on the existence of standardized

application programming interfaces (API). APIs have been a standard method of interconnecting

systems for decades, but due to new regulations and the progressing market liberalization, it just

recently became a topic in the financial services industry (Bannister, 2015).

All steps forward from a technological point of view would not be of any interest for financial

institutions unless they directly influence customer behavior. However, the technological

enhancements are being used by customers to a great extent, which puts the digital

transformation on top of most financial institution’s priority list, as it is seen as a great opportunity

(The Economist Intelligence Unit, 2016). The available set and usage of communication channels

for banking customers has expanded in the past few years. In Germany alone, approximately 75

percent of the people are actively using online banking and this figure has been stable for the

years since 2012. In the same period of time, the usage of mobile banking apps on smartphones

doubled to 21 percent, whereas the usage of tablets reached a high of 13 percent. The trend of

both device types as an entry point for banking transaction is expected to grow further (Böhning,

et al., 2015). Some banking executives in regions outside of Europe are already reporting that the

transaction volume for mobile has overtaken volumes across all other channels (Jauber, et al.,

2014). This increasing importance of online services leads to a situation in which fewer customers

are walking into branches for their banking needs (Ghose, et al., 2016).

The projection as per Figure 3, in which the usage and number of devices among all

communication channels is further rising, indicates that the various channels are complementing

Figure 3 - Development of mobile online services

(Cisco Systems, 2015) (Cisco Systems, 2015)

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instead of replacing one another. This creates the customer’s expectation to experience the same

quality of services among all channels. In other words, financial institutions are obliged to create

an omni-channel experience by providing a consistent experience across all possible customer

entry points. This includes amongst others, banking apps on smartphones and the remaining

physical branches. Customers are looking for smart, simple and easy to use solutions within a

convenient reach. Those attributes will be crucial to reach a high customer satisfaction level in

the future (Jauber, et al., 2014).

The speed of innovations will not slow down and new or existing technologies, such as cashless

payments, will impact the financial services industry sooner rather than later. Financial

organizations are obligated to monitor any technological developments even though an

immediate impact is not expected. Also a close relationship to their customers can be valuable,

for example through social media. The goal is to be in a position to anticipate changing customer

behavior and introduce proactive measures as early as possible in order to seize the arising

opportunities (Jauber, et al., 2014).

2.2 Regulatory Changes and Market Liberalization

Institutions holding licenses for credit and financial services are eligible to obtain ownership or

possession of funds or securities of customers. This is the main differentiator between them and

non-banking organizations which are restricted to take possession of customer funds with the

intention of using them for own profit driven activities (BaFin, 2016). The entire regulatory

construct is witnessing constant alterations in order to facilitate the changes in the market. The

number of new regulations for financial institutions passed by the EU parliament has increased

by 45 percent in the timeframe from 2009 to today (Figure 4). In general, regulators are defining

rules and requirements to reach the following four long term objectives (Böhning, et al., 2016):

Stabilization of the financial markets

Market liberalization

Consumer protection

Optimization of the state income

The financial crisis of 2008 triggered significant regulatory adjustments as the stability of the

financial markets was not secured during that time without governmental support (Deutsche

Bundesbank, 2013). As a response to the immense losses and since the introduction of the Basel

III, financial institutions are required to increase their level of capital in order to secure loss

absorption and risk coverage of their capital. Basel III is a comprehensive set of reforms,

developed by the Basel Committee of Banking Supervision, to strengthen the regulation of the

banking sector (Bank for international settlements, 2016). However, the mandatory increase in

equity capital is freezing funds within banking organizations which could have been allocated to

business development activities.

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Alongside the additional changes related to Basel III, the overall growth and complexity of

regulatory requirements as shown in Figure 4 is impacting the budgetary flexibility of financial

institutions. Adjustments or amendments to existing reforms entail efforts for the financial

institutions in order to fulfill the new requirements in a set timeframe. The larger the number of

regulations that are adjusted or amended, the more resources get occupied by the implementation

of those changes. The ‘Run the Bank’ (RtB) budget for maintenance and infrastructure within IT

departments of financial institutions is not expected to absorb those additional costs. As the only

option, the annual ‘Change the Bank’ (CtB) budget allocated to business development activities

gets directly impacted and is expected to further decrease (Figure 4). As a reflection of the

continuously growing number of regulations, the CtB budget for business development activities

is projected to reach a down of six percent in about four years. The minimal proportion of the

overall budget available for change indicates limited funds for adoption in the evolving financial

services industry and leaves only small room for failure (Pukropski, et al., 2013).

However, regulatory changes do not only have financial implications to organizations in the

industry. In order to rebuild trust, regulators are liberalizing the market to create a competitive

situation favorable for the consumer (Böhning, et al., 2016). Several regulations have been

Figure 4 - Regulatory requirements impacting the CtB budget

(Böhning, et al., 2016)

Figure 5 - Regulatory changes towards market liberalization

(Böhning, et al., 2016)

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enforced in the past years with the intention to simplify transactions and raise the convenience

level of consumers in the EU (Figure 5). Amongst others, consumers are now able to transfer

funds to accounts in other European countries at no charges due to the introduction of SEPA, a

standardized transaction format and process. Motivated by technological developments, the

revised payment service directive (PSD II) is the next step on this path. The PSD II promotes

innovation as account information and transaction will be accessible for third party service

provider and it further improves the security of payment services within the EU (Beijer, et al.,

2016). Based on this, the previously mentioned API technology will be of great importance. A

standardized access will significantly impact the interconnectivity of financial institutions with third

party service provider and potentially amongst financial institutions themselves. Financial

institutions are in position to leverage this in their own interest by enhancing their value proposition

for customers. However, this opportunity is a threat at the same time, as the market will be less

restricted so that industry outsiders have more options to disrupt the existing financial system

(Zingmark, 2015).

2.3 Industry Disruption and Competitive Landscape

The aforementioned digital revolution as well as regulatory changes created an environment in

which non-banking organizations can benefit from the vast opportunities to enter the industry by

distinguishing themselves from established financial institutions with customer-centric products

and services. As a result, the competitive situation reached a first turning point as an increasing

number of direct banks and FinTechs entered the market. Direct banks also known as digital

banks are institutions providing consumer banking services exclusively via online channels and

without a physical branch network (Böhning, et al., 2015). FinTechs are a dynamic consortium of

new market entrants at the intersection of the financial services and technology sectors. The

common definition describes them as technology-focused start-ups, which are disrupting the

traditional financial service industry with more innovative and user firendly products and services

(Kashyap, et al., 2016).

Business needs of personal as well as corporate customers have not changed much in the past

years. However, new market entrants are conceptualizing new use cases by taking advantage of

a common interest to reduce complexity and to simplify processes (DealSunny, 2016). As a result,

FinTechs introduced competitive solutions as alternatives to the existing products and services

for payment transactions, lending operations, asset management and Business Intelligence (BI)

tools. Each of those sectors is witnessing growth, whereas especially the payment transactions

in terms of transaction volumes and the lending operations measured by the financing volume

are gaining further importance (Böhning, et al., 2015).

The upwards trending user figures are attracting more investors to fund the promising variety of

projects. Consequently, the venture capital (VC) investments and number of FinTechs were

increasing exponentially over the past years on a global level and especially in Germany. From

12 billion USD in 2014, the VC investment was up by almost two-thirds in 2015 with 19 billion

USD, even though it started from low single-digit billions of USD per year earlier in the decade

(Figure 6). Statistics are showing that three-quarter of the invested capital are deployed into the

customer segments of personal individuals and small and medium sized enterprises (SME). Both

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segments together account for half of the profits generated by traditional financial institutions,

causing them to pay closer attention.

Business-to-Consumer (B2C) solutions can convince new clients with a better experience due to

low switching costs. This makes individuals to easy attractable targets. Business-to-Business

(B2B) solutions need to overcome several more barriers, such as corporate clients' greater need

for product / service customization and a corporate procurement department's focus on safety

and supplier risk, all of which increase switching costs (Ghose, et al., 2016). But FinTechs have

also identified great potential within the B2B sector by targeting SMEs. A major success factor for

those organizations and at the same time one of the biggest challenges is the access to funds.

Money lending services and products offered by the large financial service intuitions are mostly

designed for major corporations. The complexity and scale of those solutions do not fulfill the

needs of many smaller organizations. This leads to a rising number of start-ups offering lending /

financing solutions built for the specific use cases of SMEs. Taken together, employing multiple

solutions simultaneously can have a significant positive effect on an SME’s balance sheet

situation, leaving small businesses with more cash, improved working capital management and

more stable and secured funding (Figure 7).

Many new players streamline their focus on a single-purpose solution, designed to offer an

improved solution for just one product or service. Compared to large financial institutions that are

often slowed down by technical depth of old systems, a rigid organizational structure and a

multifaceted cost structure, agile start-ups are able to drive more radical innovation, as they are

Figure 6 - Investments into Fintechs

(Ghose, et al., 2016) (Kanning & Krohn, 2016)

Figure 7 - FinTechs attracting SMEs

(Ventura, et al., 2015)

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often able to start from ‘a clean slate’ (Ventura, et al., 2015). Traditional financial institutions might

have to deal with even larger threats as only single solution provider going forward. Most FinTechs

are not directly competing with each other, making partnerships of service and product integration

possible. As just one example, ‘number 26’, a successful German based FinTech recently

announced its cooperation with ‘transferwise’, building an attractive and powerful consortium of

services for consumers (TransferWise, 2016).

Even though the development of FinTechs is ‘booming’, the impact on traditional players is still

limited due to a lack of scalability in their services. It is critical for large financial service institutions

in Europe to elevate the created customer experience through innovation and user friendliness

before FinTechs reach scale and outperform them. In other regions such as China, this tipping

point already passed to the disadvantage of the traditional players (Ghose, et al., 2016). Should

we transform our own organization or build partnerships with successful start-ups; and if so, in

which way? Those questions have to be addressed sooner rather than later. BBVA, a Spanish

banking giant, recently increased its FinTech funds up to 250 million USD (BBVA, 2016). Those

investments or collaborations are very promising, considering the fact that banks can provide the

most important assets in this business, which FinTechs have to build up from scratch: customers

(Hieronimus, et al., 2012).

2.4 Conclusion: The Need to Adapt

The profitability of traditional income streams within financial service institutions is trending

downwards, which is creating an urgency for the creation of alternative solutions in order to close

the imminent income gap. Technological developments have to be considered as a great

opportunity for this purpose as new ways of communication are leading to new customer demands

which can be addressed with new or improved products and services. However, the speed of the

technological development is not expected to slow down. Financial institutions cannot sit back

once they adapted to the most recent enhancements as they always have to be prepared for the

next ‘big thing’. Change is going to be the only constant factor and this need for continuous

flexibility has to be reflected in the people’s minds as well as in the structure of the IT systems

hosting all products and services (Bilick, 2015).

Furthermore, the budget available to introduce measures for improving ongoing business

activities is becoming tighter. The increasing capital requirements and rising resource demands

triggered by new or adjusted regulations is limiting the funds designated to change. While there

is an absolute necessity to satisfy the rising demands of customers, the room for failure becomes

increasingly smaller. Institutions have to balance the risks associated to anything new or

innovative with the possible outcome of a failure or success. Taking one wrong decision to launch

a large project which is failing could already slow down an entire organization’s reaction time to

leverage other arising opportunities in the same or following periods. In consideration of the

devastating success rates of large scaled projects with four percent, the choice and sizing of the

transformation initiative are considered to be a critical factor within large financial service

organizations (Böhning, et al., 2015). Successful organizations will have to find a way to manage

their organization highly efficient and without the hesitation to become innovative.

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Another exceedingly critical resource for large financial institutions is time. The number and

coverage of industry attackers is rising as the variety of products and services is growing and the

targeted customer segments are further expanding. New market entrants are challenging existing

business models of large institutions and they increase the cost pressure with user friendly

solutions providing an improved customer experience. Even though the impact is still limited, the

momentum can change abruptly and the market leaders have to be prepared for that.

In conclusion, the assumption can be raised, that new technologies are influencing the

consumer’s behavior which requires adaptations to the present product and service offerings and

to the way information is used and exchanged between financial institutions and their customers.

At the same time, the growing competition is creating an urgency while the budgets for required

transformation initiatives are limited. Observers note that large organizations in this industry

should start to adapt to the changing environment today and use the existing resources in an

efficient manner in order to maintain their leading positions. In this regard, agile became a ‘buzz

word’ and in the following chapters, opportunities are discussed how it can be leveraged to cope

with those challenges.

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3 Can Agile be a Solution?

How often do people find themselves in situations where things do not go according to plan? A

decision needs to be taken whether the predetermined path should be followed rigorously

potentially facing issues or if new findings along the way should be used to make adjustments

(Rawsthorne & Shimp, 2016). Agile is specifically designed for such a scenario and expected to

be a possible solution for various reasons which are being discussed in this chapter. First, a brief

introduction to the concept of ‘Agile’ will be given, explaining its origins and then showing the

methodologies and practices as described in the literature. Following, the expected improvements

of agile over traditional practices are pointed out. This chapter will then be completed with an

overview of the existing literature on critical keys towards a successful increase of agility within

an organization.

3.1 Brief Historical Overview

Due to the previously discussed drivers of change, many experts are sharing the opinion that

financial institutions are required to go through a major transformation, which has started in some

cases already. But how do you become a leader in the digital age and separate yourself from

laggards? The one thing that is frequently linked to organizational transformations is the need to

become more agile. Agile is a military word derived from strategies applied by forces on the

battlefield. The objective is to adapt and exploit the chaos of the battlefield and to do it faster and

better than the enemy does, in order to succeed (Rawsthorne & Shimp, 2016). In a professional

context, agile was born in 2001 as a project management framework designed for the

development of complex IT solutions. It promotes iterative and adaptive thinking by breaking down

larger projects into small work-pieces in order to embrace flexibility and continuous improvements

(Goulstone, 2016). At its heart is rapid decision making, small cross-functional teams working

side by side, regular touchpoints checking progress updates and sharing problem situations to

find quick solutions. Teams are engaged to produce new quality outputs in form of functioning

product increments or features in short consecutive development cycles. Those are instantly

made available for stakeholder and users to provide direct feedback (Paul Willmott, 2015).

One of the banks which already conducted a transformation towards an agile organization is

Capital One in the US. Its CEO Richard Fairbank knows: “We’re going to need to think more like

technology companies and maybe a little less like banks” (2015). Due to its agile setup, Capital

One is able to release up to 400 new products every day, allowing them to provide customers

with innovative and user friendly solutions rather like Apple or Amazon than traditional financial

institutions (Pahuja, 2015).

3.2 Agile Methodologies and Practices

“We are all in the software business now, regardless of the product or service we provide, […].”

(Gothelf, 2014).

With this statement in mind, the demand for successful software delivery practices are rising.

Many global players in different industries like Google, Microsoft or SunCorp adopted agility in

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their organizations (Cooke, 2012). The creation and rise of agile goes back to the remarkable

high failure rate of software development projects in the 1990s. Projects constantly missed their

deadlines, substantially overrun budgets and dissatisfied customers with faulty deliverables. At

this time, the waterfall delivery framework was widely applied among IT departments. This

methodology implies that the necessary stages within a software delivery cycle analyze, design,

built, test and integrate are undertaken serially, requiring the full completion of one stage before

the next one can be initiated. The completion of every stage gets approved by the responsible

manager which is supposed to reduce the overall business risk in the delivery. However, the

approach was showing high failure rates as previously stated and three key pain points causing

poor success rates have been identified (Cooke, 2012).

The first is over-planning. Traditional IT projects usually start with the creation of extensive

requirement documents. Several layers of documents are created with ascending levels of

technical details for different audiences. This process can take months, consumes large amounts

of resources and leads to a pillar of documents which can create misalignments between IT and

the line of business (LOB) in the worst case scenario. This practice does not allow any changes

along the process to reflect changing conditions while unclear defined requirements can lead to

conflicts due to possible misinterpretations. This becomes even more critical considering the

second key pain point of insufficient communication and the strict separation between IT and the

LOB, after the creation of the requirement documents is completed. Lastly, the ‘all at once’

delivery results in a large risk, as problems are discovered at the very end when they are most

evident and very costly to resolve (Cooke, 2012).

In order to improve the common software development practices, a group of highly regarded

specialists came together in Utah in 2001 to develop new standards in form of principles and

processes in the field of software development. The result was the ‘Agile Manifesto’, a guideline

established as a framework for successful software deliveries. By now, the guiding principles of

the Agile Manifesto have been transformed into a set of software development and project

management methodologies. However, the broad range of agile methodologies shares the same

basic objectives (Cooke, 2012):

Incremental planning over upfront planning in order to respond to ongoing changes in

the environment.

Prioritize your actions in order to satisfy the most demanding customer needs first.

Release quality outputs in form of customer value from the beginning and continue to

build upon the first deliverable.

Address potential technical risk as early as possible in the process, so that changes will

not set back the progress by much or be unnecessary costly.

Utilize frequent feedback cycles through a continuous delivery of business value in form

of functional software features.

Create a trustful environment in which your staff is empowered to continuously deliver

high business value outputs.

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Encourage interdisciplinary communication between IT and business to increase the

quality of the deliverables.

Many methodologies following those guidelines have been established over the past decades

including SCRUM, Extreme Programming (XP), Kaban, Feature Driven Development (FDD), Test

Driven Development (TDD) and several more. SCRUM is the worldwide most used agile

methodology due to its simplicity. In order to get a deeper insight in an agile delivery framework,

the SCRUM methodology is elaborated in the following paragraphs, followed by a chapter

dedicated the flexibility within agile deliver frameworks. (Francois, 2013).

3.2.1 The SCRUM Methodology

In the SCRUM methodology, the acting persons are confronted with individual flexibility instead

of strict regulations. Therefore a great emphasis is put on the interaction within self-organized

teams. As part of the structure, three roles, four regular meetings and three artefacts such as the

product deliverable are defined as shown in figure 8.

The product owner is responsible for the quality and return of investment (ROI) of the newly

developed or updated product by consolidating the demands of all involved stakeholders including

customers into a list of requirements, called product backlog. Besides, it is part of his responsibility

to decide on the priority ranking of all requirements while being aware of existing dependencies.

The projects team’s main duty is the implementation of the given requirements leading to a

valuable software feature, whereas value is measured based on customer’s satisfaction. The

team combines interdisciplinary profiles such as requirements analysts, system architects,

developers and testers in order to cover all required skills. Knowledge and progress sharing is a

key activity within the team, so that individual members can benefit from each other the most. The

SCRUM team evaluates how many of the top prioritized product requirements can get delivered

Figure 8 - The SCRUM methodology

(Wintersteiger, 2013)

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within the upcoming delivery cycle called sprint as part of their sprint planning meeting. This

meeting is hosted by the SCRUM master, who is primary a facilitator and coach. Even though the

team is mainly self-organized, the SCRUM master can be seen as a leader without disciplinary

responsibility, who is engaged to create an environment in which the team is able to perform best

(Wintersteiger, 2013).

A sprint is a fixed time-box with a duration of usually two weeks (deviation possible), in which

product requirements in scope of the current sprint backlog will be designed, developed,

integrated and tested in order to deliver a functioning product increment. As part of the sprint

routine, short daily meetings will be hold to share the past progress, next steps and blocking

issues among all team members. The underlying goals are to learn from each other, to solve

problems faster, to avoid repeating problems of the same type and to check on the overall sprint

progress based on the previously set targets. At the end of each sprint a fully functioning software

feature is delivered, which can be evaluated by all stakeholders while performing the tests of the

targeted use cases. This is done in the sprint review meeting. At this point, the roll-out acceptance

is granted and / or required product improvements in form of defects are detected. To close the

loop on the one end, those have to be added back to the product backlog and ranked in the

requirement list according to their priority. In order to complete one delivery cycle, a meeting with

the entire delivery unit consisting of product owner, SCRUM team and SCRUM master is

organized to discuss possible process improvements for future iterations. According to the

process flow, the next sprint would then be kicked off with another sprint planning meeting and

the iteration is repeated accordingly (Figure 8) (Wintersteiger, 2013).

3.2.2 The Agility within Agile

One more out of many other related agile methodologies is XP. As its name indicates, the

emphasis within this methodology is on the programming part within the delivery cycle. However,

XP consists of many process elements similar or even equal to SCRUM. The development team

is also working in iterations in order to be responsive to possible requirement changes.

Furthermore as seen before, the delivery cycles are time boxed and the product deliverables build

upon another. Unlike the SCRUM methodology, developers and tester within XP are more bound

to certain practices, which are constantly aiming for immediate feedback.

TDD is one of them, in which a software developer is writing the required test cases and scenarios

to validate his code prior to undertaking development work. This helps to verify requirements and

identify misinterpretations before the implementation starts. Another practice is the so called ‘pair

programming’. Here, two developers are pairing to work together on the same assignment in order

to increase accountability and knowledge sharing. A third one is continuous integration, which

indicates that newly developed code is immediately integrated into a production environment. The

result is instant availability of product features enabling instant feedback from users. This practice

requires an automated testing procedure in order to ensure that the updated product is not

introducing errors or limiting the existing functionality (Cooke, 2012).

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Those different practices are not contradicting each other, especially since many of them have

similarities leading to large overlapping’s. Consequently, organizations can combine practices

related to different methodologies to build a framework which suits best with their organizational

and cultural needs. The increasing application of customized agile solutions is a strong indicator,

that many organizations already embrace the flexibility within the given frameworks. The SCRUM

/ XP hybrid is the second most used agile methodology measured by the number of project

implementation (Francois, 2013). Figure 9 is showing that many elements of SCRUM are present

in the XP methodology as well. Following, a SCRUM / XP hybrid model demonstrates that the

programming practices related to XP such as pair programming can be applied in the ceremonials

within the SCRUM framework. In general, the number of different agile methodologies and

practices is indicating that there is no ‘one fits all’ solution. Organizations are encouraged to

leverage the agility given in agile delivery frameworks. The trial and error principle is a legitimate

technique, in line with the guiding principles of agile, to identify the best practices for your

organization in a timely manner (Cooke, 2012).

3.3 Cultural Aspects of Organizational Agility

“It is not the strongest or the most intelligent who will survive, but those who can best manage

change.” (Charles Darwin)

This quote by Charles Darwin, the father of the evolution theory, expresses the need for agility in

its broadest sense, as being able to successfully adapt to a dynamic environment. This need

builds on the related objectives to encourage interdisciplinary collaboration in order to increase

customer value. An agile mindset can be applied to a whole organization, starting at the very top

at executive management level. Many different types of businesses, in a diverse range of

industries are improving their company’s performances through the application of agile practices

spread across multiple departments. To name one example, John Deere, a leading manufacturer

Figure 9 - The openness of agile delivery frameworks

(Cooke, 2012) (Esposito, 2015)

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of agricultural and constructions machines, started applying agile practices in parts of their IT

department. With time running by, the whole organization got infected by the convincing

advantages that agile provides. To name one out of several positive outcomes, John Deere was

able to cut down the time-to-market for new products, from the idea to the release, by 50 percent.

In most cases, the starting point for the application of agile methodologies within an organization

is the IT department. Internal references, who are showing even small improvements, establish a

positive momentum and encourage other teams and departments to follow the lead. Out of

curiosity, they would evaluate options to leverage new practices themselves in order to boost their

own performance. This can be considered as the most common sequence of how agile can

spread over a whole organization (Rigby, et al., 2015). Thus, an agile organization is not just

about using tools and following processes; it is the people and it involves the whole operational

system to enhance qualities, routines and relationships to produce outputs that meet their

customer’s expectations (Holebeche, 2015). Roles and processes can be customized, as long as

they stay in line with the guiding values and principles that agile stands for.

3.3.1 Values and Principles

3.3.1.1 The Customer is the first Priority

Agile is not about the ’how’ but rather about the ‘why you do certain things’. One of the most

striving principles within an agile organization is ‘the customer comes first’ and the obsession to

deliver actual value as the first priority. The entire staff is encouraged to put in significant effort to

deliver exactly what their customer wants. This implies the introduction of continuous customer

engagement models, enabling organizations to develop a truly deep understanding of their

customer needs. The gained insights empower financial institutions to create added value with

more personalized services and products, meeting or even exceeding their customers’

expectations. Added value in the context of organizational agility is the fulfilment of actual

customer demands and not only the release of additional features or services without an impact

on a customer’s user behavior (Gothelf, 2015).

3.3.1.2 Decisions have to be made quickly

In an environment in which uncertainty is omnipresent and where things can shift overnight, it is

necessary that decisions are made quickly. In a non-agile organization, decisions are run past

several management layers, ensuring everyone is brought in, before direction can shift. These

processes are slow and provide cover in the event, that things turn out to go sideways.

Organizational agility requires decision-making to be done in the customer’s best interest

(Gothelf, 2014). Every person in an organization is encouraged to take decisions. However, in

order to prevent a chaos with a lot of aimless or random decisions, people are made accountable

for all of their actions. Accountability is not used in the sense of blameworthiness, but you have

to explain why you took a decision which led to a certain action. Therefore, decisions are expected

to be supported by facts or reasonable assumptions to make the thought process comprehensible

for an external observer at a future point in time. In simple terms, you are asked to make the best

decisions possible, based on the information available at the time of the decision making

(Rawsthorne & Shimp, 2016).

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3.3.1.3 Create a Learning Culture with high Transparency

Good decisions come from experience and the less blame-setting an organization is, the easier

it is for an individual to gain valuable experiences and for an organization to become agile

(Rawsthorne & Shimp, 2016). Very high project success rates are a sign for incremental progress

and not for being highly innovative. Aiming for fundamental breakthroughs brings risks and risks

bring failures, but agile organizations establish a learning culture that takes advantage of

‘intelligent failures’. In evolving industries such as the financial services you can make use of the

trial and error logic. A higher number of attempts improves your odds to succeed, but at the same

time losses have to be managed and kept to a minimum. Prior to taking action, the impact of a

potential failure needs to be evaluated in order to prevent significant damages to the business. In

line with this approach goes the ‘be quick and fail fast’ principle. Early releases, aiming to test

previously made assumption, can either validate made assumptions or provide first evidence of

failure and a potential waste of resources in the future (McGrath, 2011). At this point, quick

ruthless decisions are needed to dispose projects or parts of the organization that no longer add

value (Holebeche, 2015). Obviously, failures are not always useful, especially if they occur

multiple times based on the same mistake or misleading assumption. Agility demands a high level

of transparency to convert failure into knowledge and to share it with your peers in order to add

value and create benefits to the entire organization (McGrath, 2011).

3.3.1.4 Interdisciplinary Collaboration is a Necessity

Transparency also plays a role when it comes to the alignment of enterprise interests with

individual interests. The reason for this is that the intra-organizational communication and

interaction channels need to result in an extended interdisciplinary collaboration. Starting at a

strategic level, participation is encouraged at all levels. Strategizing is a rather continuous process

due to changing environmental conditions than a static event, which is completed with the creation

of an annual business plan. Everyone is expected to be externally aware - sensing changes in

the environment, empowered to speak up and to introduce actions to take advantage of new

opportunities or to mitigate unforeseen risks. This concept goes hand in hand with the idea that

short term gains will lead to long term advantages and the principle of having a long term strategy

with a short term execution (Jauber, et al., 2014). For today’s financial service institutions,

interdisciplinary collaboration and the break-up of department silos is especially important at the

interface between IT and the LOB. A common mistake in the past was that the LOB developed

and designed an idea and left the actual implementation to the IT department without any

additional support. However, the IT department was rather focused on increasing efficiency and

standardizing the system-infrastructure than creating value through the implementation of new

ideas. This misconception of not working together for the same cause creates tension between

the business units and might prevent a successful transformation (Pegasystems, 2016).

3.3.2 Prerequisites

3.3.2.1 Outside the Organization

Is agility something which can add value to any organization, especially in the financial service

industry? In this chapter, the prerequisites and conditions favorable for agile methodologies and

practices are discussed. First, the market environment needs to be considered. Are the existing

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conditions and customer preferences frequently changing or is the market rather stable and

predictable? With a remark to chapter 2, the structural changes in the financial service industry,

it can be noted that financial service institutions are required to constantly make adjustments. In

accordance with this goes the general customer engagement and the question whether

customers are available for a frequent exchange of feedback (Rigby, et al., 2016).

Furthermore, the overall speed of how innovation progresses can make a difference needs to be

evaluated. If the competition is closing gaps very quickly and time to market plays a significant

role, organizations have to optimize the cycles from the idea to the actual launch of the product

or service. This constraint can get even more difficult, if an organization reaches limits in regard

to its resource capacity. Pressuring timelines are mitigated with increased resource allocations,

leading to budget overruns and might have negative implications to the overall quality of the

deliverables. In this case, the flexible allocation of resources leading to quick first results can be

a solution (Cooke, 2012). This leads to another necessary requirement: the minimum viable

product cannot be a fully completed error-free product in an agile project. If an early release or

limited functionality, delivered in order of their priorities, does not add any value to a customer’s

situation, the application of agile practices is at least questionable. Going one step further, if an

early release with interim mistakes could be harmful to a customer, it could have a catastrophic

impact for the organization as a consequence. Leaving the financial service industry and looking

at the pharmaceuticals for example, the early release of a new drug could be bad for a customer

or patient, but it could also completely ruin the institution who is selling it (Rigby, et al., 2015).

3.3.2.2 Inside the Organization

There are certain requisites outside an organization which are expected to be fulfilled. However,

the situation inside an organization is more crucial for the utilization of agile practices. Even

though it relates to the own staff and processes, it does not necessary mean that it is easier to

control or influence. Starting from team leads to managers and directors, people who used to

maintain a heavy-handed control over day-to-day activities of their staff, will need to be willing to

exchange control in favor of trust and employee empowerment. Agile methodologies and

practices are designed to make an easy shift in mindsets for people in managing positions, as

they can foresee the results. According to the process, the next tangible deliverable is never more

than a few weeks away. Given this constellation, there should be enough confidence to bypass

the dispensable need for close monitoring (Cooke, 2012). Empowering managers can be less

concerned about tactile design, but rather whether the strategic goals are being achieved or not

(Gothelf, 2014).

Then again, the required skills and competencies, in order to operate effectively in an agile

delivery framework and to be able to take the right decisions, are rather indispensable. Especially

the so called STEM (science, technology, engineering and mathematics) competencies are of

significant importance in the continued development of business models and the organizational

adaptability (Böhning, et al., 2015). One of the resulting implications relates to human resources

(HR) as the traditional style of hiring does not build organizational agility. Specific competencies

have to be attracted, but not by purely filling gaps in a discipline silo. Recruiters have to assess

more than just the visible skills of given candidates, such as the experience in a specific field.

Instead, ways have to be found to evaluate a person’s ability to collaborate, to be creative and

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their curiosity in terms of willingness to learn (Gothelf, 2014). This is not an easy task, but in the

end the objective is to find candidates such as ‘an accountant with an interest in software

development’, a person aware of and able to understand the importance of diverse disciplines

(Gothelf, 2014).

Furthermore, the people in an organization have to be open to new practices and release

themselves from their business as usual routines. Mainly in large and traditional firms it is hard to

establish a momentum seeking for change. Agile is not going to change an entire department

overnight. It is a learning process, which is continuously progressing and involving more and more

parties within the organization. However, this openness to abandon well established processes

and engage in new principles, such as a higher degree of self-organization or the shift away from

upfront documentation to extended communication and personal interaction, is vital (Cooke,

2012).

In order to become a truly agile organization, central processes have to be adjusted to create the

necessary framework. One of them relates to the way an enterprise budget is managed. The

resource allocation of profit driven organizations can be motivated by the return of a project while

it encourages flexible acting and thinking. Jeff Gothelf takes an interesting position in his article

“Bring agile to the whole organization” (Gothelf, 2014) by suggesting that larger corporations

should follow the example of startups and treat each team as such. Project teams have to apply

for funds and at the end of each funding period the teams must present their cases to the financing

department in order to get refunded. This process would allow more flexibility with only short-term

commitments while being more result driven (Gothelf, 2014). Although it is an interesting

approach, it also kicks off the discussion on how to measure results. A finance officer tends to

measure results based on the return on investment (ROI), but projects such as the modularization

of an existing legacy system do not generate a direct ROI. Nevertheless, such projects are crucial

for the sustainability of an organization. Therefore, the idea points in the right direction, but the

implementation needs to be aligned with the long-term strategy of an organization.

3.4 Expected Improvements from Agile

“The overall results clearly show that waterfall projects do not scale well, while agile projects

scale much better.” (The Standish Group, 2015)

The Standish Group is publishing a “Chaos Report YYYY” on an annual basis, indicating the most

challenging project success criteria as well as the success rates based on a large number of IT

projects spread across various industries. Overall, the results are providing soft evidence that an

agile delivery approach returns greater achievements than the traditional waterfall approach, as

shown in figure 10. However, the questions arises: How to measure success? The commonly

known metric to measure project success, also known as the project management triangle,

consists of three dimensions: time, costs and scope. The time relates to the set deadlines, budget

indicates the maximum amount of resources planned in order to deliver the predetermined scope,

which are desired features and functionalities (Bohnic, 2014). This traditional metric is lacking

customer outcome, as a consumer might remain unsatisfied even though the targets were

reached in all three dimensions. The Standish Group already addressed this constraint in its most

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recent study (Figure 10) by replacing the scope with perceived customer value, resulting in a

seven percent decrease in the calculated project success rate (Erik Weber Consulting, 2015).

Especially in consideration of the perceived customer value, agile is showing greater chances of

success compared to the waterfall approach. Nevertheless, the question remains how accurate

the perceived customer value can be measured without the direct involvement of customers in

the study. In the following chapters, the expected improvements attached to agile methodologies

and practices are further discussed in a global enterprise view and detached from a project

perspective. The structure of the expected improvements is inspired by the three dimensions of

the traditional project management triangle time, budget and scope.

3.4.1 Time = Time-to-market & Bouncebackability

As broadly discussed in the second chapter, the financial service industry is exposed to many

changing determinants. Technological developments are resulting in higher customer

expectations. Regulatory requirements are liberalizing the market and new market entrants offer

contemporary solutions tailored for specific customer needs. The most essential variable in this

context is the time you need in order to react and leverage the given circumstances. With too

much time passing by, a change or new development in the financial service industry can turn

quickly from a great opportunity into a great risk, if an organization is too slow to provide their

customers with a valuable solution. Even if trends are acted on proactively, an extensive upfront

planning in advance to the implementation of new ideas in non-agile methodologies, results in a

lack of responsiveness to ongoing changes and it usually takes months to create them (Cooke,

2012). The longer the time gap between requirement documentation and the implementation of

such, the greater is the risk that it either does not suit the customer need any more or others have

been faster with an offer addressing the same need (Pegasystems, 2016).

Agile organizations embracing short iterative delivery cycles are able to provide tangible

outcomes rapidly on a regular basis. This is accomplished by focusing team efforts on incremental

but fully functional, fully tested and production-ready product or service features that can be

released to the customer well in advance to the end of the project lifecycle (Cooke, 2012). In order

to avoid a misconception at this point, agile is not directly increasing the efficiency of the staff to

implement a predefined scope in less time. However, the adapted organizational structure allows

Figure 10 - A comparison of project success rates

(The Standish Group, 2015)

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the organization to focus on the highest priority features, which can be released in incremental

deliverables to cut the time to market (Cooke, 2012).

The overall duration to complete a project or initiatives is not necessarily shorter, as i.e.

developers are not programming faster than before. Even though certain indicators are given,

also a positive impact on the entire project lifecycle is possible. According to the principle ‘think

big, but act small, practical and fast while constantly adjust’, a large US based corporation outside

the finical service industry was able to compress the time needed to launch a new product into

the market by 75 percent. With the transition from a traditional sequential to an iterative approach,

unnecessary steps in the process have been eliminated to develop immature prototypes, which

have been further improved along the process. This is one of the major benefits of agile, the quick

releasing of small product or service increments to be expanded and stabilized along the project,

based on instant feedback, gathered directly from the consumer (Rigby, et al., 2016). The time

saved can be quite significant, as a project could have been heading in the wrong direction for

years without incremental testing (McGrath, 2011).

In an environment in which time is a critical factor, and especially financial institutions have to

take actions instantly, agile provides a framework to address this requirement. There may be

mistakes in a fast moving organization, but a truly agile organization establishes a bounce-back-

ability to act fast and thus being able to constantly adjust and reshape along the way (Holebeche,

2015).

3.4.2 Costs = Budget & ROI

According to a Harvard Business Review study, the average cost overrun of IT projects is

projected with 27 percent (Flyvbjerg & Budzier, 2011). As if this would not be alarming enough,

the real pitfall is, that one out of six software projects exceeds its initial estimate by 200 percent

and more. Cost overruns in this dimension can have serious impacts on an organization’s financial

stability, depending on the size of the project, and challenges the future existence. One of the key

activities in order to avoid such a scenario, according to the same study, is the ability to avoid

changes to the scope during the project (Flyvbjerg & Budzier, 2011). However, this contradicts

with the given circumstances in the financial service industry, which are frequently shifting and

change is considered as the only constant factor (Bilick, 2015).

Agile methodologies and practices are providing a framework which enables organizations to

meet budgetary limitations while being open to new requirements. A precise project cost estimate

is replaced by a budget to create value in a defined business sector (Madden, 2014). In contrast

to the waterfall approach, the scope in an agile project is rather flexible, while the time and budget

are fixed. During the project lifecycle, the execution ability is guaranteed, as a working product is

created containing a set of features, according to the highest priorities and the greatest customer

value. Even though a better cost control is given, it cannot be ensured that at a certain point in

time all targeted features will be implemented. But still the situation, in which an organization has

to allocate additional resources to get a product ready for production, does not need to be faced.

Thus, at a predetermined point in time, a production-ready product is delivered, which is expected

to contain room for further improvements or extensions (Cooke, 2012).

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In terms of costs and return, agile methodologies and practices can be considered as more

beneficial than alternative approaches during both, project failure or success. A product delivered

in time, costs and scope, based on the waterfall approach, does not guarantee success and profits

till it is launched and actual customer feedback can be gathered. In a worst case scenario, an

organization invested a large amount of resources for a product or service, which does not

address any needs. This scenario is impossible in an agile organization, as product increments

are delivered and tested rapidly and failures are detected instantly. Therefore, the decision can

be made to shift priorities in order to avoid a continued allocation of unprofitable resources

(McGrath, 2011). Assuming the same project, consisting of multiple product features, would suit

a customer need, it would start to generate return after its release. In contrast to a sequential

delivery approach, in which all features are released at the same time once the project is

completed, the most valuable features are released to production much earlier in an agile delivery

model. Given that scenario, the first product feature generates return in advance to the final

project completion and increases the ROI while it cuts the payback period (Rigby, et al., 2015). A

return does not necessarily need to be monetary. Also internal projects such as an infrastructure

upgrade, not designed to directly generate profits, would benefit from early releasing in a similar

fashion.

3.4.3 Scope = Outcome & Continuity

Many banks and other financial service institutions are facing the question how to achieve a digital

transformation and what is included in such a major change initiative. According to the guiding

principles of agile ‘the customer comes first’. Therefore organizations have to shift away from a

product centric view: ‘What are the best products?’ to a customer centric view: ‘What is the best

solution for our customer?’. This different mindset is a major characteristic of an agile organization

(Baller, et al., 2015). Financial institutions are encouraged to minimize the distance and create a

close relationship to their consumers in order to understand their actual needs. It is no longer

expedient to develop products or services without paying close attention to customer needs

(Hieronimus, et al., 2012). Since the creation of the agile manifesto in 2001, a core element of

being agile is to consider the customer as a colleague and let him take a part in the team

discussions (The Economist, 2001).

While defining the scope of a project or the next ideas to work on, the business value cannot be

neglected. Rather than defining success by output and the simple release of a certain number of

products, it is defined in outcome based terms, outlining the difference it will make to the intended

recipient. On a product level, clearly stated goals and performance indicators such as a 15 percent

increase in conversion rate, streamline the focus of a team on a measurable outcome. Lean and

agile organizations ensure that initiatives are designed around such business outcomes. Also, a

measurable outcome enables an organization to monitor the progress and to reprioritize and shift

activities when a project is off track. Contentious adjustments are being made to progressively

move towards the agreed target (Holebeche, 2015).

3.4.4 Summary: The Project Management Triangle

All three traditional success dimensions of time, costs and scope are also highly related and

interdependent in an agile world. A short time-to-market with the frequent release of product

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increments triggers a high customer engagement. Feedback is gathered to measure the achieved

business outcome and to impact future deliverables or updates in order to meet actual customer

needs. The more customer satisfaction is achieved and the earlier products or services are made

available, the greater is an organization’s return on investments. Further, the risk is mitigated to

make unprofitable investments.

3.5 Keys for Success

In the previous sections, the evolving financial service industry and the resulting implications for

existing players have been discussed. Agile is suggested to be a major part of a possible solution,

as it is not only a project management tool but rather a strategic approach for an entire

organization. Better time-to-market and an increased customer satisfaction are two out of many

expected improvements. However, such a major organizational transformation aiming at

embracing agility is not expected to run smoothly, considering the changes it causes to almost all

areas of a business. All major transformations have to overcome challenges in regard to the

people, processes or technological circumstances. Based on the identified literature, this chapter

summarizes the success criteria and challenges within the transformation of a financial institution

towards an agile organization.

3.5.1 Agile Starts on Top

According to a global survey, conducted in the financial service and health care sector, an

increased senior management sponsorship is the most critical success criteria for an organization

to achieve a digital transformation, which entails agile methodologies and practices (The

Economist Intelligence Unit, 2016). Another independent survey published by the Forbes goes

even a little further. As their respondents report, senior management sponsorship and support is

by far the most important factor in adopting agile methodologies (Denning, 2015). Compelling

support and the acknowledgement of the importance of agility is considered a major key to

success (Rigby, et al., 2015). In other words, the change must be led from the top, it has to be

accompanied by someone with a strategic vision (Pegasystems, 2016).

Being supportive and taking a lead also implies that the demanded practices and changes are

applied by the top management itself. Some of the routine C-level activities and duties are agile

incompatible. However, many and arguably the most are compatible. Strategy development,

resource allocation, cultivating breakthrough innovations or improving the organizational

collaboration are well suited for agile practices. Some of them even have to be more agile and

flexible in order to empower others to follow the lead. Senior executives who come together as

an agile team and learn to apply practices themselves would reach at least two advantages. On

the one hand, they could improve their own productivity and velocity as a management team. On

the other hand, they would speak the language of the teams that they are empowering. They

would have to overcome the same challenges, which helps to set the right expectations. Also, the

confidence in and urgency of such a change triggers the needed attitude of the staff to follow the

lead (Rigby, et al., 2016).

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3.5.2 Agile is more than a Process

Practices such as SCRUM are providing useful frameworks, but in order to be effective, an

organization is expected to undergo a shift in its culture. People have to drop the fear of taking

bold decisions, as it might impact their individual professional career. Instead they are motivated

to add value to the organization by taking actions and responsibility. They have to be able to act

agile and flexible, for example by dropping a good idea to prioritize a more important and more

valuable activity (Cooke, 2012). In addition, managers and directors could encourage intelligent

risk taking once they drop threatening consequences and punishments (McGrath, 2011). This is

highly depending on trust and the ability to pass on responsibility, which is challenging for people

in leadership positions, used to a strict hierarchical organization. Furthermore, agility requires a

certain skill set of combining knowledge with the flexibility and curiosity to continuously improve.

Hiring practices have to be adopted to identify the right multi-skilled candidate, who can be a

skeptical member of the team with the courage to speak up if needed (Gothelf, 2014).

Even highly skilled staff is not immune of experiencing an ‘agile culture shock’ without going

through the necessary training. This is a wide overlooked success criteria for financial institutions

striving for agility. As reported, financial institutions were failing because of this shortcoming. The

misapplication of agile practice leads to negative results, strengthening the position of the part of

the organization, which did not welcome the change in the first place. There will always be a

percentage of people trying to resist to any major change. Neglecting the importance of training

and cultural orientation will give them a better chance to win this battle (Aguanno, 2014). The

introduction of agile does not require extensive trainings for months, but pilot projects mainly

based on ‘learning by doing’ need to be accompanied by a supporting communication structure

in order to enable a positive atmosphere and learning effects (Cooke, 2012).

3.5.3 Agile Challenges Organizational Velocity

In order to reach a fast time-to-market or even a first mover advantage, a financial service

institution is highly dependent on the organizational velocity. Besides the development team

velocity (speed at which a team produces new value), several other factors are adding up to the

overall organizational velocity. Firstly, the flexibility is given in order to allocate resources on short

notice e.g. because of a new opportunity (Cooke, 2012). A missed opportunity due to budgetary

limitations could have a significant impact on a business. For a maximized return, the ability to

deprioritize less important activities, in order to free up funds, is important. Furthermore, the speed

at which an organization accepts and integrates new value such as an update is crucial. No time

advantage can be achieved if a new product feature can be developed in two weeks, but it takes

the operations team additional twelve weeks to test and integrate it in the next release cycle. Even

if the development speed further increases, the organizational velocity remains as a major

obstacle (Rigby, et al., 2015).

Many organizations encounter issues with the handover of products and features from

development into operations, which is negatively impacting the organizational velocity due to

several reasons. Operations is responsible for the stability of the running systems, as a

consequence major updates have to undergo extensive testing to avoid any outages. In addition,

differences in production and development environments require the operations team to make

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adjustments to new features of products to fit in the production environment, which is consuming

even more time. Even the general setup hinders operations teams to adopt and facilitate agile

practices. The workload is difficult to foresee as activities are mostly emergent and ticket based.

Furthermore, teams consist mainly of specialist dedicated to a certain functionality creating an

inflexible dependency on resources. A conceivable solution is extended communication and

greater collaboration among development and operation teams, so that issues can be mitigated

by being more proactive. Instead of waiting for a ticket to come, operations get involved in the

design and creation of features to make necessary corrections beforehand (Payton, 2015).

A standardized methodology, addressing particularly the intersection issues between agile

development and operation teams with the objective to allow continues releasing, is known as

DevOps. DevOps builds upon agile methodologies such as SCRUM, facilitating incremental and

frequent product or feature deliverables. Pairing of development and operations resources,

automated infrastructure and testing procedures as well as the elimination of discrepancies

between the development and production environment are core elements of this methodology. It

is improving the organizational velocity and the effectiveness of agility (Rackspace, 2013).

3.5.4 Agile’s Architectural Requirements

Robustness and stability have been the driving forces for designing and maintaining core banking

systems (CBS) in the past. However, with more functionalities and new communication channels

arising, the complexity of those all-in-one systems increased and made them incapable of

adapting changes quickly. An incremental development, as one of the core elements of agile,

requires modular vertical system architecture in order to have the ability to build distinct features

in short iterations, with immediate impact on customer behavior. The still active but outdated

legacy systems across most financial institutions are rather designed in horizontal layers, so that

adjustments impact a whole domain, eliminating the possibility of incremental feature deliverables

(Wintersteiger, 2013). The focus of an enterprise architecture upgrade is on the exchangeability

of system components. This, combined with application of standard interfaces connecting

components, enables organizations to integrate incremental software deliverables without a great

risk to negatively impact the entire ecosystem (Böhning, et al., 2015).

A financial service institution cannot be agile without a flexible and more simplified CBS, which is

also motivated by drivers related to structural changes identified in chapter two. A bank’s

architecture has to comply with regulatory standards such as the Basel III. Innovative solutions

and advanced technologies (e.g. big data and advanced analytics) do not comply with existing

legacy systems. Also, the costs and efforts required to maintain the existing system architecture

are immense high and operational savings can be achieved with a modernization (Kumar, et al.,

2015). Financial institutions cannot replace their existing system all at once, they have to find a

way to extend the use of their existing systems while enhancing and progressively replacing them

(Venkatesh, et al., 2013). Attempts to eradicate those legacy structures are complex, expensive

and associated with great operational risks. Failures or a rejection can have multiple reasons.

One of them is the justification of the required investment and the related identification of tangible

business output for the organization themselves. Managers have to point out the long term

sustainability while avoiding an early judgement of only being a cost driver. The objective is not

to replicate the old system based on a new technology stack, as the argument would arise that

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money is spent on the creation of redundant system. Even for this kind of long lasting project, the

benefit of producing a valuable outcome which has an actual positive impact on a consumer can

be adopted. In that scenario, the consumer would be rather a user in person of own employees

running the IT and operations (Venkatesh, et al., 2013).

3.6 Author’s Thoughts on Literature

The literature on the discussed topic is still young and recent, but therefore brings the challenge

of being not extensively developed. Most of the publications are by practitioners, consultants,

companies or individuals that have experimented with Agile in a specific environment. One of the

negatively regarded consequences is a lack of differentiability, as most authors are representing

a single perspective. The occurring normative argumentation approach leads to one-sided

thinking in black-and-white terms, which is neglecting the given structures and complexity within

today’s financial service institution. Agile is advertised much more suitable to the evolving market

needs than existing methodologies. However, the existing structures are most likely chosen or

kept for a reason, as they add value in a certain way. A revolutionary transformation, changing

the way an entire organization is working including a redesign of their system infrastructure and

a shift in people’s mindsets, seems to be too ambitious and might not be possible in every

organization. The conceptually designed methodologies do not take the current state of financial

institutions and resulting complexity of a transformation into account in order to create a grey zone

for a more sophisticated view.

The same concern applies for the application of agile practices outside an IT department. Many

authors are sharing the opinion that agile is applicable throughout an entire organization.

However, it is not clearly addressed which of the practices are eligible or in which way they have

to be customized in order to comply with other business units. Agile has its origins in the

development of software and it has been particularly designed for the needs of IT departments.

However, the needs of the IT and other departments are differentiating and this has to be

reflected. Most literature is directed towards agile software development and it is difficult to draw

a line between this and the phenomena of an agile organization.

Furthermore, a related shortcoming in the existing literature is the lacking discussion of weak

spots concerning the application of agile methodologies and practices. The improvements related

to an increased agility are extensively discussed while the deficiencies are neglected. Individual

authors are reporting the challenges faced during a transformation and that some banks failed to

overcome such. But what are the disadvantages once you reached a certain level of agility in your

organization? Besides the fact that organizations usually attempt to hide negative events from

external parties, the immatureness of agile methodologies and practices in this industry could be

causing this limited view. Even though the creation of the agile manifesto reached its fifteen’s

anniversary, the application of the related practices has not passed the infancy stage. Many

organizations are still in an agile pilot phase. This also applies for the four specifically for this

research study investigated financial institutions, which are elaborated in the following chapters.

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4 Primary Research Design

The relevance and urgency of an organizational transformation due to constantly changing market

conditions has been discussed and a theoretical path to overcome existing challenges and to

reach the benefits of an agile organization has been pointed out based on secondary data.

Building upon the foundation and having shown the limits of the existing literature on the subject,

primary research is required in order to confirm or challenge the findings made by others.

Selecting the appropriate methods is an essential element for the effectiveness of this research.

A research methodology is a tool used to collect information and data for the purpose of making

business decisions and scientific progress (Cambridge, 2016). The chosen methodology needs

to be transparent, so that a reader can follow the line of argumentation leading to a certain result.

Therefore, the research methodology is discussed in the following paragraphs, in order to provide

sufficient information for traceable and coherent results.

4.1 Research Aim

When doing research, valuable information can be gathered using either quantitative or qualitative

research methods with the objective to find answers to open questions or hypothesis. In many

cases, the research question or topic is only compatible with one, either a qualitative or

quantitative, research method. Also, the type of result is differing and depending on the chosen

method. Quantitative research is an empirical investigation of a restricted subject area which is

inflexible and predetermined. Based on a representative number of respondents and thorough

statistical and mathematical techniques, generally valid statements are made to confirm or reject

a hypothesis about a certain phenomenon. In contrast, qualitative research is rather seeking to

explore a phenomenon with the possibility to end up with a set of follow-up questions. In case of

a qualitative research method, the researcher focuses on absorbing the big picture, which is

examined from different perspectives (Golafshani, 2003). The objective is to describe and explain

variations, while an individual experience can already make a difference and become a valuable

finding (Mack, et al., 2011).

Agile is a broadly discussed and examined topic in the field of IT. However, the researcher is

seeking to explore the potential benefits of agile methodologies and practices to a whole

organization and set off the limitations to the IT, which became a topic rather recently. However,

the question is not if being agile or a certain agile practice is beneficial for an organization. It is

rather how an organization in the financial service industry can embrace agility to make the most

out of it. Where are the boundaries or limitations of agile methodologies and practices? In which

circumstances are they most effective? Therefore, the topic is highly flexible and open to new and

individual perspectives and opinions as answers can go in multiple directions. The resulting

explorative nature of this research aim is well suited with a qualitative research method, which

has been selected by the researcher as most suitable (Gansen, 2011). Also, this research project

is one of the first studies in this research field, and thus a qualitative approach is essential. Based

on the findings of this research, other researchers have the opportunity to break down the different

aspects and perspectives into further empirical studies.

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4.2 Data Collection

In qualitative research studies a researcher has a set of data collection techniques to choose

from. However, most qualitative studies utilize one out of the three most used techniques. As the

name suggests, participant observation requires the researcher to become part of a community’s

or organization’s daily activities in order to observe their routine, to identify different perspectives

in order to understand the interplay among them (Mack, et al., 2011). The second is a focus

group(s), where the researcher meets with a group of participants to discuss a given topic as

presented by the researcher. One of the strength of this technique is to identify group norms or a

group dynamic (Mack, et al., 2011). The third option, even though multiple techniques can be

utilized simultaneously to collect even more meaningful data, are in-depth interviews. In-depth

interviews are a technique designed to elicit a profound picture of the participant’s perspective on

a topic. Even sensitive questions can be addressed, provided a trustful relationship between the

interviewer and the interviewee exists. Receiving extemporary and uncensored answers from

industry experts on their perspective on agility was one of the main drivers for the researcher to

select in-depth interviews as his primary data collection method (Mack, et al., 2011).

In exchange for straight insights, the researcher guaranteed all interviews that the provided

content will be totally anonymized, so that references to the interviewees or their financial service

institutions are eliminated. All interviews followed a semi-structured approach, providing the

interviewee with a framework of questions in predetermined categories, while leaving open space

so that each interview can develop its own dynamic. The compatible question type are open-

ended questions, enabling the interviewee to express his perspective in great detail. All

interviewees were questioned in the following five categories according to the previously designed

interview guide (Appendix B).

Number Category Objective

1 Personal background / Position

Categorize the individual perspective and understand interplay between departments

2 Organization Classify the investigated organization in the financial service industry

3 Financial Service Industry Identify the trends in the industry and create context to the main topic

4 Agile organizations in general

Examine individual perspective and knowledge on agile practices and methodologies

5 Structural implications of agility

Describe status quo of agility in the investigated organization on high level

6 Operational implications of agility

Determine operational readiness of agility in whole organization

Table 1 - Interview Categories

For each interview, a one-hour meeting was scheduled with the selected professionals. The

researcher made field trips to the interviewee’s office locations in order to conduct the interviews

in person, only one exception was made and an interview was conducted via phone. Each

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interview was hold in the interviewee’s native language in order to avoid any language barriers or

misunderstandings and to receive detailed insights. As a result, one interview was hold in English

and the remaining interviews in German. Figure 11 is summarizing the formal research

methodology as chosen by the researcher and as described in chapter 6 in order to create

traceable research results.

4.2.1 Research Participants

The researcher targeted interview partner currently employed by financial service institutions in a

top management positions with responsibilities over multiple areas of the organization.

Throughout his research project, the researcher got supported by the technology consultancy

COREtransform, specialized in transformations of the finical service institutions. The contact to

potential interviewees was established through active client relationships, which enabled the

researcher access to participants in top management positions. A top management position

already indicates that all interviewees can fall back on great experience in the industry and their

awareness of activities impacting the whole organization. Within the financial service industry, the

primary target were banking institutions, whereas the researcher also included interviewees from

one insurance company as part of the universal financial service industry. The researcher

attached importance to a diversified portfolio of organizations in term of size, large corporate

financial institutions were investigated as well as small and medium sized organizations to reach

a broad coverage. The researcher was aiming to interview multiple people in the same

organization covering the LOB and IT side of the organization, because this is the most important

interplay within an agile organization. This objective of combining different perspectives within the

same organization was accomplished in two out of four organizations due to the limitations in time

and willingness of the top management to allocate themselves to a research study. To ensure

comparability while still gathering diversified perspectives, financial service institutions from

different countries but all in the German speaking European area were selected. Table 2 provides

Figure 11 - Overview of the selected research methodology

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on overview of all seven research participants, even though names of the individuals or their

organizations cannot be listed in consideration of the confidentiality agreements.

Number Financial Service Institution

Industry Position / Role

Business or IT

Interview Language

1 A Banking Head of Strategy

Business German

2 A Banking Head of IT IT German

3 A Banking Head of PM Business German

4 B Banking Sr. Pro-gram Mgr.

IT German

5 C Banking IT Area Manager

IT English

6 D Insurance CFO/CIO Business German

7 D Insurance Head of IT IT German

Table 2 - Overview Research Participants

4.3 Reliability and Validity

Reliability and validity are key requirements for all types of research projects and a precondition

for a study’s relevance. It particularly applies in qualitative research, because the researcher’s

subjectivity could impact the interpretation of collected data (Brink, 1993). In general, research

results are considered reliable if they can be reproduced under a similar method (Golafshani,

2003). The used method in this study is documented in great detail and non-existent interpersonal

relation between the researcher and the interviewees or their organization eliminates the

existence of any dependencies (Shenton, 2004). Both are strong indicators for reliability as the

entire process is reproducible for a third person. Validity as a second requirement determines

whether the research truly measures what it was intended to or how truthful the collected data

are (Golafshani, 2003). One of the weak spots within this research project in the rather low sample

size. However, the gathered information is very detailed and specific, resulting in an in-depth

analysis as outlined in the upcoming paragraphs. Also, the professional background and

qualification of the researcher with first-hand experience gained in the IT department of a bank

enables him to attest validity to the provided information. In addition, the position of all

interviewees expresses the trustworthiness and credibility of their testimonies (Shenton, 2004).

When it comes to the secondary data research, the most crucial part is to choose reliable sources.

Especially Internet sources need to be closely evaluated. Preferred sources for this research are

books, articles form scientific journals, publications from industry experts and statistical reports

form certified databases.

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4.4 Data Evaluation

Once the data are collected, they need to be processed into general applicable results. This

process, starting from preparing the collected data and leading to the analytical approach in order

to draw verifiable conclusions, is outlined in this chapter. The principles of being transparent and

traceable are particularly important to the processing and analysis of data.

4.4.1 Data Preparation

Till this point, the collected data were a number of audio files as all interviews have been taped

and audio recordings have been produced. The next step of transcribing the interviews was

important, because once an interview is transcribed, the transcript becomes the interview and

audio files are neglected. It is also the point in time where the field work stops and the processing

as well as production part of data starts. With regard to the fact that it is a very time consuming

exercise, transcribing provides the researcher a first possibility to reflect on the dialogue which

he once participated in. In doing so, he starts to attach meaning to the provided answers and after

the first interview transcripts are completed, he recognizes the first patterns among different

dialogues (Lindlof & Taylor, 2011). There are several techniques to transcript interviews. In this

case, the researcher used two devices simultaneously. One device was used to play the audio

recording via headphones. The researcher repeated the same words very slowly himself, so that

the second device was able to capture the voice into a text document. A final touch was required

and the researcher was required to carefully read the text file in order to make necessary

corrections (Appendix C).

4.4.2 Data Analysis

For a qualitative data analysis, the researcher followed the three necessary steps according to

Lindlof & Taylor of data management, data reduction and conceptual development. Gaining

control over the rapidly growing amount of data is considered as data management.

Consequently, data reduction was needed in order to effectively process only the important

information (Lindlof & Taylor, 2011). For this purpose, an evaluation matrix reflecting the structure

of the interview guide has been created (Appendix D). Each interview was screened and only the

key messages for each question were retained and translated into English. Once all interviews

belonging to the same organizations were completely processed, the researcher reflected on

them and summarized the findings in a rather descriptive way, leading to one case study for each

of the four financial service institutions (Chapter 5). Even though it is hard to generalize from

individual cases, it is a profound method to address specific phenomena within a broader field of

research. A case study is designed to provide information beyond the description of a real-life

environment. It also helps to explain the complexities of real-life situations, which may not be

captured through experimental or survey research. The conducted in-depth interviews are

building a well suited foundation for the creation of cases studies and are in line with the chosen

strategy (Zainal, 2007).

After all seven interviews were screened, the result consisted of four comprehensive case studies

and a complete evaluation matrix, which was conceptually developed in the next step. The already

reduced set of data was further clustered from an inductive perspective in order to identify

46


similarities, variations or unique elements concerning the initial research question of how to

embrace organizational agility in financial service industry. This procedure resulted in the

generation of general applicable but provocative statements (Chapter 8).

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5 Case Studies

As previously indicated, seven interviews have been conducted in four different finical service

institutions in order to investigate their handling of agile methodologies and practices in various

layers of their organization. The following four sections describe those institutions while focusing

on the individual status of their organizational transformation.

5.1 Case Study: Financial Service Institution A

Financial Service Institution A (FSI A), a stand-alone bank as part of a major corporate banking

group, transformed from a medium-sized retail bank into a specialist offering a limited set of

banking products. With a base of approx. 1.000 employees, the FSI A has been generating

steadily growing profits in the recent past. Even though the bank is not the best performing player

in its market segment of installment credits, but it is able to compete with the top players. The FSI

A does not consider itself as a classical credit institution but rather as a liquidity provider for

consumers in various situations. Instead of limiting itself to traditional banking products, the FSI

A offers convenient solutions to prevent its customers from any kind of personal financial

problems. Just recently, a new product to offer installment purchases for online sales was piloted

in cooperation with several online merchants (factoring business). Generally, the primary

distribution channel for the bank’s purely B2C products is through partnerships (B2B channels),

such as the branch network of other financial institutions within its corporate group.

As indicated by the new installment purchase for e-commerce customers, the FSI A recognized

the significance of the digitalization and started to utilize it to its own advantage. Today, the bank

is directly engaging its customers via online channels, which would not have been possible

without the extraordinary increase in online activities. The next step on its strategic roadmap is to

enhance direct customer engagement with a new service, which will be launched in the upcoming

year. A liquidity management application will provide mutual benefits for both the consumer and

the financial institution itself. The consumer receives a comprehensive overview about all his /

her financial activities, whereas the bank gathers large amounts of valuable data. From the

organization’s strategic point of view, the trend towards big data and data intelligence is regarded

as a promising opportunity. This can also be seen in how agile thinking starts at the top level at

FSI A, as strategic directions are defined in close collaboration between the LOB and IT side.

Consumer trends as well as technology trends are monitored and weighted with the objective to

genuinely fulfill actual customer demands. A clear priority for the senior management is that the

bank’s initiative towards an agile transformation has an impact on all layers of the organization.

Furthermore, the current office setup enforces a high level of interdisciplinary collaboration and

agility within the project teams of the FSI A. For mostly technology driven projects, resources from

IT and LOB are assembled and collaborate closely in order to build better consumer solutions.

SCRUM, the most commonly used methodology for agile software development, has been

applied in three individual projects with the intention of cutting down time-to-market. This also

illustrates the overall motivation to establish an agile organization. Even though major time

benefits cannot be attested for the agile pilot projects so far, the iterative process of constantly

incorporating consumer feedback led to an improved outcome. One example is the prototype for

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the liquidity manager application, which has evolved since its initial concept, as continuous

adjustments had to be made in order to keep pace with consumer needs. In general, consumer

needs and demands are analyzed through various channels such as surveys or grey testing. The

most instant feedback, however, results from the recently created usability labs within the

premises of the bank. Prototype products and early features are tested by actual consumers prior

to the official release. This also applies to internal projects such as the CRM systems. Employees

are testing immature applications, as they are considered consumers in this case.

The overall demand for agility has already changed many company-wide processes and

structures. This shows the seriousness attached to the targeted transformation. Even though FSI

A traditionally reserved a certain percentage of its yearly budget for unpredictable activities, it

started to use a continuous planning process to become even more flexible. Resources are being

allocated to projects based on priorities, which are measured by their strategic as well as their

business value. The re-evaluation of new and existing projects is done at the beginning of each

quarter. However, the diversity and number of active projects is overextending the current

organizational structure. As a first step to balance the rising willingness with the ability to change,

a new department responsible for these transformational activities was founded. One of the

projects with the highest strategic value is the upgrade of the existing CBS. The architecture of

this legacy systems needs to be unitized in order to make individual modules exchangeable,

which is a prerequisite for the prompt integration of new products or features. The redesign of the

existing architecture will be a long lasting project as it impacts many areas of the bank. But it will

lead to a two-speed IT architecture, which fulfills the requirements of an agile organization. The

CBS will remain stable while the surrounding system components are highly flexible and

independent. Without this necessary upgrade, the organizational velocity would never match the

delivery velocity and the benefits of agility would be limited by stretched out release cycles. As of

now, two major system upgrades are released every year. This limits the time-to-market of new

products or features and therefore adjustments have to be made.

The most urgent and challenging obstacle in regard to the targeted transformation is overcoming

the difficulties caused by the transfer of agile developed products into operations. So far,

operational and project activities as well as resources were managed separately, leading to

situations in which the operation teams are not prepared to take over. This is a lesson learned

from the first agile projects. Yet, management was not expecting a perfectly smooth

transformation, but as a part of the agile mindset, the right adjustments have to be made going

forward. For this particular scenario, the targeted solution is to remove the boundaries between

project and operations by assigning operational resources to upcoming projects. FSI A took the

necessary first steps to become an agile organization, but this path needs to be pursued.

5.2 Case Study: Financial Service Institution B

The second investigated organization, Financial Service Institution B (FSI B), is a major retail

banking cooperation. As a traditional retail bank, it is offering the full range of consumer banking

products and it also serves corporate customers. In the fiscal year 2014/15, it generated income

after taxes of more than 500 million EURO. In its current corporate setting, the IT department is

separated from other parts of the organization as an own legal entity. In this constellation, this

46


subsidiary is considered an IT service provider for the parent company and the parent company

as the exclusive customer for the subsidiary.

As a result of the given distance between the IT teams and the retail banking customers, direct

consumer engagement and the incorporation of instant feedback is limited. Even the exchange

of ideas and feedback between the IT teams and its parent company (LOB) is restricted. A close

collaboration between them is only established during the conception phase of a new or updated

product or feature, leading to the creation of detailed requirement documents. The second and

last shared milestone is the user acceptance test (UAT). Once a product or feature has been fully

developed and tested by the IT service provider, the customer (the parent company) is expected

to validate the final product. In between the upfront requirement documentation and the UAT, the

development teams are left alone in order to prevent distraction from their main responsibility,

implementing products and features as per the previously written requirement documents.

The corporate structure itself as well as the related processes already indicate that the FSI B does

not apply agile methodologies or practices organization-wide. However, in a small selection of

projects, agile practices have been piloted. One of the disclosed benefits was an improved

collaboration between the IT and LOB during the development and implementation phase. In

general, projects and project leads are free in their choice of a delivery approach including the

traditional waterfall and various agile methodologies. Having the choice to refuse promising

alternatives demonstrates the lack of executive support and it does not transmit the discipline

required from a team to take advantages of agile practices. Becoming agile is not part of FSI B’s

strategic roadmap and therefore, it is neither adequate supported nor demanded by the decisive

authorities. An additional indicator for lack of seriousness is that the staff is not getting formally

introduced to new practices and the general principle ‘learning by doing’ is followed without any

supporting guidance.

Moreover, one of the major advantages of agile to increase the time-to-market is blocked by the

inflexibility of the current system architecture and infrastructure. The monolithic architecture of the

existing system is highly interdependent, which requires a complete system test for every single

change even though just one feature has been updated. An entire system test is very time

consuming, as the stability of the system needs to be secured at all stages of the integration into

a production environment. This requires the bank to test all possible use cases prior to a release.

The consequence is a static release cycle with two major system updates / releases a year. This

concern has been identified by the management team and the objective has been set to improve

the organizational velocity in the near future with an increased number of major releases a year.

Organizational agility is facing additional constraints within FSI B. The bank is still structured in

traditional hierarchies, which is restricting the decision-making ability of most employees.

Furthermore, budgets are planned at the beginning of each fiscal year in advance restricting the

bank to reallocate resources in order to utilize unexpectedly occurring opportunities. Even though

the general concept of annual budgets does not contradict with the agile principles, the ability to

change direction within the agreed budgetary restrictions needs to be given. Besides the hard

organizational structures, the institution is also lacking soft structures and skills. So far, no

learning culture has been established as the importance of frequent retrospectives in all layers of

the organization has been neglected. Nevertheless, the development towards a continuously non-

46


agile organization is not considered critical for a sustainable success according to the

management.

5.3 Case Study: Financial Service Institution C

Financial Service Institution C (FSI C) with more than 5 billion EURO in operating profit before tax

is one of the largest and most profitable banking corporations in Europe. One of the fully owned

subsidiaries as part of the corporate banking group is the entity governing all card processing

operations, which is the main research object within this case study. Its responsibilities cover the

technical implementation, operation and maintenance of all card processing processes. Even

though this subsidiary is mostly driven by the needs of its parent company as its primary income

source, it also provides IT services to other banks which are not part of its corporate group. In

general, FSI C is a highly innovative retail bank which considers itself as a financial service

provider strongly driven by technology. This is particularly evident in regard to the time it takes

the bank to utilize technological trends such as artificial intelligence (AI) in order to launch new

products and services or to make existing once more profitable.

New or enhanced products are triggered by massive pressure to innovate in order to keep pace

with the fast moving market. Whereas the previously mentioned subsidiary considers the fast

moving market as an opportunity, the corporate head is rather cautious and keeps a close eye on

all technological trends. When it comes to the development of new products and services based

on new technologies, agile methodologies are applied to increase the delivery speed. In general,

the objectives attached to the application of agile are a better time-to-market as it reduces the

bureaucracy to a minimum and to build more customer focused solutions. Agile is widely applied

in those parts of the organization related to the development of products but intentionally

neglected in other parts. Teams primary conducting repetitive activities are not eligible for agile

practices. In those business units, the bank is simply cutting resources as much as possible for

better and more profitable results.

Even though the concept of agile is highly promising in theory, the FSI C is currently running in

some rather practical problems for a better time-to-market. Money processing for millions of

customers every day does not leave any space for experimentation. As a consequence, new or

updated features have to be sufficiently tested, which is highly time consuming and sets back the

advantage of time to a certain extent due to infrastructural limitations. Budgetary resources are

managed flexible enough to reprioritize and shift resources, because the annual planned budget

is only seen as a framework due to the level of uncertainty at the beginning of a year. If the agreed

processes are followed, budgetary resources can be relocated on short notice.

However, the real bottleneck and the biggest challenge is the deficit in the infrastructure. Building

a separate infrastructure for every new product would consume too much resources. Therefore,

the integration into the existing infrastructure which is already serving the entire consumer base

is the only option. In order to keep the advantages of agile while accepting the given infrastructural

limitations, a combination of old and agile practices is applied. As a result, FSI C’s products and

services are built upon a two speed infrastructure with a stable CBS but flexible and autonomous

modules surrounding it. Even though the number of major release remained the same, the bank

46


is now able to launch minor releases every month. Therefore, a platform was created which allows

incremental product releases, while the stability of the entire system is ensured due to less

infrastructural dependencies and adequate test cycles. The organizational velocity was simply

adjusted to match the delivery velocity.

Also, the second desired advantage of building better products with a stronger focus on customer

needs is challenging in the current setting. The subsidiary as part of the corporate group is serving

two types of customers. The first customer type is the own corporate head and other banks as

users on the one side and the retail banking consumer as the user on the other side of the

transaction. While there is a close collaboration with the one side, the existing gap towards the

consumer is a red flag. Here, the IT relies on its parent company and the ability to surpass the

most compelling consumer demands.

Besides, those structural and organizational challenges the bank needs to overcome some

interpersonal obstacles unavoidable for an organizational transformation of this size. Most

employees have to discard the behavior and mindset related to past practices and adjust to the

new agile framework. They have to learn how to leave their personal comfort zone in order to take

decisions previously taken by their managers. With regular retrospectives and lessons learned in

any kind of working setting, the staff will get increasingly comfortable with the guiding principles

of agile such as transparency and will develop a learning culture. The management of the bank

is supporting this initiative by training a selection of employees on agile practices. Those men and

women will then perform key roles such as the SCRUM master in agile teams and pass on the

gained knowledge to other members of the team (train the trainer). By doing this, the FSI C will

further progress towards an agile organization.

5.4 Case Study: Financial Service Institution D

Contrary to the three previous case studies, the Financial Service Institution D (FSI D) is located

in the insurance industry. However, the FSI D is rather a service provider offering insurance

products than a common insurance company according to its management. The primary objective

is to create customer retention for its B2B customers with its single B2C product. More than 20

years ago, this product was designed to address a specific need for car holders. This need is still

up-to-date, which is the basis for FSI D’s profitable business. As a specialist addressing a niche

market, it faces certain advantages and disadvantages. On the one hand, its business and

operation is too specific to use standard software solutions leading to a highly customized system

landscape. On the other hand, the unique business model combined with a relatively low sales

volume is a high entry barrier for other insurance companies striving to replicate the business and

serve the same customer need. However, the customer range is about to change and FSI D as

an opportunity driven organization is aware of this matter. Consequently, an organizational

transformation initiative impacting all layers of the business has been initiated to further optimize

the ongoing business, to be ready for upcoming opportunities and to repel future threats.

The long term objective is to become an agile organization, which is able to take advantage of

changing conditions with a greater flexibility and in less time. Within the organization, agile is not

only seen as a project management methodology but rather as an organizational strategy

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affecting all departments, because the boundaries between them will fade away. The

transformation started and especially in the IT environment early signs are indicating progress in

the right direction. The digitalization is a major trend and an opportunity in the insurance as well

as in the banking industry. As an agile service provider, the FSI D would be in a great position to

leverage upcoming opportunities such as big data or digital payment solutions to generate even

more profits, especially since it has already the financial resources to make the necessary

investments.

The management team is fully engaged in this initiative and actively building the environment to

embrace the desired advantages of agile. The current system landscape is built upon a monolithic

backend system, which is highly complex and prevents a flexible product life-cycle. However, the

modernization has been started in order to build an infrastructure satisfying the evolving user and

business needs. At the same time, the organizational structure and processes are being adjusted

to reach the same level of flexibility. To name the most significant of those adjustments, a

dedicated department called service management has been established as a mediator between

the IT and LOB. The expectation is an increased interdisciplinary collaboration as an enabler for

internal and external customer engagement. Also, the backend modernization project is the first

project following an agile software delivery framework. This problem of defining the complete set

of project requirements in advance to an implementation kick-off while still being uncertain has

been eliminated in this pilot project. The requirements are defined and changed along the way.

In addition, the first project deliverables are creating confidence that a better time-to-market can

be reached.

Nevertheless, the transformation just started and FSI D still has a long way to go. Presently, many

employees find it difficult to step out of their comfort zone and overcome the required mindset

change. Managers are used to delegate rather than to create an environment for autonomously

working teams. Vice versa, many employees are afraid of taking decisions due to the criticism

they have experienced in the past for making mistakes. Employee empowerment is still a big

concern for the management and needs to be further improved. Within the agile pilot project,

regular retrospectives are hold to address concerns like this. It is important to continuously

improve in all layers of the organization, which is one crucial element of the agile mindset. The

next step on the roadmap towards an agile organization for FSI D is to dedicate a growing number

of resources to the projects, which will also help the transition of new features into operation. The

earlier stakeholders are involved, the more open they will be to change. This process could be

further streamlined with the creation of dedicated project space. However, the current office

situation does not allow an interdisciplinary working area due to the rapid growth of the company

in the recent past and the shortage of office space. In general, all changes in processes and

practices are introduced according to the principle ‘learning by doing’, which fits with the general

agile principles if the right adjustments are made along the way and it can lead the organization

into a sustainable future.

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6 Concluding Statements

Even though each of the four case studies consists individual elements, many fundamental

characteristics of those financial institutions, regardless of the industry and the size, are

overlapping. The following statements are based on actual findings, taken from the investigated

organizations in correlation to the existing literature on agile organizations as per chapter 3.

6.1 Agile – The Drive for Speed

“Let me be honest and say, we haven't measured it that way. So I do not have a

metric to prove that we have been faster. But just going with the stomach without

any data, yes, we have been faster.” (IT Area Manager, FSI C)

Authors writing on this topic name a range of benefits, advertising the application of agile

methodologies and practices. But according to the interviewed professionals, financial service

institutions are almost exclusively motivated by the potential increase in speed. Priorities can shift

on short notice, so that arising opportunities can be leveraged or mistakes can be corrected

quickly. Less bureaucracy leads to an increase in efficiency and frees up capacity for value adding

activities. Finally, iterative processes and incremental deliveries reduce the time-to-market of

products or services (IT Area Manager, FSI C). Particularly in today’s fast moving world, time

equals money and to miss out an opportunity can have a significant impact on a business. Banks

as well as insurance companies are profit driven institutions and even a slight increase in speed

can have a tremendous impact on their results (Head of Strategy, FSI A).

However, there are no quantifiable results of an increased speed within the investigated

organization due to a lack of comparability. Even though it is not supported by empirical evidence,

the overall tendency based on personal perception indicates a rather positive impact of agile

practices in terms of speed. With time passing by, this impression is expected to become stronger

as agility implies a strategic transformation, which is designed to achieve sustainable

improvements rather than short term results. Apart from the time advantage, agile practices

provide other improvements which are strengthening the already existing positive impression.

One interviewee is indicating that it would be too early to confirm an improvement in terms of time,

but the quality of the products developed, following an agile framework, increased due to the

continuous adjustments towards a more customer centric solution (Head of PM, FSI A). This is

coherent with an outcome and continuity driven approach as described in chapter 3.4.3.

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6.2 Agile – In Need for a Specific Mindset

„You call it governance model, we consider it as a leadership culture that

increasingly requires us to empower our employees through a leap of faith and

trust. […] Making a mistake is accepted. You can develop something which is

consisting bugs, but you have to have the courage to address those, as this is

what agile practices are about. Without such a culture, we will fail.” (CFO/COO,

FSI D) [Translated by author]

Changing processes, advanced responsibilities attached to newly established team roles and

potentially a set of different supporting tools, those are only a few variables that are changing with

the introduction of agile methodologies. Yet, the overall consensus across all interviewees is that

the most challenging shift needs to happen in the mind of all affected employees. Agile is a

framework which has to be filled with the necessary attitude and motivation. In order to reach time

advantages, decisions need to be made in a prompt manner in all levels of the organization. This

implies that those employees used to strictly follow instructions since many years are now

stepping out of their comfort zone to become accountable for their actions. To disburden

managing personnel by taking on responsibility seems to be more challenging for lower level

employees than the distribution of responsibilities based on trust for their managers (Head of IT,

FSI D).

The question arises whether agile and the related mindset change require a certain skillset. One

interviewee argues that it would be thoughtless to assume that the same team would fit into a

new agile framework as it is highly dependent on the given skillset (Senior Program Manager, FSI

B). The potential replacement of current employees in order to accomplish a cultural change

within an organization has been neglected by the publishing authors on this topic. Being

transparent, the general openness to change as well as the ability to collaborate are some of the

basic skills crucial for the success of agile practices. Moreover, it is questionable whether a person

can acquire those along the process. Without these skillsets, an organization is not able to

constantly question itself and thus reach continuous improvements, which is one of the core

principles of agile (Head of IT, FSI D). However, one observation made during the investigation

is that financial institutions who are actively striving for a transformation towards an agile

organization are incorporating professional support to achieve this change in mindset within their

existing staff. Even though the general premise of ‘learning by doing’ is followed in all

organizations, the use of structural and cultural guidance by professionals to pass on knowledge

underlines the significance of the transformation in the eyes of the top management and increases

the chances of success, as also indicated in chapter 3.5.1.

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6.3 Agile – Unleashing Technology

„Also we are moving towards a two-speed architecture, which creates a

sustainable infrastructure consisting of a stable core banking system and quickly

adaptable surrounding systems. […] You will reach a two-month release cycle for

major releases and monthly or even weekly cycles for minor releases.” (Head of

Strategy, FSI A) [Translated by author]

Technology can be seen as the connection between financial service institutions and agile, as it

is the focal point of interest for both. Within today’s financial service institutions, the discussions

started and opinions are differing, whether banks will remain banks or become primary technology

provider. This question has been actively discussed in the management board of FSI A (Head of

Strategy, FSI A). Regardless of the individual perception concerning this question, the shared

understanding of all interviewees is that technology is the driving force of every financial service

institution. In the digital age, technology is the fastest changing variable and consequently the

biggest opportunity. One of the possibilities to take advantage of it is to establish an agile

organization which is capable of quickly adapting to technological enhancements in order to

address rising customer needs when going forward.

This capability depends on the existing technology and system environment, which needs to meet

architectural and infrastructural standards so that it can be constantly enhanced through less

dependencies and exchangeable components. However, the existing systems and particularly

the CBS is complex and a replacement would require large investments and put the stability of

the entire system at risk. Attempts to eradicate the existing CBS as indicated in the literature

(chapter 3.5.4) led to ‘burned finger’ as reported by one interviewee (IT Area Manager, FSI C).

As a workaround, two of the investigated financial service institutions are building upon a two-

speed architecture. This approach is recommended as a feasible solution for small and medium

sized financial institutions (Head of Strategy, FSI A). Due to the complexity which has been

underestimated in the existing literature, the CBS remains mainly the same as no additional

functionality is added to the core and modifications are limited to the creation of standardized

interfaces. On the contrary and congruent with previously identified architectural requirements

(chapter 3.5.4), the surrounding components are structured in modular vertical system

architecture in order to enable distinct features and end-to-end solutions built in short iterations.

The exchangeability of system components is of special interest in order to reduce the overall

complexity and interdependencies of components. The results are autonomous products and

system lifecycles, leading to shorter release cycles of product related upgrades while the CBS

remains unaffected (IT Area Manager, FSI C). This technological reconstruction is the enabler for

a continuous exploitation of technological enhancements, which are driving the business.

46


6.4 Agile – Useful to a certain Degree

„Organization-wide, I would imply that agility is not required in all areas. But it is

useful in areas where certain targets have to be reached particularly those

impacting the customer experience in accordance with our strategic direction.

One-hundred percent agility is not applicable for a traditional bank, because there

will always be counteracting conditions. This applies for us and for every other

bank in the same way.” (Head of IT, FSI A) [Translated by author]

Most organizations in the financial service industry seem to be familiar with agile methodologies

and practices. It has gone far enough to be considered as an industry-wide trend, as stated by

one of the interviewed professionals (Head of Strategy, FSI A). Nevertheless, critical voices exist,

challenging the application of agile practices in certain areas of an organization. Typically, teams

conducting highly repetitive or strictly controlled activities are referred to as incompatible (IT Area

Manager, FSI C). For example, the annual or quarterly financial reporting is required to undergo

a predetermined process in order to pass the supervisory examination. Within this process, agile

practice would not add any vale or could even be harmful and lead to a rejection (Head of

Strategy, FSI A). Also, rather emergent or event based activities such as debt collection or

software operations will remain in the traditional structure, due to the fact that activities are difficult

to foresee and prioritize.

Therefore, the co-existence of multiple methodologies needs to be coordinated. Several

interviewees reported that simultaneously running methodologies have been one of the biggest

challenges, particularly at their intersection. Even though agile will not be applied in certain areas,

teams have to be able to take over agile deliverables, which primary refers to the transition from

product development into operations and maintenance. The lessons learned, taken from agile

pilot projects within the investigated financial institutions, are an earlier involvement of affected

stakeholders. Thus, a potential issue can be addressed in advance to avoid critical situations

during the transition or once the deliverable is running in the production environment. This

learning relates to the known DevOps practice, which combines development and operation

teams to one unit (chapter 3.5.3). According to the conducted interviews, managers would like to

maximize the number of people dedicated to projects, as that is where agile practices are most

beneficial.

46


6.5 Agile – Requires Discipline

„From my perspective it is not decisive whether you have a planned and

budgeted portfolio. It is not contradicting. You have to accept restrictions such as

budgetary limitations but you can be flexible within the given frame.” (Senior

Program Manager, FSI B) [Translated by author]

Being open, flexible and collaborative are guiding principles of agility, but you have to be

disciplined in order to take a real advantage out of them. It starts with the selection of the right

practices, which can be adapted to meet team or company specific needs. However, it would be

the wrong approach to customize methodologies and select practices based on convenience

(cherry picking). Therefore, the first iteration within a newly setup agile project is recommended

to strictly follow the ‘recipe” of the chosen methodology. Taking this as a starting point, the team

can adjust the given processes using the regular retrospectives (Senior Program Manager, FSI

B). Decisions towards process improvements, in line with the previously described agility within

agile (chapter 3.2.2.), can then be discussed and taken as a team.

Discipline is also the key to align agile methodologies with budgetary limitations. All interviewed

professionals agree that managing budgetary restrictions is an indispensable requirement for all

organizations in the financial service industry. FSI A already adapted their budgetary planning

processes to enable agility while staying within a given budget. On a quarterly basis, projects are

reevaluated and resources are distributed based on the highest priorities in terms of business and

strategic value. As a result, the highest ranked projects are founded throughout the year even

under changing circumstances, whereas the planned budget will not be overrun. However, this

also requires the discipline to make decisions and reject or postpone potentially profitable

projects, once they dropped in the priority ranking. Managers have to stay disciplined and deal

with the resulting uncertainty of running out of resources due to a shift in priorities (Head of

Strategy, FSI A).

46


7 Recommendations & Open Topics

Agile methodologies and practices provide great advantages over traditional approaches in

theory. In consideration of the fast moving environment, there seems to be no other option for

financial institutions than to follow that lead. However, reaching those advantages in practice is

challenging and cannot be underestimated. The study points out that a transformation requires a

cultural adaption as its scope is not comparable with the introduction of a new tool. In order to

undergo a transformation which impacts the entire organization, confidence among all employees

needs to be established so that the changed strategic direction is the necessary next step for a

sustainable future of the organization. Even though it is a large scale transformation, it will start

on a small scale with the potential to grow.

At this point, the first crucial strategic decision needs to be taken and the best suited project needs

to be selected in order to pilot new practices. Should it be a large strategically important project

and who should manage it? Am I able to take the risk of failing? There are certain conditions

favorable for agile practices such as unclear requirements, customer involvement or a

manageable impact of interim mistakes. But as of today, there is no clear guidance on what kind

of project to start with. No matter what project it is, having an internal reference showing an ‘agile

success story’ can have a tremendous impact on the confidence level and drive towards an agile

organization.

In addition, the definition of an agile organization or organizational agility should be discussed to

identify given boundaries. An agile organization does not imply that all departments within an

organization have to be structured in SCRUM teams. Taking the example of a sourcing

department, agility could imply to create a frame, which allows to flexibly switch between different

service providers without any contractual long term obligations. Agile is useful to a certain extent,

but where exactly is the limit? As pointed out in the result section, agile practices are incompatible

in certain areas, but this might be limited to the commonly known agile practices. The guiding

principles might be valuable in all areas of an organization - they just have to be applied in a

different way.

Lastly, as indicated in chapter 3.4, the question remains whether or to what extend agile

methodologies and practices are improving a running business. The largest gap within this field

of research is the missing empirical evidence for the improvements related to agile. Agile is a

dynamic procedure based on iterative processes, leading to unpredictable results. Priorities and

consequently activities are shifting over time. In contrast, the traditional sequential approach is

rather static, which makes it simple to measure against the project management triangle

consisting of time, costs and scope. However, a project delivered in time, scope and without cost

overruns does not guarantee success in terms of increased revenue, if the actual product demand

falls short of its expectations. Measuring success of each agile and traditionally managed projects

just by themselves is already rising concerns. Comparing them with each other becomes even

more complex and the question after reliability and validity occurs.

This issue is not caused by a lack of effort, as shown by the Standish Group which analyzed

projects in hundreds of companies based on the personal perspectives of their managers

46


(Chapter 3.4). It is rather the non-existence of an appropriate research methodology in order to

eliminate any impacts of individual subjective opinions. This research study states the difficulties

to measure the improvements even within an individual organization, which makes it even harder

on an industry level. Thus, this research project was not designed to fill this gap, as the research

objective goes beyond the IT or project perspective and addresses the new phenomena of an

agile organization.

However, the IT remains the biggest and most challenging area within financial service institutions

and quantifiable evidence on the advantages of agile could have given this research study a

significant push. This potential gap is an opportunity for further research studies. But even without

the support of statistical results, most indicators taken from the secondary as well as the primary

research of this study are reporting a positive progress with an increase in agility, which is

underlining its importance for successful financial institutions in the future. Agile provides the

ability to respond in a highly dynamic environment and potentially improves the delivery speed,

the execution ability as well as the overall output quality of organizations within the financial

service industry.

8


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Author

Nico Malena is Transformation Manager at Core. As a graduate

business manager, he accompanies clients from the banking and

insurance sector in complex change projects and supports them

from strategic positioning to the go-live of innovative data systems.

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About Novancia Business School Paris

Novancia aims to educate a new generation of managers possessing a dual competency in

entrepreneurship and commerce, who will be experts in "business development".

Novancia suggests an original educational model, with a grande école curriculum in two stages:

the Bachelor (accessible directly from secondary school) and the Master 1 (open to students who

have completed at least 3 years of postsecondary education). Bachelor students may spend up

to 12 months in internships over the 3 years. They may spend their third year working and studying

under the apprenticeship model. From their first year students will become familiar with

intercultural issues through study abroad and international internships.

Another feature of the school is project-based learning. Based on practice and on diverses

situations (actual case studies, creation of hypothetical companies, projects on business

development abroad, completion of real assignments for businesses and nonprofits, etc.).

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About COREinstitute

The COREinstitute is a think tank studying the dynamics and systematics of technologically driven

transformations in industries that put emphasis on IT with regard to value creation. In order to

shape the changes of technology, we analyse the cause and effects of complex IT transformations

and develop solutions together with decision-makers from within the industry, politics, and

science. The results of our research are provided to the broader public as comprehensive

publications, individual studies, and lectures.

http://institute.core.se/home/

Disclaimer

Trademarks are the property of their respective owners. The logos shown are owned by the

respective companies. COREtransform GmbH does not hold any rights to the logos. Logos used

are for scientific purposes only. The author made an affidavit to the university as part of the

examination. The copyright remains with the author. COREtransform GmbH does not assume

liability for infringements of copyright or negligent infringements by the author in connection with

the thesis.

http://institute.core.se/home/

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COREinstitute CORE SE

Am Sandwerder 21-23 Am Sandwerder 21-23

14109 Berlin | Germany 14109 Berlin | Germany

https://institute.core.se https://www.core.se

Phone: +49 30 26344 020 Phone: +49 30 26344 020

[email protected] [email protected]

COREtransform GmbH COREtransform GmbH

Am Sandwerder 21-23 Limmatquai 1

14109 Berlin | Germany 8001 Zürich | Helvetia

https://www.core.se https://www.core.se

Phone: +49 30 26344 020 Phone: +41 442 610 143


COREtransform Ltd. COREtransform MEA LLC

One Canada Square DIFC – 105, Currency House, Tower 1

London E14 5DY | Great Britain Dubai P.O. Box 506656 I UAE

https://www.core.se https://www.core.se

Phone: +44 203 319 0356 Phone: +971 4 3230633


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