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Opportunities for Action in Financial Services Transformation in Financial Services: How to Load the Dice in Your Favor
Opportunities for Action in Financial Services
Transformation in FinancialServices: How to Load the Dice in Your Favor
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Transformation in Financial Services:How to Load the Dice in Your Favor
Financial services companies today are increasinglyfinding that they must transform critical elements oftheir businesses. As a result, the ability to managesuch efforts quickly, effectively, and confidently hasbecome an important source of competitive advan-tage and shareholder value. The problem is thattransformation, by its very nature, stretches organiza-tions—often pushing skills, resources, and comfortlevels to their limits.
Compounding the challenge is the fact that there isno widely accepted way to gauge if a transformationprogram—concerning, for example, product distribu-tion, back-office operations, or bank branch revitaliza-tion—is set up for success, failure, or mediocrity. Dif-ferent managers and employees are bound to view thesame program differently. At the same time, dozens ofchange management gurus have declared differentactions to be the absolute key to success.
The varying perspectives on change are not necessari-ly incorrect; on the contrary, many have much to of-fer. But given the resource constraints present withinfinancial institutions, the central issue is really a mat-ter of focus. Which conditions actually govern thechange process? Which factors matter most? How dothese conditions and factors vary among differenttypes of change initiatives?
Our analysis—based on The Boston ConsultingGroup’s experience and research, including studies of more than 200 transformation efforts in financialservices and a broad range of other industries—re-veals that a few common elements determine the
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outcome of almost all change projects. Success or fail-ure ultimately comes down to a combination of thefollowing:
• The duration of the project or the time betweenmajor review milestones
• The performance integrity of the project team
• The organizational commitment to change, specifi-cally that of senior managers and local-area staff
• The additional organizational effort required forimplementation beyond usual work requirements
When taken together and considered properly, thesefour elements offer a litmus test for assessing theprobability of success of any given transformation proj-ect or set of projects. What is more, they can helpshine a spotlight on some very specific actions thatcan improve the probability of success before imple-mentation even begins. Using these elements, man-agers of financial institutions embarking on changeprograms can in effect load the dice, stacking theodds in favor of success.
DICE: The Four Key Elements of Change
The above elements, which we refer to as DICE,1
together constitute a simple continuum from projectsthat are set up to succeed to those that are set up tofail. Projects at either end of the spectrum are easy toidentify. A short project—led by a highly skilled team,
1. DICE is a registered trademark of The Boston Consulting Group, Inc.
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championed by senior management, implemented in an area receptive to change, and requiring littleeffort beyond the usual workload—is clearly set up tosucceed. By contrast, a lengthy project that is alsoweak when it comes to the other elements will mostlikely fail.
In reality, most change projects in financial servicesoccupy the middle ground where the probability ofsuccess is far more difficult to determine, particularlyin the early stages. For example, if a project is shortand has a great team in place, but senior manage-ment commitment is unclear and implementationrequires significant additional effort from a reluctantstaff, what is the likelihood of success? We have foundthat the answer lies in a thorough consideration ofeach of the four DICE elements. For instance, withregard to duration, the key is actually how well learn-ing milestones—providing clear opportunities to as-sess progress and make adjustments—are structured,rather than actual project length. Similarly, projectteams must not only possess sufficient technical skillsand a capable team leader but also show strong cohe-siveness. (For more detail on points of considerationfor each of the elements, see Exhibit 1.)
In comprehensively evaluating the four elements, it isespecially helpful to use a standard scoring mecha-nism—in essence, an objective framework for makingwhat are inevitably subjective judgments. Such amechanism ensures that projects will be evaluated ina consistent manner across the organization ratherthan handled differently depending on the viewpointof specific individuals or departments. A scoring sys-tem also makes it possible to combine the ratings ofthe four key elements mathematically, thereby estab-lishing a unified project assessment. By comparingproject scores with a sufficiently large set of past expe-riences, simple statistical analysis can be reliably and
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quickly used to predict the likely outcome of anyproject.
BCG has developed a formula that generates an over-all DICE score ranging from 7 (best) to 28 (worst).When we calibrated the results of our database ofchange projects, representing more than 20 millionperson-hours of companies’ experiences, the analysisgenerated a clear and compelling distribution of out-comes. Indeed, the DICE methodology allows us toassess objectively whether any given project falls intoone of three broad categories: win, meaning the proj-ect is statistically likely to succeed; worry, meaning theoutcome is unpredictable; or woe, meaning the proj-ect seems preordained for mediocrity or outright fail-ure.2 (See Exhibit 2.)
The time (DURATION) until the project or the next learning milestone is completed• A learning milestone is a predetermined stage in implementation when project strengths, weaknesses, and progress against key indicators are formally assessed
The performance INTEGRITY of the project team, including• Capable and respected leadership• Clear objectives• Appropriate resources and organizational skills
The COMMITMENT to the change, including• The attitudes of the local area undergoing the change• The visible commitment of senior management
The additional amount of local EFFORT required during implementation
• The ongoing effort required to maintain existing operations, while simultaneously implementing change, is a critical and often over- looked consideration
D
I
C
E
SOURCE: BCG analysis.
Exhibit 1. The Four Elements of DICE
2. The DICE formula and supporting database are BCG intellectualproperty, with a U.S. patent pending. For more information aboutthe DICE methodology, please contact the authors.
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To be sure, in calculating DICE scores, not everyoneevaluating the same project is likely to produce identi-cal assessments. But far from diluting the value of theexercise, these differences in scoring are an impor-tant aspect of using the DICE tool. The ongoing dia-logue provoked by varying opinions creates debateregarding such questions as, Why do we see the proj-ect in different ways, and what can we do to ensurethe project will succeed?
Using DICE to Win
Discussions among senior managers and project teamsbased on the elements of DICE—and what the assess-ments say about the likelihood of a project’s success—have proved to be extremely useful for financial insti-tutions. Take the case of a large retail bank that under-
Highlysuccessful
Actual outcome 1 2 5 3 7 1 4 7
1 1
1 12 4
1
Mediocre
Highlyunsuccessful
WIN6
9
1 5 6 3 1 1
1 1
15 9 2 9
1 1 2
4 1 9
1
WORRY
1 8 5 1 1
1 1
3 1 6 2 2 2 1
1 2 2 2 1 2
1 1 15 5 6 1 13 4 1
1 1 1 1
1 1 1 1 2 5 1 3 1 2 1
DICE score7 8 9 10 11 12 13 14 15 16 17 18 19 2021 22 23 24 25 26 2728
WOE
SOURCE: Analysis of DICE database.NOTE: Superscribed numbers represent the number of projects withthat particular DICE score and actual outcome.
Exhibit 2. DICE Scores Range from Win to Woe
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took a total restructuring of its back-office operations.At the project’s outset, the bank’s managers agreed onthe rationale for the change and on specific goals. Atthe same time, each had a different view of whetherthe bank could realistically achieve the objectives,which would require major changes in processes,behavior, and organizational structures. But bringingeveryone together long enough to air their opinionsand sort out their differences prior to commencingbroad implementation proved to be nearly impossible.Quite simply, and not surprisingly, people were justtoo busy to spare the time.
A decision to analyze the project using DICE and thejudgments of key stakeholders and senior managerscondensed a debate that would have required at leasttwo full days (and therefore probably would neverhave happened) into a highly productive two-hour dis-cussion. The focus on the four key elements generateda clear picture of the project’s fundamental strengthsand weaknesses.
For instance, the restructuring would take more thaneight months to implement and had no clearly de-fined review-point milestones. Also, although the proj-ect team’s performance integrity was “good” andsenior management showed reasonable commitmentto the effort, there was room for improvement in bothelements. In addition, the back-office work force wasvery resistant to change, with more than 20 percent ofthe staff facing a probable job loss as a result of theproject. Furthermore, managers and back-office em-ployees agreed that the back-office staff would need tomuster an additional 10 to 20 percent of effort, on topof current commitments, throughout the course ofimplementation. On our scale, the project scored a21—well into the woe zone.
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The good news was that the assessment and scoringexercise led the managers to a clear view of what stepsthey could take to increase the odds of success—before they started the project rather than weeks ormonths into implementation. For instance, the bankdecided to split the project timeline into two parts.Doing so allowed the bank to schedule meaningfulreview points more frequently and to maximize up-front learning before it took on the most complexaspects of the transformation.
In addition, to improve the commitment of the back-office staff, the bank decided to devote more time toexplaining why the change was necessary, how itwould be implemented, and how the staff would besupported during the difficult times ahead. The insti-tution also took a closer look at the people whowould be involved and reconfigured some of the proj-ect teams—particularly the leadership. Finally, seniormanagers made a concerted effort to show their owncommitment. Taken together, the bank’s overall set ofplanned actions shifted the project’s rating to an 11—well within the win zone. Ultimately, the change proj-ect was a major success.
Another example is that of a leading retail bank thatundertook a large transformation initiative involvingits sales force and IT department. The goal was todeliver updated, comprehensive sales data to frontlinesalespeople and managers on a weekly basis thatwould enable fact-based discussions to take place onsales force effectiveness and progress toward specifictargets. With the bank’s sales-and-service personneltotaling more than 10,000 people, the task of chang-ing sales force behavior—and increasing transparencyand accountability—was daunting, to say the least. Itrequired significant changes in technology, meticu-lous tracking of data, and substantially improvedfocus on achieving real, confirmed sales.
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When a group of roughly 15 people—mainly seniorand middle managers, with a few outside contrac-tors—first sat down to formulate DICE scores, theproject fell into the middle of the worry zone. Therewas also wide variance in how individuals perceivedthe bank’s strengths and weaknesses in each of thefour elements.
Among the steps taken to shift the score into the winzone were tightening progress milestones (over aplanned project length of 12 to 18 months) and step-ping up efforts to get the right individuals onto theproject team at the right time. To reinforce the bank’scommitment to the initiative, senior managers beganattending project meetings more frequently—provid-ing guidance, intervening when warranted, andbroadly communicating their support of the project.Aided by these adjustments, the bank has enjoyed asignificant degree of success in the project (which isstill in progress)—much of which it attributes to usingthe DICE framework.
It is worth noting that this particular bank decided toreformulate the project’s DICE scores on an ongoingbasis—not just before but during the implementationperiod—in workshops held roughly every six weeks.These workshops proved to be highly effective atbringing problem areas to light and designing actionsto be taken in the next phase. The bank reports thatthe resulting candid discussions about varying percep-tions of progress in the four DICE elements—oftenheld in an after-work, convivial atmosphere—havebeen invaluable in getting to the heart of the matter.
Taking Luck Out of the Equation
Many commentaries on organizational change ap-proach it as a linear progression—a predetermined
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series of tasks and events that can be completed andticked off. In reality, the ways in which institutions—financial and otherwise—behave and respond tochange are much more analogous to what happens inliving systems: progress is nonlinear, dynamic, andsubject to multiple feedback loops. Organizations,after all, are dependent on people, who unfortunatelyoften lack a common, pragmatic language for under-standing and analyzing joint projects. The result, inour experience with the change process, is that peo-ple and organizations alike are too often influencedby chance.
To be sure, an approach based on DICE is not a silverbullet. It augments rather than replaces other toolsthat may already be applied in understanding andmastering large-scale organizational change—whenmajor transformation is indeed what is necessary. Wehave found, however, that an approach that leveragesthe elements of DICE, along with the frank dialoguethe framework helps create, ensures that energies arefocused on the most critical factors of success. Indoing so, the approach allows organizations—in plan-ning as well as in deed—to reduce the influence ofluck and diminish the overall risks inherent in any sig-nificant change initiative.
In the end, if an organization has the right teamsinvolved and influential leaders clearly backing them,if employees are not overwhelmed with too muchwork, if objectives are clear, and if transformation ismoving at the right pace and meeting explicit mile-stones, then the chances of success are muchimproved.
Remember that competition in financial services—beit in retail, corporate, or investment banking; asset orwealth management; insurance; or any other seg-
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ment—is no different than any other type of competi-tion. Skill, strategy, and execution are essential. Andto improve your odds of winning, it helps to load the dice.
Perry KeenanAlan Jackson
Jorge BecerraHarold L. Sirkin
Perry Keenan is a vice president and director in theAuckland office of The Boston Consulting Group and is the firm’s global topic leader for rigorous program manage-ment and implementation. Alan Jackson is a senior vicepresident and director in BCG’s Sydney office. Jorge Becerrais a senior vice president and director in the firm’s Miamioffice. Harold L. Sirkin is a senior vice president and director in BCG’s Chicago office and head of the firm’s global Operations practice.
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© The Boston Consulting Group, Inc. 2004. All rights reserved.
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