The Importance of Simplifying Your Tech Stack

As we reflect on a year of great change and volatility, we should take time to evaluate the organizations that thrived and those that did not. Obviously, some that did not, or will not, survive are in industries like hospitality that had no chance, but for those in other industries, how well did they adapt and what was the common denominator?

While COVID-19 required organizations to innovate, respond, and react all the while protecting themselves from new threats, it wasn’t the only story. We saw some of the worst breaches in history. We dealt with political turmoil and an uprising against racial injustice all while battling a global pandemic. Some organizations fared well and some, not so much.

What set them apart? It starts with leadership. Not leadership in the sense of guiding a company’s vision or strategy. I am referring to leaders that understand change management and recognize the need for turnaround strategies to help an organization respond to challenges in order to grow.

According to a report from McKinsey: “Financial Institutions should carefully draw on the lessons that the current situation offers and use them to inform their digital transformation, while building a much higher degree of both operational and financial resiliency.”

In times of volatility, businesses need leaders who can make quick decisive actions and lead their organization to respond and react rapidly. But, what if your organization can’t respond?

Unfortunately, this is a common issue for businesses of all sizes in most industries especially when it comes to operations and infrastructure. People like being comfortable. They like understanding the systems within which they work. Due to a lack of clarity of vision, understanding of options and fear of the unknown or misunderstood, many organizations are stuck with the infrastructure and software that are neither nimble nor responsive, mostly because it is complex and has evolved untamed over time.

Traditionally, many companies have allowed business unit leaders to pick technology products and build processes in isolation. Financial institutions are not exempt. For example, the lending team needs data products and they want automation tools to close loans faster, so the marketing team buys automation tools and the compliance department buys risks software, while the cybersecurity team buys the best in breed products in every category. This goes on and on, all in the name of automation, big data, productivity.

But those decisions, while well intentioned, create a complex web of systems, data and processes that are difficult to manage, connect, and secure. They require a high overhead to keep working, often requiring far more FTE’s and dollars than they are worth. Those tools are often underutilized, generally using about 25% of the functionality they provide and overlapping with many other products in the organization.

As financial institutions evaluate efficiency ratios, it is critical to analyze infrastructure and software tools in place and the return on investment, specifically use, management, and effectiveness.

In addition to the impact a company’s infrastructure and software stack can have on profit efficiency, for most legacy infrastructure is an additional burden or the cause for unnecessary risk. This complex web of tools and legacy infrastructure can be difficult to understand and control in the case of a breach or other unplanned crisis, making an organization slow to respond, which could lead to a domino effect of negative outcomes and missed opportunities while more lean and prepared organizations thrive.

The Solution = Simplify Your Stack      

Start with a business case and identify a critical process within your organization that you believe experiences friction and could be more efficient - often for financial institutions that is one that drives revenue such as the loan process. Then, map the process to see where the most friction exists and how technology helps or hinders the productivity throughout.

Nimble, streamlined organizations can respond and react quickly to improving, evolving or adding processes. Modernized infrastructure, lean software stacks and clear policies and procedures make it easy to communicate, manage and adapt when in crisis. Simplicity requires bold leadership. Leaders who recognize that uncomfortable or unfamiliar, but necessary changes to establish a simple, manageable set of infrastructure will help the organization pivot, reduce risk and adapt for growth.

Simplifying your stack means greatly reducing the number of systems in place and requires strategic systems thinking. Often, when leaders push for simplicity they are met with the “best in breed argument”. The business unit leader will suggest that the preferred tool, is the best tool available and the business must have the best tools. While this may be true, having the best tool for every single function is not as important as having the most lean and simple organization that is agile with the ability to respond and react whenever needed.

How can you simplify?

Review your current stack and ask tough questions - what does this cost? who uses this? how is the experience for the user? what are the goals and business outcomes for using this? can we further utilize what we already have before adding more?

Often you’ll find that people are using manual workarounds to avoid friction in a flashy new tool! Technology for technology sake can hold you back.

Identify the software platforms that are already performing well and can add more value if further utilized, and shed those that don’t. For example, many organizations use platforms like Microsoft 365 but will spend months researching and selecting communication platforms like Slack and Zoom when much of that functionality already exists in M365. Does it make sense for a mid-sized FI to have multiple communication tools? The infrastructure that powers your stack is just as important and should be scrutinized in the same way. Computing platforms like Azure or AWS are available, accessible and can provide real-time resources to match your production needs and drive efficiency.

Securing the platform cannot be achieved alone in such a volatile, dangerous climate. Frankly, staffing a 24/7 cybersecurity operation that matches your budget and risk tolerance doesn’t make sense for a bank. It is critical to select a cyber partner to outsource and manage your security in a proactive way. Establishing policies that enforce the focus on a core set of tools and platforms and educating your people to help your organization operate efficiently and responsively.

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Efficiency not only reduces risk and makes your organization more nimble – it also makes you more profitable. When you simplify your stack, you reduce overhead, improve productivity and are prepared to respond to any planned or unplanned change.

For more content like this, Subscribe to our Blog below and listen to Think|Stack CEO, Chris Sachse’s recent appearance on the Banking on Experience podcast - Episode 49: Technology, Process, & Innovation: Why FIs Are Lagging

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