As economies reeled and the crisis engulfed global markets in 2008, leading financial institutions rushed to expand efficiency initiatives, looking for a path back to prosperity. Companies around the world launched “process reengineering” programs aimed at achieving quick productivity gains and cost savings. Many programs were based roughly on the innovative lean-manufacturing principles pioneered by the Toyota Motor Company.
These first lean forays by financial institutions typically focused on cost-oriented process redesign, sourcing, and outsourcing. In many cases, companies enjoyed a degree of initial success, increasing productivity, and capacity. Some firms gained breathing room from the relentless pressure to cut expenses while simultaneously trying to win new clients and expand market share.
The gains proved ephemeral, however. Financial companies discovered that the initial wave of so-called lean programs had been too limited—in scope, endurance, and commitment from top management—to drive sustained improvement. Companies had revamped processes but stopped short of holistic efforts across the organization. They failed to create new operating models and cultures able to sustain their initial hard-won efficiencies.
Although the initial crisis has abated, turbulence and uncertainty remain—and financial institutions struggle in a “new new normal.” Capital and liquidity are scarce, and the cost of credit risk is increasing. In this two-speed world, emerging economies enjoy robust expansion while developed countries confront slow-growth economic recovery. At the same time, institutions face sustained pressure from regulatory reform, shifting customer demands, boardroom scrutiny, disruptive competition by new delivery channels, and complaints from overworked employees.