Innovation. Transformation. Digital…I could go on, and on…and on. Technology-linked advances are dominating the change agenda and rightly so. Nonetheless, where larger, more established institutions are concerned, the renewed focus on cost and efficiency has become a distraction from the purpose of putting customers first. As a consequence, the customer-driven ecosystem is challenging the relevance of legacy operations more than ever.

Over the past five years, the pressure on banks to fend-off the challenge of disruptors through evolution and innovation (particularly digitally) has intensified. I don’t know of any institution that is not undergoing some form of ‘digital transformation’. Much of this is positive work: enterprising, ambitious and, above all, necessary. However, much of it is also a topical veneer applied to traditional business change in an effort to imply relevance.

There are few banking institutions or CEOs that do not grasp the imperative for change. Nonetheless, for the majority, true transformation (digital or not) remains elusive. Business change has, traditionally, been tactical, incremental and iterative. Ultimately, risk averse. However, the birth of more nimble disruptors that have swarmed around evolving customer needs has drawn attention to the relevance of larger, more established institutions. Simultaneously, traditional customer loyalties are being challenged by genuinely differentiated options. The result: piecemeal change alone is no longer enough to remain competitive, let alone relevant.

The problem more established institutions face is how to simultaneously reinforce their core offering to remain current, while adapting to new demands and delivering acceptable shareholder returns. I liken it to asking a Formula 1 team to implement their end of season updates while the car is racing: adapt the front wing, the spoiler, the tyres and other crucial engine parts without a pit stop. Inevitably, the car may have to slow down to speed up.

Compliance-orientated obligations aside, more recent change has focused on cost and efficiency. Efficiency is, unquestionably, crucial for the long-term sustainability and viability of businesses, particularly those under increasing margin pressure. However, to continue the analogy, evolution is about more than speed and efficiency. An efficient bank is not necessarily a relevant bank.

Similarly, heritage (or legacy) does not equate to irrelevance. Indeed, in my opinion, quite the opposite. While many institutions focus their efforts on competing with disruptors or, increasingly, non-traditional participants (such as Apple and Amazon), I believe heritage should continue to be the bedrock from which established institutions build.

Where new entrants boast various differentiators, few can compete with the customer base (and the knowledge that comes with this), infrastructure, reach and product set of long-standing banks. What is crucial is the ability of traditionally less flexible institutions to think more broadly about how these assets can be configured in a business model that retains relevance.

Ultimately, this will be branded a ‘strategy’. However, in my view, a strategy is only as strong as the firm’s cultural ability to optimise their operational infrastructure, engage with customers and, most importantly, embed a growth mindset, in which change is cherished and failure leveraged as a means from which to learn and adapt further.

In the past year, we have been working with two of the UK’s most established banks in the field of data innovation. Exploring new methods to harness data has, obviously, been central to this work. However, what struck me is the power of data and scenario modelling to help refine assets and capitalise on existing offerings, rather than simply focusing on what’s new.

As I stated in my first post, at Grant Thornton we’re committed to delivering differentiated and innovative solutions to support our clients’ aspirations. At the same time, we’re not forgetting our heritage: using our deep experience of financial institutions, risk and regulation to affect change. The message, both for us and our larger clients, is that relevance and innovation can be achieved with what already exists if you are prepared to put it together in a new way.