To drive innovation, you need to allow failure, says Standard Bank's Josef Langerman

Josef Langerman, Group Head: Software Engineering and Organisational Change, talks about new ways of working at scale.

“All of the conventional wisdom for large IT according to textbook practice was wrong – not only for Standard Bank but in the financial industry,” says Josef Langerman, Group Head: Software Engineering and Organisational Change at Standard Bank. Langerman, also an associate professor at the University of Johannesburg, oversees software development for the bank. He spoke to CFO South Africa about the changes they’ve implemented at the bank to become agile, and new ways of working at scale. “What’s interesting is how we transformed an organisation of 6,000 IT professionals to work in a way that enables a digital revolution.”

 

Needing to change

“Three to four years ago, the challenge within the bank was that our cost to produce one little piece of functionality, one little piece of software, was about three times more expensive than elsewhere in the market. Getting software to market took 12 months. We needed a way to change this. At that stage, I’d been teaching software engineering for eight years. We did everything according to the textbook at Standard Bank, but it didn’t work. This made it interesting. Myself and two colleagues went overseas to visit Silicon Valley companies and saw how they worked. On the flight back, I realised everything I thought was true and what I taught, was false, and we needed to start with a clean slate. That was the big realisation.

“We started with a three-pronged approach to turn IT around. The first step was to change the culture of the organisation; the second was to change our process and how we went about working; and the third was to build a community.”

 

The three-pronged approach

“The first step involved a cultural transformation – we needed to loosen things up and bring fun and joy back to unleash creativity. We started with a strapline: you cannot roll up your sleeves in an Italian suit. Part of that became a corporate transformation – we needed a new culture for big corporates. The second step – changing our process and how we worked – was to make us more agile. Traditionally within IT you have the user with his requirement, who goes to a business analyst who writes it up in business talk, then it goes to the architect, then to a designer, then to a programmer for coding, after which it ends up at a tester for testing, and then finally with the customer. Because we focused on resource optimisation and utilisation, some of these teams sat in different locations. Now, everybody sits together and works together, and we develop software every couple of weeks, small things, rather than in big chunks. We rolled this out across 6,000 people, and became a worldwide reference site because we did it at such scale. This is now spilling over into finance, who’ve also moved to agile. The third step involved building a community. A common problem in South Africa is that we work in silos. I realised that for Standard Bank to win in these new ways of working, the whole industry needed to change the way it works, because in a way, we all circulate the same staff. We can only win as a bank if we win as an industry, and we can only win as an industry if we win as a country. I spoke to all the CIOs of the big banks and said let’s work together on new ways of working. We had our first conference three years ago, and said only banks can talk to banks to talk about how can we all improve. We had one earlier this year that saw more than 400 people attend. It followed the mantra of ‘how do we build South Africa?’, because then you have jobs moving back to South Africa. Standard Bank created 200 jobs by moving a portion of its testing work back from India.”

 

 

Overhauling education

“At this point, we all realised our education system needed to change; the curriculum needed to change. We invited lecturers to come and spend time with us and see what it’s like, which started changing the curricula. We recently had a Fulbright scholar here from the US looking at how we are doing things. This is amazing because, between academics and industry and the banks, we are starting to organise ourselves towards building a better industry and putting IT in South Africa on the map again. We have ‘come and sees’, where international companies come and see what we’re doing here. International banks are coming here to see how to do these agile things and work at scale. That’s incredible.”

 

Finance leaders take note

“Agile is not only an IT thing – it’s now a whole business management philosophy. We realised quickly that you cannot be agile without your HR and supporting functions, as well as finance, becoming agile too. Finance has their own flavour of this – Beyond Budgeting. So, how do we change finance to become better? By having continuous budget cycles rather than yearly. Also, where finance partners support their IT partners, as the functions change to become more agile, so they need to adapt to these things.”

“It also simplifies finance because you’re not doing bottom-up budgets for the following year. Because, when you hit next year, the market has moved. So, how do continuously keep these processes up to date? For example, some of the cultural aspects of this agile way of thinking include how you allow for failure, because in this new culture you’re going to experiment and make some mistakes, and you don’t know what will pay off and what not, and if you’re in an organisation where failure is victimised, nobody will ever be innovative. To drive innovation, you need to allow failure. In this type of brave new world, you need to do that.

“The changes we’ve made enable products to get to customers quicker and cheaper because internally, for example, our unit costs have been reduced by 300 percent. With our cost base lower, things are cheaper for customers. Also, the velocity of getting things to customers has improved.”

“I think what we’re going to see in the larger finance industry in South Africa is that almost every bank I know of is on an agile adoption journey. This will affect how we budget, prioritise, and improve investments within the IT community. As a CFO, there processes needed to adapt for these new ways of working. To prepare, CFOs must look at some of the management frameworks for these, for example, Beyond Budgeting and agile.