Across financial services, transformation portfolios are stretched thin. Most firms spend heavily on foundational delivery through managing regulatory change, remediation, and BAU digital plumbing, while also trying to drive real transformation through product innovation, improved customer experience, and operating model evolution.
Both types of work are necessary. Striking the right balance is where complexity sets in.
The Imbalance between Foundational Change & Real Transformation
Too often, foundational work dominates budgets, but its value remains invisible to customers and investors. Meanwhile, real transformational change – the type that delivers growth, differentiation, and shareholder value – is underfunded and underestimated in terms of cost and complexity, resulting in delays and dissatisfaction.
“Most Financial Services firms target spending about 80% of their technology budgets on optimization and maintenance and 20% on transformation.” (Kyndryl)
This is an easy trap to fall into. Whilst foundational activities are urgent and mandatory, they also reduce capacity for genuine transformation. Without deliberate portfolio management, firms are stuck in a cycle of safe but slow change, remaining compliant but with stagnant growth.
Barriers to Achieving Balance
- Resource competition: Both types of change pull on the same limited pool of budget, talent, and leadership attention.
- Mandatory work demands focus: Fixed deadlines and clear regulatory requirements make mandatory change more straightforward to prioritise.
- Legacy constraints: Outdated systems and technical debt drive firefighting, which consumes time and budget for innovation.
- Transformation complexity: True innovation requires new capabilities, cross-functional collaboration, cultural change, and sustained executive commitment, making it harder to plan, execute, and fund.
Getting your Portfolio Strategy Right
An effective approach can be to establish a central oversight function – for example, a Transformation Office – to give leaders a clear view of all major change initiatives. This visibility supports informed decision-making and enables resources to be prioritised towards high-impact transformation projects, rather than being consumed by urgent but lower-value tasks.
With this oversight, firms can make deliberate decisions about where to focus effort and investment, balancing foundational work with initiatives that drive growth and differentiation.
The following steps outline how to structure and manage your portfolio to achieve that balance.
1. Classify your investments
Start by segmenting your change portfolio into three categories:
- Regulatory-led: Compliance and risk-driven initiatives
- Technical foundations: Core platforms, IT modernization, and other essential programs that keep the business running and enable future growth
- Differentiators: Innovation-led growth - AI products, new services, enhanced customer experience
Most firms are heavily weighted toward regulatory and foundational-led activities. But over-indexing here risks being compliant yet commercially stagnant. To break free, organisations must classify and measure spend across these categories, enabling deliberate decisions that rebalance the portfolio and shift investment toward value-creating capabilities and differentiation.
2. Have a ruthless focus on value
The shift begins with ruthless scrutiny of foundational spend, which often goes unquestioned and gets delivered without clear returns.
Ask the hard questions, such as:
- Can we stop funding foundational activities that prop up low-revenue, low-priority products? Could we rationalise our offerings and redirect that spend toward growth and innovation?
- Are we maintaining ageing IT platforms that no longer drive growth or efficiency? What would stop working if we scaled this spending back – and what opportunities can we unlock by doing so?
- Can we make our essential foundational activities more efficient? Could we optimise how we invest in these necessary programmes, so we free up resources for growth, innovation, or differentiating capabilities?
By rigorously challenging foundational spend, firms can free up resources to invest in initiatives that truly drive growth, differentiation, and long-term value.
3. Use foundational work as a catalyst
With routine, low-value maintenance scaled back, the foundational spend that remains should drive maximum impact. Every essential regulatory or infrastructure initiative should be designed to enable future growth and differentiation. For example:
- Remediation projects can double as opportunities to trial modern workflows, boost efficiency, and strengthen controls – turning necessary maintenance into a springboard for innovation.
- Platform upgrades can serve as a chance to streamline systems, enhance data accuracy, and speed up the launch of new capabilities.
4. Develop BAU ownership over time
Foundational initiatives should embed new capabilities into day-to-day operations, so improvements don’t remain one-off projects or ongoing emergencies that drain change teams and budgets. For example, remediation programmes can transition into business-as-usual processes, ensuring controls and workflows are maintained without constant intervention. Similarly, operational IT teams can take ownership of upgraded platforms, managing updates, monitoring performance, and optimising usage over time, making improvements sustainable and reducing reliance on change teams. Building BAU ownership and capacity frees up resources to focus on growth, innovation, and long-term value.
Conclusion
Foundational work is essential, yet it often dominates attention and budgets, while being treated as a sunk cost instead of a platform for innovation. By approaching every foundational project through the lens of innovation, firms can unlock additional value, accelerate their transformation agenda, and ensure mandatory work drives strategic impact rather than simply consuming resources.
A strong Transformation Office can support this shift by giving leaders a clear view of the portfolio and highlighting where resources are invested. By categorising spend across regulatory, foundational, and innovation-led initiatives, it enables informed decisions about where to focus effort and funding, whilst identifying opportunities to use essential work as a catalyst for transformation – instead of crowding it out. Introducing a team accountable for overall transformation also encourages long-term planning, including the deliberate transition of foundational work back into BAU to free-up capacity for high-impact initiatives.
Firms that get this right do more than remain compliant. They innovate for customers, create real and lasting value, and position themselves to lead the industry.
Ready to rebalance your transformation portfolios and drive maximum value for your clients? Speak with one of our transformation experts today.
