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Why Do Some Loan Origination System Implementations Succeed While Others Fail?

Implementing a new loan origination system (LOS) is a significant investment for any mortgage lender. From software licensing fees to training staff and reworking processes, the costs and stakes are high. Yet, while some lenders find their new system unlocks efficiency, compliance, and profitability, others face stalled implementations or long-term struggles. What makes the difference? One key explanation lies in Gall’s Law.

Gall’s Law: A Simple Concept with Big Implications

Gall’s Law is a principle from John Gall’s book Systemantics: How Systems Work and Especially How They Fail. The law states:

“A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and cannot be made to work.”

In other words, successful systems evolve over time, building on simpler foundations that have already proven effective. When this principle is ignored, efforts to design and implement a fully-featured, end-to-end complex system often fail because the foundation is too unstable to support the complexity.

How does this relate to LOS implementations? Let’s break it down.

The Pitfalls of Building Complexity Too Quickly

Many mortgage lenders embark on LOS projects with ambitious goals. They want the system to handle every workflow, integrate seamlessly with existing tools, and deliver game-changing efficiency. While this vision is understandable, trying to achieve it all at once can lead to failure. Here’s why:

1. Overloading Initial Configuration: Some lenders attempt to implement every possible feature or workflow from day one. This “all or nothing” approach creates complexity that is difficult to test, understand, and troubleshoot. As a result, errors go unnoticed until they snowball, causing frustration for staff and delays in going live.
2. Insufficient User Adaptation: A new LOS is a major change for the people who use it daily. When too many complex features are introduced at once, it can overwhelm staff and hinder their ability to adopt the system effectively. User resistance often follows, with employees reverting to manual processes or workarounds.
3. Unrealistic Deadlines: Rushed timelines force teams to skip essential steps like thorough testing or phased rollouts. This often results in a system that technically “works” but lacks the stability, usability, or customization necessary for real-world operations.

I learned this lesson firsthand. When my partners and I set out to build the most sophisticated mortgage fraud prevention system ever, we made a critical mistake—we tackled the most complex part first. The result? Budget overruns, missed deadlines, and a product that impressed the industry but not our bank accounts.

Ironically, our second-tier system, FraudGuard, turned out to be the real success story. Unlike our initial approach, FraudGuard started as a simple, functional system that generated revenue. Over time, it became the foundation for the sophisticated fraud detection tools used today.

If we had started with FraudGuard, I have no doubt we would have built a better system—on time, on budget, and possibly still under our control. This experience aligns with Gall’s Law, which states that complex systems evolve from simple, working ones. Lenders would do well to keep this principle in mind when implementing a new LOS.

The Gall’s Law Approach: Build on What Works

To apply Gall’s Law, focus on building a simple, functional foundation before layering on complexity. Here’s how this approach leads to more successful implementations:

1. Start Small and Scale Up

Begin with the core functionality that your team needs most. For example, focus first on originating and processing standard loan types. Once the foundational workflows are running smoothly, introduce more advanced features like custom reporting, integrations, or automation. This iterative approach allows you to identify and fix issues early, without derailing the entire implementation.

2. Prioritize User Adoption

No matter how powerful the system is, its success depends on how well your team uses it. Prioritize training and user engagement early in the process. This means:

• Involving End Users in Decision-Making: Get input from loan officers, processors, and other staff who will rely on the system. Their feedback can help identify potential pain points and ensure the configuration meets their needs.
• Phased Training: Instead of overwhelming staff with every feature at once, train them in stages. Start with essential tasks, then build on their expertise as new functionality is introduced.

3. Test and Optimize

Testing is critical to ensure the system works as intended. Use a phased rollout to introduce the system to smaller teams or branches first. This “pilot” phase allows you to gather feedback, identify issues, and make improvements before a full-scale launch.

Real-World Example: The Difference Between Success and Failure

Consider two lenders implementing the same LOS:

Lender A: The “Big Bang” Approach

Lender A’s leadership team wants the LOS to handle every type of loan, workflow, and integration from day one. They push for an aggressive go-live date, leaving little time for testing or training. When the system is launched, users encounter bugs, workflows don’t align with their processes, and the team struggles to adapt. Frustrated employees resort to manual workarounds, and the LOS becomes a costly failure.

Lender B: The “Iterative” Approach

Lender B takes a phased approach. They start by configuring the LOS for their most common loan types, with minimal customizations. They involve end users in testing, gather feedback, and provide targeted training. Once the system is live and stable, they gradually add more features and integrations. By building on a solid foundation, Lender B’s team feels confident and empowered, leading to long-term success.

Why Training Is Key to Success

Training plays a crucial role in making the iterative approach work. Even the best-designed LOS will fail if users don’t know how to use it effectively. Here’s how tailored training supports successful implementations:

1. Improved Confidence: Training helps staff feel confident and capable, reducing resistance to change. When employees understand how the system makes their jobs easier, they’re more likely to embrace it.
2. Fewer Errors: Proper training reduces errors caused by misunderstandings or misuse of the system. This leads to smoother operations and fewer headaches for everyone involved.
3. Stronger Feedback Loops: When users are well-trained, they can provide more insightful feedback during the testing and optimization phases. This helps fine-tune the system for maximum effectiveness.

How We Can Help

At Cyberlink Software Solutions, we specialize in helping mortgage lenders implement the MeridianLink Mortgage LOS system successfully. Our training programs are designed to:

• Simplify complex concepts for users of all technical skill levels.
• Focus on the most critical workflows and features first.
• Provide ongoing support as your team adopts and expands the system.

By following the principles of Gall’s Law and prioritizing user adoption, we’ve helped countless lenders avoid the pitfalls of overly complex implementations.

Conclusion

The difference between a successful LOS implementation and a failed one often comes down to how complexity is managed. Gall’s Law teaches us that starting simple and building on what works is the key to long-term success. By prioritizing user adoption, testing thoroughly, and taking an iterative approach, lenders can achieve their goals without overwhelming their teams or systems.