While digital transformation and its risks are top-of-mind for the majority of financial institution senior leaders, there is still a wide gap between the cost of implementing digital solutions and their eventual success within the organization. In fact, in 2019 research indicated that up to 70% of digital transformation initiatives did not reach their goals to the tune of $900 billion of spending and investment going to waste. Since the pandemic in 2020 brought on increased pressures to acquire digital solutions to meet new, urgent needs, this number has likely increased.
“Why do some digital transformation efforts succeed and others fail? Fundamentally, it’s because most digital technologies provide possibilities for efficiency gains and customer intimacy. But if people lack the right mindset to change and the current organizational practices are flawed, digital transformation will simply magnify those flaws.” – Harvard Business Review
Tom McGill, Director of Customer Experience, dives below into the dangers of collecting the latest and greatest digital solutions without having a solid strategy for why they are needed and a road map for successful implementation.
When my kids were much younger, we’d often read them a series of books about the Berenstain Bears, and one of the favorites was called “The Berenstain Bears Get the Gimmies.” At one point in the book, the young bears get the “galloping greedy gimmies” to their eventual deep regret and detriment! What, pray tell, does this have to do with banking?
As we work with our clients across the country, it strikes me that much of the industry is also suffering from “the gimmies” – particularly when it comes to all things digital. So many organizations are in a rush to implement something they read about in some industry publication that we wind up in an arms race to accumulate digital assets. Too many times, a bank’s digital capabilities are evaluated based upon how many bucky balls can be fully colored in rather than how effectively the various digital assets are deployed.
Acquiring a digital asset – a product, if you will – with the belief that you need it, and you’ll figure out how to use it once you get it happens too frequently.
“Lesson 1: Figure out your business strategy before you invest in anything. Leaders who aim to enhance organizational performance through the use of digital technologies often have a specific tool in mind. ‘Our organization needs a machine learning strategy,’ perhaps. But digital transformation should be guided by the broader business strategy.” – Harvard Business Review
Of course, we must recognize that pursuing digital transformation without a plan is an understandable misstep when we consider how fast the landscape is changing in the financial services industry (especially today!) and given our inability to always predict the future correctly.
“Most companies we know are trying, and struggling, to do two things at once: to reinvent the core by digitizing and automating some of its key elements, for example, and to create innovative new digital businesses. The challenge is acute because of the dizzying pace of digital change and the uncertainty surrounding the adoption of new technology. Even if the technology for autonomous vehicles pans out, for instance, when will the majority of people really begin to use them? Given the impossibility of knowing, it’s easy to wind up with an unfocused hodgepodge of digital initiatives—a far cry from a strategy.” – McKinsey Quarterly
McKinsey recommends viewing your company as a “portfolio of initiatives at different stages of seeding, nurturing, growing or pruning.” This is sound advice as it allows you to see where digital transformation can improve processes, eliminate the duplication of effort or make a customer’s journey with your financial institution better and more efficient.
“As a first step, the company went through its portfolio business by business, focusing on three questions: Which emerging digital products and services were missing from the portfolio? Which product offerings and elements of the existing operating model should be digitized or fully digitally reengineered to improve customer journeys? And what areas should be abandoned? The answers for the company’s healthcare markets differed from those for banking, but the company became comfortable with hard choices and more attuned to new opportunities by tying all decisions to clear use cases.” – McKinsey Quarterly
Another frequent mishap we see is when an institution implements a new digital product or service and does so from an IT perspective only. All new product deployments not only need to have a strategy wrapped around the deployment, but they also need to have employee education built into any such deployment. And when I say employee education, that education cannot be limited to “how” a product works but also must delve into the value proposition of that product. The product must support the overall vision of the organization, with employees using it completely bought into that vision of success.
“Digital transformation worked for these organizations because their leaders went back to the fundamentals: they focused on changing the mindset of its members as well as the organizational culture and processes before they decide what digital tools to use and how to use them. What the members envision to be the future of the organization drove the technology, not the other way around.” – Harvard Business Review
As the Berenstain Bears learned, having too much candy is not a good thing. In banking, having a bunch of products and services that aren’t purchased and deployed within the context of a broader strategy is just like eating too much candy – it may taste good at first, but it doesn’t take too long before you aren’t feeling good about your decision.
Don’t be an institution that just acquires new products to be at par with the competition. Have a digital strategy that is part of the broader bank strategy and use the decision-making discipline that we’ve all been taught to use throughout our careers to make the right purchases at the right time.
Digital Transformation is Not About Technology, Harvard Business Review
Digital Strategy: The Four Fights You Have to Win, McKinsey Quarterly
Digital Features Every Customer is Looking for From a Financial Institution, Profit Resources Inc.
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