It’s not about the Technology…

One of the most widely discussed topics in popular business commentary today has to be that of ‘Digital Transformation’ and ‘Digital Innovation’ in Banking – and there are only so many ways to say the same thing – banks intent on reaping the benefits of digitisation, have to change how they think and act as they go about their daily business, technology is simply the enabler.

The consensus view across the many websites, blogs, case studies, research and anecdotal opinion, points to a clear link between those organisations that have successfully made deep-seated changes – not only in the sphere of Digital Technology – but the way in which they think and go about their business, are starting to reap the benefits.

This should not come as a surprise. The latest in a series of annual surveys of senior bank executives, published (by EFMA) reveals that only a handful (13%), believed that they had the core systems and infrastructure to support a digital banking ecosystem, while almost all (91.3%) agreed that the future of banking lay in their ability to collaborate with ‘Fintech’s’, and just about everyone (96%), said that banking as an industry, has to evolve alongside the digital banking ecosystem.

The answers (at least at a high level), are self-explanatory

Invest in the technology to support and extend the digital base
Collaborate externally (with Fintech’s, partners & vendors), where it is beneficial to do so
Change how people work and behave, to reflect the new digital reality

However if commentators, opinion-makers and bankers agree, why do so many banks (particularly those with 6,000 employees or fewer), find the digital transformation journey so hard? Banks, stuck in a kind of digital ‘no-man’s land’, having invested in digital technology and with a few key appointments, find the same challenges as before. Complacency, slow to market and unable to keep pace with what their customers increasingly expect, short of their initial aspirations they fail to realise the full value of their investment in technology and digital platforms.

Beset by inertia, and frustrated by the lack of (perceived) benefits in their ‘digital’ project’, they gradually settle into a new status quo, where the Digital Transformation ‘project’ is gradually pared back, and folded into the broader bank, offering customer digital products or service enhancements, as they are able.

Out with the old, and in with the…. old

The central issue we have found, working with over 40 banks from 30 countries, is that the Digital capabilities needed to do this, are usually concentrated in unevenly distributed ‘pockets’ of digital excellence around the organisation. And we often find such pockets exist on the periphery, or even outside the usual centres of hierarchical power and control.

This uneven spread of organisational capability, results in an internal dynamic between ‘the old’ (Managerial hierarchies or centres of organisational power at risk of losing influence or control) vs. ‘the new’ (Digital business units, who, unwilling to wait, often bypass traditional hierarchies, resorting to cloud-based consumer tools to manage projects and share information to get stuff done)

The Digitally-savvy individuals and groups, who understand the power of new tools, and new ways of working, find themselves able to share information easily and get stuff done, bypassing managers and lines of authority, creating parallel information flows, outside, and at the expense of traditional top-down hierarchies. This is beautifully illustrated in Charlene Li’s TED talk on the same subject.

The results of this internal dynamic can be as obvious, as they are painful to watch;

Slow, uneven or even stalled decision-making caused by internal politics, the result of competing priorities, between the different centres as they struggle to reach consensus

An inability to articulate the basic business case and value of digital, using traditional ROI calculations, resulting in lack of senior management sponsorship

Delays as decision-makers and traditional hierarchies who fear losing control to the new digital regime, respond by restricting use or access to social platforms; placing undue emphasis on “Risk”, “Security”; or resisting new ways of working

An excessive focus on Digital Technology as a quick-fix, to deliver, at the expense of rethinking how people work, and re-wire the structure to reflect the new digital reality

Changing the business, operating, and customer models to actually be ‘digital’ is somewhat different to just doing lots of digital stuff

What needs to change?

It is increasingly clear that the way decisions are made; how people think and act at work, and the way individual and group effort is performed, recognised and rewarded, is key to understanding how successful the organisation is likely to be, when executing and delivering on the digital transformation project.

Culture – How your people think about, process and respond to the world around them
People – Who works in your organisation. What do they do, know and how do they behave?
Structure – What are the optimal arrangements that best provides for the first two?

Of course the devil is in the details, or as Mike Tyson once famously quipped “everyone has a plan until they get punched in the mouth”…

From Process Managers to IP Creators

For decades banks have become very, very good at streamlining just about every possible action and interaction into a series of standardised, repeatable processes that ultimately reduct costs and ‘right-size’ operations. This idea of how to derive efficiency and value is so deeply embedded in how banks think and work, that it is still deeply ingrained in how banks attract, retain, reward and promote their people.

However digital has changed all that. The nature and pace of digital change requires thinking differently about ‘work’ and ‘value creation’. Efficiency, value and (ultimately) success is no longer solely determined by an employees ability to slot into, or manage a series of processes (no matter how complex).

Success increasingly resides in the value of individual and collective IP (Intellectual Property) brought to bear through the process of creation/invention or complex problem-solving, derived from thinking and acting in ways that may not necessarily be reduced to a set of discrete processes.

If staff are required to think, act and work in a different way, structure needs to reflect that, with the right balance of mechanisms to empower those with knowledge and skills lie, with adequate accountability and responsibility.

Tackling the deep-seated cultural, people and structural, changes is not an easy task, and cannot be done in isolation from the broader business. Tackling each requires some soul-searching, as the risk of upsetting the apple cart through clumsy or poorly timed interventions is real. It requires facing up to the fact that no amount of investment in digital technology, will automatically make any bank more digital, and that getting the culture/people/structure balance right is key to navigating beyond a Digital no-man’s land.

Of course, this is easier said than done (refer to the Mike Tyson quote above), and, if I have learnt anything, at least these three things are clear;

There is no single recipe, blueprint or ‘one size, fits-all’ approach. Each is different, starting from different points.
Play the hand you have been dealt. Very few, have the privilege of starting from a clean slate (unless starting or launching a new Digital Brand from the ground up)
A committed leadership, cool heads, and a steady hand on the tiller wins every time, both in keeping the ‘lights on’, and keeping the shareholders happy over time.

But for now at least the jury is agreed that unless organisations come to grips with the ‘Digital’ genie that has been unleashed into their industry and business, and recognise where the real levers of change lie, they will struggle to realise the full value of their investment in technology and digital platforms and risk falling behind their rivals

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