Banks invest heavily in digital transformation. They deploy modern technology platforms and solutions in a bid to optimize business processes, operations, and deliver personalized services and products to customers. But despite this technology investment, does the bank fully benefit from a digitized infrastructure? Almost never.
Unfortunately, this is only too familiar a scenario for many financial institutions across the world. Only 30 percent of banks are able to successfully implement their digital strategy while the rest fall short of their objectives.1 Often it is the organization culture, legacy mindsets, and lack of upgraded skills holding back the organization from fully realizing the benefits of their digital transformation efforts. To be successful, financial institutions must not only invest in the right technology, but also consider transforming their organization culture and behavior as well in parallel.
Technology and Culture – Two Pieces of the Puzzle
The rapid advancement of technology has changed customer needs, as well as the competitive landscape, putting traditional banks under pressure to deliver hyper-personalized offerings and experiences. Most organizations now understand that digital transformation is an imperative for meeting the challenges of this rapidly evolving industry landscape. But what exactly are they aiming for when they set out on their transformation journeys?
To put it simply, banks need four key capabilities to be able to truly modernize and innovate for the digital era:
- Agility: the ability to move quickly to get their desired results, and the ability to respond quickly to market changes.
- Scalability: the ability to change capacity to meet changing demand.
- Continuous Improvement: the ability to always ensure operational efficiency.
- Leverage the Ecosystem: the flexibility to work with an external ecosystem of partners to extend or improve offerings.
The right technology platforms are of course crucial for achieving this. But technology is just one piece of the puzzle, because technology is only as good as the people who use it. The right organization culture and innovation-focused mindset is equally important.
Changing Organizational Culture
People lie at the heart of any organization’s culture. And banks must now focus on recalibrating their people processes and strategies to empower teams and transform their culture. A few key factors to focus on include:
- Hierarchies: Banking is one of the oldest industries in the world. Understandably, hierarchies are deeply entrenched within these organizations. While some level of hierarchy is required for smooth functioning and ensuring regulatory compliance, it is important to understand that rigid hierarchies are detrimental to innovation, experimentation, and agility. Dismantling some hierarchies to foster greater flexibility, trust, and collaboration can be a good starting point for culture transformation.
- Employee Experience and Engagement: Research indicates that employees spend 25 percent of their time searching for information they need to do their job.2 This is because there are multiple applications for each business process. This is time consuming, frustrating, and unproductive and inhibits innovation. The employee experience must be one of the key guiding pillars of an organization’s digital transformation strategy. Empowering the workforce with intelligent tools and agile processes they need to perform their job well can make the experience less frustrating and enhance employee engagement and over all experience. Skills development and training, particularly for older employees, can be invaluable in empowering every member of the workforce to be able to effectively use the tools at their disposal and offer a superior customer experience.
- Experimentation, Calculated Risks, and Learning: Innovation cannot come only from the technology in use. Employees must be empowered to try new things and experiment with new approaches for solving customer problems. Of course, experimentation within a highly regulated industry like banking is not easy, but as many banks are demonstrating already, it is not impossible. Some careful planning, the right tools, and opportunities to develop these skills can help banks foster an environment of trust and calculated risk-taking.
Comprehensive Transformation Effort
There are no half measures when it comes to digital transformation. Banks cannot just modernize some aspects of the business while hanging on to archaic processes and approaches for others. Consider this: a bank may choose to modernize their digital infrastructure to offer customers a digital banking experience. But they may hesitate to extend this to the loan application process and continue to ask customers to fill out lengthy forms on paper and physically visit branches to submit the paperwork. As a result, customers will end up being frustrated and may even choose to switch loyalties to a neo bank or a fintech which has simpler and end-to-end digitized services. When it comes to their digital transformation efforts, banks must invest time and effort in establishing a comprehensive strategy and roadmap. The office of the Chief Information Officer plays a crucial role in developing and implementing this strategy, taking a holistic look at all processes to ensure there are no gaps in th modernization efforts.
Balancing the Old and the New
Financial institutions must be open to new ideas, experimentation, and learning, and be able to take quick decisions. Of course, legacy mindsets are not inherently all negative, as they are largely rooted in experience. For decades the banking sector operated in much the same way and there may be an unwillingness to change established processes that worked well thus far. The focus here must be on identifying and retaining the strategies that remain valuable in a rapidly changing world, and discarding those that are now redundant. It is this balance of the old and the new that can prove to be their biggest competitive advantage. This balance is essential to ensure stability and compliance amidst a push for innovation.
In today’s rapidly evolving banking landscape, technological advancements are reshaping customer expectations and competitive dynamics. But as banks accelerate their digital transformation journeys, they must remember that transformation goes beyond just the technology in use. The transformative effort must include an equal focus on moving away from legacy mindsets to a more open, experimentative culture. Only when the organization culture is in sync with the technology transformation, can the bank effectively innovate for the digital era.