In the last year, banks have spent over a trillion dollars on “let’s change the bank” digital initiatives – US$1.3 trillion to be exact. Yet, it is estimated that 70% of that investment – $900 billion – went to waste. Why have these significant investments not produced their expected results?
Most leaders recognize that it’s not the technology itself that is the most difficult part of a digital transformation. Digital technology only provides the possibility of gaining efficiencies and a better customer experience. It’s the internal issues such as the lack of agility, complacency and an inflexible culture that are often the biggest barriers to overcome. A digital transformation is fundamentally about people – because it changes, and even disrupts the organizational dynamic of how work gets done. If people lack the right mindset to embrace the change, a transformation initiative can end up emphasizing all the things that don’t work in an organization. But we’ve seen a number of initiatives succeed and from what we’ve observed, there are a few fundamental principles that enable success:
Recognize when you are making assumptions about value
In the rush to deploy a range of digital tools and processes that optimize the customer experience, financial institutions often overlook asking: will this be of value for our customers. Rather than question, they make assumptions:
- that customers want to be online all of the time
- that a digital experience is a better experience than a face-to-face experience
- that an app or an e-banking portal will totally replace the current customer experience,
- that digital transformation efforts will automatically translate into value for customers
It is crucial that digital leaders take a vigorous approach to expose these blind spots that are shaping their definition of value. For instance: are customers are actually interacting with the newly-installed robo-greeter at the branch. Do they want to? Does the branch’s new lounge space with good coffee and fast WIFI translate into a tangible, great customer experience? Does the video conferencing room at the branch truly making things simpler for a customer if they still have to drive to the branch and find parking? Does a customer want to make their first inquiry about a mortgage online in a bot conversation? Digital has created a seismic shift in how we can deliver value to customers. Make sure your efforts are truly valuable to the customer.
Be aware of the disconnect between IT and leadership
Business leaders and their IT teams are often not in sync when pursuing their digital transformation strategies. Some of this can be attributed to a singular approach to digital initiatives – departments operate in their silo and kick off their own version of a digital initiative. But this is only indicative of a larger disconnect. According to a 2019 report by The Economist Intelligence Unit (EIU), two-thirds of private and public-sector organizations (66%) say they buy new systems and solutions without involving IT teams— Nonetheless, despite bypassing the IT department, 43% of respondents say their IT teams are still accountable if something goes wrong with a digital transformation initiative. But not surprisingly, collaborators have a better chance of success. Organizations in which IT and non-IT teams collaborate regularly are significantly more confident about overcoming digital transformation challenges. Eighty-nine percent of collaborators say they are confident about overcoming obstacles compared with 55% of non-collaborators.
Senior leadership needs to grasp what transformation entails beyond technology adoption digital transformations lag or fail for many different reasons, one of which is a lack of executive support. When C-level executives talk about digital, there’s often the pressure to quickly produce something and show results. For instance, rather than rush staff to deploy a chat feature that fulfills a board directive, leadership should first consider how to optimize chatting so that it extends the hours of the branch and makes it simpler for a customer to communicate with you. Such an effort would be a lot more efficient and effective when it’s guided by the insight of the IT department. In the end, it’s critical that transformation efforts don’t get lost in the disconnect between front-line IT staff and C-level executives.
Be prepared that traditional approaches to adoption won’t cut it
Employee education has to be at the core of a cultural change. But online classes or even in-class learning will not be enough to promote a new mindset and a new way of thinking. Organizations often underestimate what adoption will take. Despite the roadshows, the presentations and emails to staff explaining the digital changes, don’t be surprised if staff look at you blankly when launch day comes. Don’t assume it’s their priority just because it’s your priority. The best reaction is to listen, acknowledge and understand their perspective. Beyond broad announcements, the new cultural shift that comes with your digital initiative needs to be reinforced in private conversations and group meetings. Consider creating a virtual environment with gamification or a hack-a-thon that allows employees to role play as a customer and a banking and explore the possibilities of the new platform or tool.
Finally, be empathetic. Change is hard. Digital transformation can’t only be about changing processes and technology. It’s imperative that banks understand the context and impact of the change they are asking for. Because it often isn’t a cultural shift – it’s a cultural earthquake.