De-Risking Digital Transformation in Financial Services
Financial services and insurance companies find themselves in an increasingly challenging competitive landscape where new technology vendors are invading the finserv space. New startups are disrupting the industry through digital-first and tech-first solutions, while traditional finserv companies are struggling to digitize their products and services at a time when there’s more competitive pressure than ever.
Solving that challenge means finding new ways to serve their clientele with smarter, more digital solutions. It also means finding new approaches for mitigating the considerable risks arising from digitization, as Equifax and JPMorgan, among many others, know too well.
Removing risk from digital transformation was the topic of a recent Crownpeak webinar, “De-Risking Digital Transformation in FinServ: Three Keys to Unlocking the Big Issues,” where I was joined by Eric Feige, Managing Director of digital transformation agency VShift.
Moving toward greater digital maturity
Financial services and insurance companies often trail firms in other sectors when it comes to digital transformation, and applying digital tools to evolve their products, services, processes, corporate culture, customer experiences, and more.
One advantage of coming to digital transformation later is that we’ve learned a lot of what works and doesn’t work. One of the most critical lessons is that taking a phased approach dramatically increases success rates and faster time to value. Each phase can prove the value of the technologies and processes being deployed, and builds a case for the next phase.
Tech businesses lead the way in the march toward digital maturity, and they’re often offering their own financial services solutions, too. Think PayPal or Quicken, technology providers at their core, as examples of this.
It’s a crucial issue for financial services firms, as Eric explained. “Though they’re digitally immature, they rank as industries that are investing, candidly, the most in digital transformation,” he said, but are encountering powerful obstacles.
Finserv companies have been hamstrung by inflexible business structures making digital transformation tough to pull off. One example is the fact they’re often separated from the customer by intermediaries or are focused on maintaining traditional “relationship” models versus delivering the direct, quality customer experiences that are increasingly important to digital services consumers.
This isn’t really a technology issue, but a leadership issue, an organizational issue. In any company, even the most advanced technology can’t succeed unless the people, structures, and processes employing it are updated in parallel to optimize its impact and value.
The keys to de-risking transformation
It’s estimated that digital transformation initiatives have a failure rate of as much as 84% – not the kind of odds that would encourage a financial manager or actuary, certainly. But the causes of failure – lack of executive sponsorship, organizational confusion about who’s doing what, underestimating the scope of a project, and betting on the wrong solutions – are avoidable by following three keys for success.
1. Alignment and governance
To accelerate progress toward successful digital transformation, it’s vital to have CCO or CMO executive committee sponsors. IT leaders or operations leaders typically see less success in this, since they don’t “own” the commercial relationship between the business or brand and its clients.
Cross-functional support is crucial, though Eric notes how it’s important they’re shown digital transformation benefits and goals that are relevant to each of them, rather than being asked to focus on a “northstar” macro business objective. This “constellation of stars” approach will better encourage functional groups to each play their part in the overall initiative. Other stakeholders, meanwhile, should be given a steady stream of education about what’s underway, and opportunities to engage within the transformation phases where they’re needed.
Here’s an example of how a digital transformation governance group can be set up: With cross-silo representation, alignment to common principles and goals, resulting in the ability to handily resolve issues.
2. Breaking down technology risk
Like the Titanic’s iceberg, legacy IT processes and traditional technology architectures are obstacles that can sink the digital transformation ship. The monolithic software frequently used in legacy IT is restrictive, forcing unnecessary compromises and locking the organization into a prescribed vendor-dependent “strategy” that serves the vendor’s business needs more than it does those of its users.
Strategy should precede technology adoption, and tech investments should be based on business needs – not on trying to keep legacy systems afloat because of sunk costs. Those companies that are most successful are following that path of picking just what they need to match up with a well-thought-out strategy.
Other problems with monolithic architectures? Time-to-market (and competitive agility) is slowed to a crawl, while the costs of maintaining outmoded infrastructures – which can be rife with vulnerabilities – are significant.
Moving to a decoupled architecture accelerates time-to-market, as individual solutions can be flexibly, precisely, and economically applied across the entire range of needs confronting a financial services firm, as shown in the chart below.
Plus, decoupled’s ability to let a company cherry-pick the right solution to meet each need helps avoid the all-too-common risks involved with making massive front-end investments in monolithic platforms. Very often, monolithic architectures don’t do an adequate job of meeting a multiplicity of needs, and can’t be readily (or affordably) updated to keep pace as technologies evolve.
Decoupling further de-risks transformation significantly by delivering consistent and common user interfaces even across global organizations, by addressing high-risk interdependencies, and integrating these best-fit tools very quickly so they can be put to work in weeks, not years.
Crownpeak’s decoupled architecture makes it a natural fit for digital transformation projects, becoming the fabric that can unify touchpoints and digital experiences across channels.
3. Culture
Changing behaviors throughout the organization is the third key to digital transformation success in financial services. And empirical studies, Eric says, point out how culture is the factor which can have the greatest impact, for good or ill, on that effort.
A development process like the one shown below, intended to result in a product with significant potential upside, can fall apart at the very start, he says: “If your business goals are not focused on culture, typically you can expect that your transition from phase to phase is really going to be difficult.”
Eric cites Amazon as an example of how culture can make all the difference. Its obsessive focus on customer service, which underlies every facet of its success, runs across the organization. Enterprises that formalize cultural goals and the metrics used to measure them stand a much better chance of pulling off digital transformation than those that don’t. Companies who lack plans for changing their organizational culture are wasting any resources they’ve directed toward digital transformation.
Driving cultural transformation, particularly for firms at a lower stage of digital maturity starts with laying out “role model” behaviors they’d like to see from everyone: ownership, empowerment, client-centricity, cross-functional collaboration, and digital literacy. Cultural goals need to be assigned to everyone, starting at the top of the organization, and dependency on any partners whose culture and goals don’t align with yours should be reduced. And like any good tech product, culture itself should be subject to testing and iterative improvement.
VShift and Crownpeak have found “beacon projects” the best way to ease into digital transformation and the cultural shift. In these projects, organizations have applied these guiding principles to specific product launches, demonstrating how they positively impact behaviors and elevate results. This creates a compelling example for leadership and the rest of the organization.
The results of “de-risking”
As both Crownpeak and VShift can attest, companies that have undertaken these principals have been able to add speed and flexibility to execute content-driven digital transformation initiatives. Which has put them on a much more competitive footing by delivering the sort of seamless digital experiences and omnichannel engagement customers have grown to demand.
And, they’ve done it while meeting the stringent compliance demands of highly regulated sectors.
Check out all the insights and details Eric and I covered in the webinar, and the Q&A with attendees, by accessing it here.
View original content here
Related Crownpeak News: