The DNA of a successful digital-first transformation

Digital transformation is tough. According to a recent study conducted by McKinsey, only 30% of banks that have implemented a digital transformation project say that it actually delivered on their expectations. Most of those projects actually failed.

Something is clearly amiss at the heart of most transformation programmes.

Banks aren’t alone in struggling with transformation, of course. Data from EY suggests that a full 90% of change initiatives now fail to deliver the anticipated returns. As “reassuring” as this collective rate of failure may be, however, it isn’t likely to make things any more palatable for a bank that has seen its own project fall short. So, what exactly is going wrong? And what can be done to rectify the situation?

While there are any number of reasons that a digital transformation project can fail, in my own experiences, three specific issues cause the vast majority of problems:

1: Unrealistic Expectations

If 90% of transformation programmes really do fail to meet expectations, that’s probably because those expectations weren’t realistic to begin with. There’s a tendency to assume that digitalisation will automatically result in a more efficient and better functioning company. In truth, while digitalisation can deliver transformative impact – it won’t fix all of your problems at once.

2: A lack of leadership

Even when a business does have realistic expectations about digitalisation, a lack of senior management support can quickly undermine its success; any programme of a sufficient size really demands MD or CEO-level involvement to drive it forwards. Moreover, that guidance needs to be truly hands-on, with the exec sponsor committed to steering the project on a regular basis.

3: Siloed structures

Many banks – particularly those at the larger end of the scale – have very siloed organisational structures. As a result, even the digitalisation of a single process may end up touching on 20 or 30 different departments. Many of those teams will be completely isolated from one another (geographically as well as structurally), which only adds an additional layer of complexity to the proceedings.

These issues sit atop an already suboptimal foundation. Most banks are complex organisms, their tech stack having been built layer by layer over the course of four or five decades. The acquisition of smaller institutions, and the gradual folding in of their own infrastructure, will only have helped to muddy the waters further. In many ways, the DNA of a typical bank is diametrically opposed to successful digitalisation.

Because of that, I believe that banks – and particularly larger ones – need to approach digital transformation from a very specific perspective. To all intents and purposes, they need to shrug off their existing behaviours and tackle transformation in the same kind of way that a younger and more agile financial institution would.

This begins with the formation of a small (five to eight person), cross-functional team that is formally aligned to the project. Members should be seconded to that team, and provide strong representation from those areas that will be most affected by the proposed changes. Relevant technical representation is also essential, whether that happens to be development capabilities or security expertise.

As its first priority, this team should take the time to fully map out existing workflows. This will help to identify key interdependencies, and avoid the risk of any changes causing a process elsewhere in the organisation to “break” unexpectedly. This exploratory period can also be useful for validation – checking that the problem being tackled isn’t actually the result of shortcomings much deeper in the organisation’s overall architecture. Whilst mapping these flows, they can begin to identify process stages that will benefit most from the change, and flag potential risk points for the project.

Finally, this team must also have the support of a very senior executive. In line with the second and third challenges outlined above, not only does this give the programme the drive it needs, it also ensures that issues resulting from siloes and disconnects can quickly be resolved. The more geographically diverse an organisation is, the more senior that person will need to be, as they’ll likely need to drive entire divisions into action.

Underpinning this structure should be an “Agile” approach to success. Not every problem needs to be solved at once, nor can it. Most banks would find it infinitely preferable to digitalise 90% of a process, for instance, than to spend three years attempting to bring the whole thing online at once and failing all the same. That remaining 10% can always be revisited later, when the solution may be more readily available anyway.

Is this a surefire route to success? Undoubtedly not. The only “right” approach to digital transformation is the one that works best for the organisation in question. At the same time, I do believe that this approach can help to address what is the true challenge here – the inherent complexity that now lies at the heart of many major banks.


Author: Carolyn Goddard

Editor: Iain Gomersall