Digital transformation? It's just like riding a bike | BankNXT

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Everyone knows by now that transformation of banking products, services and experiences needs to happen. Most banks are either already implementing (or at least scoping out) transformation programmes. But everyone also knows that turning that change from vision into reality is difficult, with transformation encompassing siloed business units within the bank that each have their own ingrained processes (and sometimes a disregard for each other).

‘Digital’ has been seen as a panacea for the transformation gridlock that occurs when good intentions run into the speed bumps of the real world. It’s all too easy for banks to fall into the trap of thinking that sprucing up their website, building an app or sharpening their social media game counts as ‘doing digital’. The vagueness with which the term is thrown around suggests that many don’t realise the full potential of digital transformation, and that there’s a fair bit of bandwagon-jumping going on.

Genuine transformation – the kind that will set banks up to succeed in the new market landscape – requires a holistic approach and, crucially, a systemic change in thinking that embeds digital and customer-centricity at the heart of an all-encompassing change process. Banks need to adopt a new way of working; one that can feel as risky and unfamiliar to staff as it did when they first started to learn to ride a bike.

There’s always going to be resistance to change. People are risk-averse, and don’t like to leave behind processes that have worked in the past – often even if they know they won’t work so well in the future. Driving digital transformation relies on securing internal buy-in and creating broad-based cultural change. The best way to overcome resistance is to stop the talk of grandiose visions and start actually doing. This is where banks can struggle, though.

There are two basic things banks are getting wrong, hindering their change efforts. To go back to the bike-riding analogy:

  • They are riding without stabilisers at the start, and taking on difficult terrain too soon, and without specialist equipment.
  • By obsessing over building their own bikes, they risk getting left behind in the race.

Flattening the learning curve

There’s only so much that theoretical preparation can help you with when learning to ride a bike. Ultimately, it’s only once you climb onto a working, well-maintained machine that you can properly learn to balance yourself and take control, using the experience of falling off to improve your technique, build your confidence and increase the distance you can ride in one go.

As children learning to ride, most of us will have benefited from stabilisers fixed to our back wheels to help keep us upright while we got to grips with concepts such as steering and braking. We practiced under the watchful eye and encouraging hand of our parents, on flat, smooth, clear ground – perhaps the road outside our homes, or a path at the local park. We were given a frame the right size for us, the saddle and handlebars adjusted accordingly.

In the same way, bank staff leading and implementing digital transformation projects need to be supported with the right tools and processes that are built according to financial services industry standards, and tuned to accommodate the individual bank’s data and compliance policies.

Your first bike was probably a pretty basic all-rounder, suitable for the road, cycle paths in the park, maybe some light off-roading. You got used to that, and it probably continued to be the best fit for your needs for a number of years. Now, if you’re a keen cyclist you might have a road bike for touring country roads, a mountain bike for hammering through rougher terrain, or a fold-up Brompton for nipping around the city, all carefully designed for their different specific uses, and requiring subtly different handling.

The learning curve for banks going through digital transformation is similar. Before tackling anything too challenging in terms of specialist platforms or niche innovation use cases, banks need to make sure their teams are bought into and skilled-up on the broader platforms and ways of working on transformation. This familiarisation over time will embed the change culture and make it easier to tackle the more specialist tasks further down the line.

No need to reinvent the wheel. And the pedals, chain, brakes, handlebars …

Banks attempting transformation programmes have had a tendency to pursue the long, circuitous and expensive ‘DIY’ approach, trying to build platforms from scratch. I often find myself asking why; when it’s the doing that gets internal buy-in for transformation programmes, when third parties can provide suitable solutions, and when building their own platform simply delays the transformation and innovation process for banks and holds no guarantee of success? There are three reasons:

  • First, habit: large banks in particular have always built their own IT systems.
  • Second, it’s as simple as the excitement of getting hands-on with new technology.
  • Finally, most banks just don’t realise there are better alternatives to the DIY approach available from third parties.

However much banks may want to build their own platforms, speed counts more than the kudos of doing something your own way. The biggest value for banks lies in being first to market with new products and services, able to iterate rapidly and without risk. The DIY approach is costly and time-consuming, and doesn’t gain the bank anything significant. The self-built platform, if successful, will by definition look much the same as anything they could have got off the shelf from a third party: well-behaved, efficient and compliant. It will support bank-specific policies and architectural standards, but ultimately it’s still the same smooth, flat road to ride on. Why spend time and money laying it in your back garden when there’s already a perfectly good one outside your front door?

Banks may think they’re giving themselves better long-term control over their platform by taking the DIY approach, but they’re also committing themselves to long-term maintenance and risk. Why go through the hassle when a third-party option can support your needs with flexibility as to deployment, operating and licensing model? Having things your own way on ultimately inconsequential personal or organisational technology preferences just isn’t worth the delays caused by going DIY.

If banks are already building a digital transformation platform, they should consider how they can refocus on the most important decisions – such as IaaS providers – and work with third parties to accelerate development. If they are yet to embark on their transformation programme, they should pick one service and talk to a third party about how they can use a change platform to score the ‘quick wins’ that help reinforce the transformation culture they should be trying to cultivate.

READ NEXT: Everything else is changing – why isn’t your bank?

Photo by Dan Andrei Deaconu, Pexels CC0 Licence