What cultural dimensions and capabilities do mid-sized financial services organisations need to focus on?
We explore four cultural differentiators and how ieDigital can help you embrace a digital mindset.
Another management consultant’s self-evident statistic or something more practical?
You’re two-and-a-half times more likely to succeed with digital transformation if you focus on transforming your organisation’s culture and building capabilities during the process. So says McKinsey¹
As I mulled on this, I wondered what lay beneath this somewhat obvious statistic. If we could dig beneath the surface, might we find that those organisations with the wherewithal to invest in culture and capabilities also had the heft to invest in many other resources that underpin successful digital transformation?
Might these organisations have the resources to industrialise their innovation practices into repeatable, optimised processes?
Would we find leadership roles like Chief Innovation Officer, Chief Digital Officer, and correspondingly well-resourced teams alongside a large HR department that continuously develops its workforce?
Back to reality
The resources of small to mid-sized financial services organisations probably aren’t on the same scale as the firms McKinsey identified as digital transformation leaders. Instead of Chief Innovation Officers or Chief Digital Officers, the crucial responsibility for digital innovation falls on CEOs, COOs, and CIOs, who must simultaneously run the firm and reimagine it.
It would be nice to imagine your learning and development team partnering with McKinsey to deliver a multi-month digital culture development program. But when your HR team struggles to hire and retain talent, and your training options tend to be off-the-peg rather than tailored-fit, perhaps it’s best not to let our imaginations run wild.
Four cultural differentiators for digital transformation success
More usefully, McKinsey’s article highlights three cultural differentiators which correlate clearly to successful digital transformation and positive economic performance. And we add to that a fourth capability you must master for your digital transformation program to achieve long-term success. These are the willingness to embrace risk, a commitment to changing siloed mindsets, a relentless focus on the customer, and adopting a product (rather than project) mindset.
1) Developing an appetite for risk
Embracing a digital mindset requires leaders to encourage experimentation. A test and learn approach is essential for innovation to flourish. That requires a tolerance of failure as part of the learning process. Otherwise, employees who believe that they are monitored and rewarded for output will find it hard to engage in experiments, preferring the apparent safety of operating their current ‘machine’.
Over and beyond encouraging employee engagement, business leaders will naturally want to minimise the likelihood of failure. The temptation may be to revert to bloated requirements definitions and exhaustive process analysis. Such waterfall methodologies—although still common for slow-changing technologies such as core banking and ERP systems—are a poor fit for fast-changing customer experiences such as digital banking.
Developing an appetite for risk means developing fluency with agile development. Fast-paced, iterative development with weekly or biweekly demonstrations to all stakeholders minimises the risk of rework. But adapting to the need for continuous engagement, timely feedback, and fast decisions can be a cultural shock for those unaccustomed to agile development.
Just like a team sport, developing fluency with agile development requires match practice. No wonder, therefore, that organisations that invest in transforming their culture to embrace agile methods tend to be more successful at digital transformation.
Equally, choosing a technology and consulting partner that can help you learn on the job and get your team fluent with the fast pace of Agile is an excellent alternative to months of change management coaching.
2) Breaking down silos
According to McKinsey’s research, executives rank siloed thinking and behaviour as the number one obstacle to a healthy digital culture.
Considering all the disciplines required to design, deliver, run, and continuously optimise digital banking, this is no place for narrow and parochial mindsets. Frictionless digital customer journeys transcend legacy organisational boundaries. Those journeys and digital experiences are much easier to design and maintain without departmental silos getting in the way.
McKinsey provides excellent suggestions for breaking down those barriers, inspiring employees with a shared vision, and thoughtfully rotating managers. But even without those long-term measures, a well-crafted agile program should go a long way towards fostering a collaborative, multidisciplinary approach.
Daily stand-ups and regular demonstrations to all stakeholders from risk, compliance, operations, and the senior leadership team help to keep everyone aligned. And with the advent of low-code, rapid development, it’s much easier to keep stakeholders aligned, with projects taking weeks rather than months or years.
3) Getting closer to your customers
Customers should be at the heart of digital transformation, especially in the case of financial services organisations. In the digital age, being customer-obsessed isn’t just good business practice; it’s likely a matter of survival.
Agile, iterative development and co-creative design thinking and feedback sessions get you closer to your customers. These same techniques reduce the risk of failed experiments.
Instead of months of development in a vacuum and then waiting to see how customers react, customers can be part of the design process. And with the speed of low-code development, adjustments can happen in real time in co-creative feedback sessions.
Naturally, your choice of technology and consulting partner can accelerate design and widen your customer perspective. Take ieDigital as an example. Rather than start from a blank sheet, you can quickly configure the Interact application suite to your organisation’s requirements. Moreover, the suite and our consulting prowess have years of customer-facing experience baked in.
4) Adopting a product (rather than project) mindset
Leading IT advisors and industry analysts, including Gartner², have long advocated that digital propositions should be managed as products rather than projects.
The following definition of digital transformation helps explain why:
Digital transformation: The continual creation and improvement of new business models and customer propositions enabled via digital technology innovation.
I’ve underlined continual creation and improvement to emphasise the following point. Transformation is not a build, deploy, and forget exercise. It demands continuing effort to experiment, learn, and adapt to ensure customer needs and preferences are met. That’s the only way for your business to remain relevant and competitive.
So, whereas a project has a start date, a resource plan, a budget, and a delivery date, a program must be a more open-ended endeavour.
The shift from IT projects to products is aptly described by Deloitte³:
“A traditional IT project management discipline is usually insufficient for meeting today’s software development needs. Tracking activities and budgets provides a false sense of security that may become apparent only when the software product hits the market.
“Product management changes the aperture through which a team views their work. It’s time to shift mindsets and embrace behaviours and metrics that quantify success based on outcomes, often defined by the software’s end users.”
Bringing this back to building or modernising a digital banking solution, if you’re still thinking of this as a delivery project, you’ve not yet embraced a digital mindset.
Thinking of your digital banking capability as a product should inform how you plan to build or buy and then continually manage it. Our eBook “Three Strategies for Modernising Digital Banking” explores the pros and cons of buy versus build. We also advocate a third option—the combination of buy and build. We think it gives you the best of both worlds. A market-tested product, proven at numerous financial services firms, plus the freedom to rapidly make it your own.