What does “digital transformation” mean, exactly?
Ask any banking industry expert and they’ll likely stress the importance of web and mobile banking, improving user experiences, and embracing emerging technology. But these answers may strike you as a bit vague, and lacking any real substance about what the term, and the actions that follow, really entails. For financial institutions specifically, the digital-forward technology improvements are often just window dressing on a business model that needs a deeper overhaul.
“Banks are deluded into believing they’re digitally transforming their organizations when all they’re doing is deploying new tools for yesterday’s industry.” – Ron Shevlin for Forbes
“Digital transformation” is really an umbrella term that encompasses countless ideas and will mean different things for each financial institution, depending on that institution’s unique needs. Because of its open-ended nature, it’s impossible to define. That’s why it’s imperative that institutions delve deep into creating a detailed, actionable plan tailored for what they really need instead of simply applying the “digital transformation” label to every initiative. That way, their transformations are better positioned to be successful, meaningful, and sustainable – think a marathon, not a sprint.
If you’ve used the phrase to describe your institution's evolution, don’t worry – we’ve all done it. And that’s okay! Embracing the prospect of transformation is a great starting point, and a crucial first step towards fully actualizing the myriad opportunities that emerging technology offers for all institutions and their end-users.
But it is, realistically, only a first step. Any new digital service can be labeled a “digital transformation,” but without the right underpinning, the “transformation” often fails to make a lasting impact. The vagueness and open-endedness of the phrase leaves financial institutions bereft of a real, actionable plan to leverage digital banking – it’s an attempt to slap a one-size-fits-all term onto complex, nuanced issues. The words “digital” and “transformation” can mean a lot of things, and will mean different things in different scenarios. Some might think “digital” means going paperless, while others associate it with AI integration or more personalization. Either could be the right solution depending on the situation and the institution, but it remains unclear without further detail.
Likewise, “transformation” is a lofty idea, but it’s often too large and too nebulous to implement practically, and often ends up going nowhere or even making things worse because it’s at once overarching and missing the marks. What’s more, “digital transformations” are known to fail – a lot. Even as recently as 2020, 70% of businesses saw their planned “transformations” wither on the vine. While some facets of them may be successful, many companies are ultimately left with the nagging feeling of an unfinished project.
If your financial institution is already struggling with alignment on one or more issues, this lack of clarity exacerbates the existing issues, so “digital transformation” instead becomes another pain point rather than a solution. The Enterprisers Project states, “In organizations already struggling with alignment around a complex issue, a lack of common meaning for a common term quickly moves from infuriating to completely derailing.”
Acknowledging “digital transformation” as only the first of many steps means that institutions can quickly pivot to developing detailed growth plans that truly reflect their needs and the needs of their customers and communities.
“There's a massive shift to being more digital and Narmi’s working every single hour of every single day to help there. That being said, focus is key. Being ‘digital’ is not a strategic plan. Being ‘digital’ is not an obtainable goal.” – Nikhil Lakhanpal for Bank Director’s FinXTech Xchange
First and foremost, transformation – digital or otherwise – does not exist in a vacuum. Too many institutions assume that a “digital transformation” is something that only exists in the ecosystems of IT and engineering, but it’s much deeper than that; transformation starts in the institution’s very structure, culture, and DNA. If those aspects are not fully recognized, the project can fail.
Other issues that can negatively impact transformation efforts include lack of cultural alignment, not hiring or keeping the right talent, and not having clear, articulated goals.
The most important thing to understand is that transformation is never limited to one department or product feature. For positive change to occur, a holistic approach is crucial. Consider how these changes will affect the organization as a whole and how different departments can contribute to the transformation. This also means you’ll need a culture of cooperation, communication, and collaboration across your entire company.
Financial institutions also must assess the technology they actually need vs. the technology they don’t. There are a thousand tech innovations made every day, but how many of them are really right for you and your customers, and how many might actually make processes more confusing and less efficient, or are just trends that aren’t relevant to what your people want? Careful research into the right tech will mean less backtracking, less unexpected gaps, and less time, money, and energy wasted.
Then there’s project timelines. Nothing meaningful happens overnight, and no lasting change is made in a short time. On the other hand, dragging out a transformative process is costly and leads to both internal frustrations and a negative experience for your customers and members. . That’s why it’s important to implement a realistic, and editable, timeline for projects. And since culture and technology are always changing, no “transformation” can ever really be complete. Staying current with digital expectations is an ongoing process, so it’s wiser to see it as a series of interconnected projects rather than a monolithic overhaul.
Finally, understand that the transformation may need to be more than digital, which means you might need to think about what really needs to change. Is the problem something that can be fully solved by implementing new tech, or is it something deeper?
The first step for any institution is to make sure everyone on your team is aligned, informed, and excited for change. Therefore, it’s crucial you talk about the project in the right way. For one thing, leave the phrase “digital transformation” at the door. Instead of generalizations, talk about your evolution in your terms. Make your team aware of what “digital transformation” means for your specific institution as a whole, and for each department. Use clear, concise, and direct communication for every goal.
Declaring you’re going to change something always invites the question of why, and if there’s no clear answer it’s not going to generate excitement. In fact, it may do just the opposite. A lack of a clear goal will also result in lack of alignment and see people trying to fill in the gaps on their own and thus going in diverging directions. So start with the goal, and come up with a realistic plan of how to get there.