Across every industry, companies are scrambling to reinvent themselves for the digital age. But here’s a sobering fact: a staggering 70% of digital transformations fail.
Banking isn’t immune to this failure. Despite years of plugging away at change, only 16% say their digital transformations have improved performance. Less than 50% say they’re prepared for new competitors and rising customer expectations.
What’s so difficult? Why do so many attempts at digital innovation fail? Well, here are the 5 main reasons we believe cause digital transformation projects to run into trouble.
The 5 blockers that can sink any project
1. Hitting the legacy hurdle
No list of this kind would be complete without mentioning legacy tech. It’s the problem that simply won’t go away: 57% of retail bank execs still say legacy systems are the number one barrier to digital progress.
From running updates without disrupting day-to-day operations to rolling out new products, everything becomes a struggle. Outdated infrastructure has the potential to sink even the most well-managed transformation project.
2. Struggles with scope and scaling
Sometimes, we can’t help thinking of transformation without a capital ‘T’: the enthusiasm is there, the resources are available and so they’re going to transform everything all at once. But taking on too much is a big mistake. When your project scope is too wide, you risk burning through your budget and burning out your team.
That doesn’t mean starting small is without its problems, though. Plenty of banks have failed to set up transformation projects with scaling in mind. They may get lost deep in a business silo when they need cross-unit support to thrive, or there might be a gulf between the digital capabilities of running a pilot and what’s available to scale it.
3. Moving at the wrong speed
Speed is a tricky one.
Banking executives are under pressure to keep up with their competitors, but rushing to market can lead to cutting corners: less time spent on putting a product through its paces can see them launch something that really doesn’t cut it.
On the flip side, dragging out a digital transformation project can kill momentum and sap a team’s belief in what they’re doing. Often, what’s delivered in the end doesn’t provide the value that got everyone excited in the first place.
4. Losing the customer
A sure-fire way to wind up with a project that doesn’t provide long-term value is starting without a crystal clear understanding of customer needs.
Too many banks still believe that digital transformation is about systems and workflows, so the customer’s voice gets drowned out by a gung-ho chorus fixated on the latest tech. You can deploy the most advanced stuff in the market, but if you aren’t solving for the customer, you’re still failing.
5. A culture stuck in the past
Legacy culture is a major drag on digital transformation. The concept is pretty broad, so let’s just look at three aspects:
1. If success depends on collaboration, on teams working together to achieve project goals, then the way banks are structured is one of the biggest blockers. Silos do not make working across units easy.
2. Transformation projects throw up all kinds of surprises, but legacy culture makes for rigid thinking. The problems start when a project calls for flexibility, speed and decisiveness, but the culture doesn’t support a shift towards a more agile mindset.
3. Risk-aversion culture is a real innovation killer. It impacts everything from being able to spot new market opportunities to whether a bank can look beyond its vendor pool and partner with the kinds of fintechs that can speed up change.
Culture isn’t a wishy-washy concept: it has real, material impacts, and it’s been the driver behind enough failures to make people sit up and take notice.
So what should you do?
Now you might think that with problems like these it seems pretty hopeless, but that’s not the case. It’s just a matter of getting the approach right from the start. Here are 5 tips for banks starting out on a digital transformation journey.
1. Partner with fintechs to speed up change
You can’t cast off legacy overnight, but you can get the right foundation for digital transformation in place by gradually migrating away from it. Tap into the power of plug and play fintech solutions to roll out customer-centric digital journeys at speed.
2. Get the right people in the room
No more siloed thinking. For digital transformation to succeed, the right people have to be in the room from the start. This isn’t just about getting ‘buy-in’. It’s about building a cross-functional team made up of people from product, risk, distribution and IT. They’ll need the tools and authority to get things done, which is why C-suite support is so important.
3. Stay focused on the customer
Keep the customer front and centre. Focus on the most important journeys in their banking relationship and start there, because transforming them will unlock the most value. Resist the temptation to go down the tech rabbit hole. Customer first.
4. Look for quick wins to build momentum… and then keep delivering
Try to demonstrate value quickly and keep the enthusiasm for change up. Digital transformation is a journey, so maintaining energy is important. Work towards the big vision through incremental steps that get results.
5. The C-suite should lead
The most successful digital transformation projects are led by a CEO (37%) or Chief Digital Officer (17%). Why? Because they can actively drive change and set the tone for a company-wide culture shift.
For more information on how to ensure your banking project is set up for success, talk to our team.