As the banking industry undergoes a dramatic evolution, CEOs and their leadership teams will play a fundamental role in deciding the success of their banks through digital transformation. But transformation is not just about the underlying technology – transformation is truly a transformative experience, re-shaping entire processes, skill sets and cultures throughout an organization. As such, Chief Technology Officers as well as their peers throughout the enterprise must do more than just invest in technology – they must develop digital strategies that can be truly impactful and this can only happen through collaboration, discourse and education.
Technology is transforming our daily lives and is introducing non-traditional competitors to even the most established industries, including banking. With the rise of Google Wallet and ApplePay, P2P lending and Bitcoin / blockchain, the traditional bank as we know it is facing unique pressures. In a recent University of Oxford and Said Business School “CEO Report,” CEOs highlighted the importance of discerning the true speed of change, with 94% emphasizing the pace or speed of change. Across countries and industries, CEOs of small to large organizations are turning to digital transformation as a means to adapt and succeed. Francisco Gonzalez, Chairman and CEO of BBVA, recently went so far as to say that he predicts that in the next 20 years, we will see the world go from 20,000 “analog” banks to no more than several dozen “digital” institutions.
Although digital transformation is undeniably necessary for banks, very few have completed it and most are just beginning to fully embrace digital. A 2014 McKinsey report “The Rise of the Digital Bank” stated that across Europe, retail banks have digitized only 20-40% of their processes and that 90% of European banks invest less than .5 percent of their total spending on digital. With so many institutions beginning or amidst digitization, there is likely no one “right way” to pursue digital but many best practices based on shared challenges and solutions. In a world of “adapt or die” – banking executives should be pursuing a strategic approach to transformation, using every available resource to define and then deploy best practices. Discourse between banking executives around the world is invaluable to the transformation process.
Digital transformation traverses the entire knitting of an organization, from its processes to its culture to its people. Executives need to shape the entire digital trajectory of their organizations and obtain the crucial buy-in needed to help these programs succeed. This is best summed up in a recent MIT Sloan Management Review titled “Strategy, not Technology, Drives Digital Transformation”: “What separates digital leaders from the rest is a clear digital strategy combined with a culture and leadership poised to drive the transformation. In order to develop a digital strategy, executives must look to education and peer-to-peer discussion to better understand how best to develop and execute an effective transformation strategy.
While an emerging bank in Latin America may have vastly different challenges and needs than a top 5 bank in the US, there is much to be learned from both successes and failures that these organizations have experienced along each step of the digital transformation journey. Bank CEOs need to tap into the collective wisdom and insight of their community. This is highlighted in the “CEO Report” where one CEO firmly declared himself “out of the second-guessing game because it will drive you crazy,” but later advised that “you have to have people you can go to, a network, to say ‘Look, I’m really struggling with this, can I get your opinion, your advice?’” expressly adding that “if you don’t, you’re not doing your homework.”
Given the foundation-moving nature of a comprehensive digital transformation process, CEOs can’t afford to not be getting advice or doing their homework. As such, we encourage CEOs and executives to find every opportunity to educate themselves about the latest research, developments, insights and case studies emerging from their industries. Opportunities for such discussions do exist – such as the Oxford Polaris Digital Academy, at which we’ll be bringing together academics, executives, analysts and consultants to deeply engage in peer-to-peer discourse and learning. We will use the Polaris Digital Maturity Model to help these executives understand at what point their organization is their journey to become a truly digital organization, and what steps they will need to take in order to reach their goals. We hope that through rich and fruitful discussions that we can benchmark where banks are in their digital journeys and brainstorm potential solutions for challenges along the way.
About the Author
Dr. Ted Roosevelt Malloch is a Senior Fellow in Management Practice at the Saïd Business School, University of Oxford, and is a PhD in international political economy. He is Program Director for the Oxford Polaris Digital Academy, which is an exclusive two-and-a-half day executive education program that is designed to provide leaders in financial services firms with the insights needed to address their organization’s digital transformation. Held at Oxford University, the Digital Academy is a unique learning experience that combines an academic perspective from the Oxford faculty paired with numerous banking industry leaders who have led their company’s digital transformation.