For many businesses, digital transformation is now a key business priority that requires immediate resolution. With 85% of enterprise decision-makers stating they have a two-year period to make significant inroads into digital transformation or they will fall behind their competitors and suffer financially[i] and $1.18 trillion predicted to be spent globally on digital transformation technology and services in 2019[ii].
The reality is that transformation is unique to each individual business, and often fraught with challenges. It’s expensive, time consuming, and changes may need to operate alongside existing legacy systems and BAU governance as they’re being introduced. (Which could be why Capgemini found that 50% of banks and 56% of insurers were found to have barely started the digital transition and are thus being classed as beginners[iii].) With less than one in six organisations delivering successful digital transformation programmes[iv] and just 12% of global financial institutions considered a ‘digital transformer’ by Gartner[v], it’s clear that many companies struggle to get it right.
Ross Timms, Head of Strategy at Rufus Leonard, shares how financial services organisations can overcome the two main barriers to successful digital transformation: definition and impact.
Choosing the right transformation
To be successful, you need to know why you want to transform, and therefore what kind of transformation your business needs. Following 30 years of helping business leaders transform their organisations – from BT’s first website in 1994 to BBC’s future of voice strategy in 2019 – we typically see three distinct types of transformation, each with their own characteristics:
- Change how you do business: responding to changing consumer demands, running the same fundamental business but delivering it in new ways, with new processes and through new technology.
Example: Fidelity – one of the largest asset managers in the world, which is over 70 years old – have invested $2.5 billion a year on technology through Fidelity Labs and Fidelity Centre for Applied Technology to deliver new and innovative products to the market. With a focus on blockchain, artificial intelligence and virtual reality, they have launched an interactive money check-up, a first-of-its-kind brokerage app with a customised feed based on user assets, and FidSafe which is a free secure online tool to store all of a family’s most important documents. Fidelity have also been transitioning into a new style of business; interestingly, one that competes with tech firms like Nvidea rather than their traditional Wall Street rivals like Charles Schwab.
For Fidelity, their success is clear to see. In 2018, despite a slowdown of stock markets (the worst performance in a decade), Fidelity was able to hit record financial performance; with a 19% operating income rise, 12% boost in revenue to a record $20.4 billion and hit annual income over $6 billion for the first time.
- Change your business: changing your business offering and responding to evolving needs and behaviours by solving problems in new ways.
Example: To create products and services for SMEs, NatWest decided not to use their existing business and infrastructure. Instead they launched Mettle, a new digital-only business current account. Mettle is just one example of an innovative solution coming out of the bank’s portfolio of initiatives, ventures and products to better support SMEs across the UK – responding to customer needs with new features developed quickly.
Plus, NatWest Tyl, the bank’s re-entry into the merchant acquiring market was announced in May; NatWest APtimise, the UK’s only end to end accounts payable solution; and automated lending platform ESME, which announced in March it has already lent over £50m to UK businesses. These all offer business customers more choices in banking.
- Change your market: understanding how changing behaviours will create new markets and being there to meet that demand first.
Example: With a clear transformation strategy set out; moving from a products-based company to a platform, PayPal has delivered innovation, digital experiences and partnerships which have set it totally alone in the digital payments market. The company’s ability to evolve through innovation while providing customers with more freedom in how they want to pay has been key to this.
Most recently, PayPal have created partnerships with banks to enable customers to sign-up to PayPal using their bank card, link reward points from multiple banks to their PayPal wallet, and used its open technology platform to expand partnerships with the likes of Google and Apple to allow payment using PayPal account and fingerprint authentication.
In 2018’s full year results, PayPal posted growth across the board due to its transformation efforts. This included revenue growth of 18% to $15.45 billion, a 17% increase in active accounts to 267 million and 9.9 billion payment transactions which was a rise of 27%.
The drive to digital transformation needs to balance two things: the practical need and the requirement for a north star. The former is driven by pressure on profit and the need to move at the speed of the consumer. The latter is driven by your company’s mission, purpose or vision. Aligning your brand to your technology gives your platform a purpose, a role beyond the practical and a clear point of focus which drives transformation efforts.
Find your single point of focus
Defining the purpose of your transformation programme is integral to measuring its impact and success. Once you’ve defined your ‘why?’ you can distil this into a single point of focus that explicitly meets top-line commercial objectives.
Looking back at our three brand examples, all of them can demonstrate this single point of focus. Fidelity aligned everything back to their ‘Community Bank’ vison. NatWest decided they need to offer simple banking in an SME environment. And PayPal have always had a pinpoint focus on democratising financial services to enable everyone to participate fully in the global economy. That single point of focus gave each of these businesses a clear steer on how to define both growth and performance objectives.
In turn, this single point of focus acts as a guiding star for how to leverage your brand, how to shape your customer experiences, understand what’s required of the organisation and your technology platforms. Ask yourselves, ‘how might we defend or improve our brand market position/ensure ongoing user relevance/create internal alignment/maximise platform performance?’.
Measuring the impact
Understanding this creates a clear platform to identify and align KPIs across the organisation. Do you need to increase brand value/equity or increase share price? Do you need to create channel shift through self-serve or improve customer satisfaction? Do you need to reduce employee churn or improve workforce utilisation? Or, finally, do you need to increase platform utilisation or ensure security of data and information?
This approach makes sure that a micro view on performance aligns back to the macro measurement of impact and progress. It gives the business the levers it needs to keep everyone on course over a multi-year programme of significant change. And, crucially, it provides a clear goal to galvanise everyone in the business.
In recent years, we’ve helped brands like the Aviva, AA and Lloyd’s Register tackle large-scale digital transformation. As a result of facing off the challenge of delivering successful transformation, we’ve created the Business Impact Matrix. Built on the principles explored here, the tool establishes a clear point of focus for all business units, aligning growth and performance activities. It ensures that all customer-facing and colleague-facing activities align to a shared goal and clearly aligned objectives. The tool drives a process of prioritisation, helping to align separate agendas and providing a clear framework to decide what to do first, second and so on.
However, you choose to define success, bringing both vision and impact into a single tool is the biggest single step any organisation can take to make sure they are part of the 15% of companies that are successful with their transformation ambitions.[vi]
[ii] IDC – Worldwide Semiannual Digital Transformation Spending Guide
[iv]The Digital Helix
[vi]The Digital Helix