The pandemic is about to enter its third year, dominating our collective consciousness on a personal and business basis. At the beginning, financial institutions reacted quickly, developing new products and improving the digital experiences of products built for an analog era.
As the impact of the pandemic continues, banks and credit unions are focused more on digital transformation than ever. With a goal to become future-ready, organizations are changing the way they deliver services, the level of automation of back offices, how and where work is done, and the focus of leadership. The question is – what will the future bring?
According to futurist Mike Walsh, the changes we continue to see in response to the pandemic are the foundation for a new world that runs on new rules. Mike discusses several of these new rules and the changes we will see going forward in an interview on the Banking Transformed podcast.
The Future is Uncertain
Digital transformation requires a combination of many components, including advanced application of data and analytics, new ways to interact with customers, incremental innovations done faster than ever before, new alliances and partnerships, and new deployment of talent, states Walsh. The interaction of these components will sometimes lead to unexpected results that will completely redefine legacy business models. The question Walsh tries to address in an article in Harvard Business Review and on the Banking Transformed podcast is, “How do you navigate a transformation from what you know to what you have yet to define?”
Walsh believes that a proactive approach to digital transformation will focus on three principles:
- Act ahead of the marketplace. The application of data, AI, automation, and modern technology allows organizations to move quickly, ahead of the majority of the marketplace. Speed of transformation will be a competitive differentiator. Partnering with fintech firms, big tech organizations and solution providers enables this focus.
- Increase velocity of learning and deployment. Rapid learning is what allows firms to evolve faster than the competition. Tremendous power exists in the potential of incremental learning and improvement creating a ‘flywheel effect’ for the delivery of significant results.
- Invest in capabilities, not competencies. “The best response to uncertainty is not a retreat to the familiar, but a bet on your capacity to explore the unknown,” states Walsh. Organizations must avoid simply digitizing what has been done in the past. Instead, they must use data, AI and modern technology to keep options open for the future.
Below are excerpts of my discussion with Mike Walsh. He discusses how these changes in our environment are resetting the business model for all industries, not just financial services.
What are some of the new rules that will govern 2022?
Walsh: Most of what had been accomplished in digital transformation before the pandemic was more incremental than transformational. Everything that we thought was going to be the future in 2030, ended up just being how we get through the next 12 months. This means that we now need to reset our expectations about what innovation really looks like, because no one’s impressed with you having a mobile app anymore or having a digital channel, or having some level of automation, or accepting digital signatures. Let’s face it, if you hadn’t figured out how to do these things in the most recent period, you’re probably no longer in business.
What’s possible today that wasn’t possible pre-Covid?
Walsh: You’ve got a much more digitalized ecosystem and you’ve got a lot more computational power available at cheap prices. So, now we can start with a clean sheet of paper and we can say, “Okay, rather than just trying to digitalize our existing business, what really is a bank? How do we rethink presenting risk and reward to the consumer? If we stop trying to sell them a product or service, what are customers really trying to achieve at different life stages? And how do we engage customers in a much more hyper-individualized, hyper-personalized way at scale?
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How has the concept of customer experience changed?
Walsh: The best kind of engagement is when you actually don’t pay attention to the engagement. What defines an AI-powered organization is the quality of experiences it can deliver for its customers and its stakeholders. If you look at companies like Spotify, Uber, and Netflix, what they have in common is that they’ve shifted the customer’s focus from the underlying transaction to the experience. We’ve started to move into this realm of algorithmic experiences, where companies are leveraging artificial intelligence and data to create hyper-engagement that drives value.
We are at a point now where data is a two-way relationship … not only can you use it to personalize what you offer to the customer, you can actually use it to generate entirely new products and services. We’re in a new realm, not of digital design or interface design, but truly of experience design.
What do you envision as the future of work?
Walsh: The ‘Great Resignation’ is actually accelerating automation. Since no one can find people to work, they’re doubling down on automation, artificial intelligence, and machine learning. When more people reenter the workforce, we need to start to define what a human’s good at and what a machine’s good at. Part of being an effective human leader or worker in the future will be the ability to constantly reinvent yourself. Likewise, the key component of someone you want to look for in the future, is the ability to destroy their own job
How do you view a successful leader in the future?
Walsh: I refer to a quote from Walt Whitman, “Be curious, not judgemental.” This is because if a leader is judgmental, they’re closed-minded, don’t see new opportunities, don’t adapt new ways of working, and don’t take in more data. Alternatively, if a leader is curious, they’re open to adapt and open to change. So, the most valuable characteristic in leaders in this new world isn’t the ability to program or code or understand technology. It’s about being open-minded, adaptable, critical, and probabilistic.
In this new environment where things are changing constantly – where we’re being asked to pivot, to reinvent businesses, to change overnight – sometimes you have to be prepared to act with 60%, 70% certainty.
What role does culture play in the future?
Walsh: I believe we spend too much time and intention on building a data infrastructure, without trying to understand how to build a data culture. What’s going to differentiate a good company from a great one — an industry-shaking transformative organization — won’t be the amount of money spent on tech, but the internal cultural operating system that they’ve figured out. It’s about the complex system of interactions that govern how people make decisions, how they interact, how they communicate, how they collaborate, and especially, how effectively they can do that in a hybrid environment.
What will have the biggest impact on business in 2022?
Walsh: There is a high probability that next year will be harder than this year with regard to the pandemic. It’s harder because people don’t want to go back under control, under regulations. They want to be out, they want to be interacting. This will create a really big challenge in the workplace … how do firms get hybrid work to function effectively? We haven’t learnt how to build a distributed organization with delegated authority that allows people to make decisions effectively without all physically being in the same place together.