4 Non-Tech Steps to Digital Transformation Success in Banking

Technology and processes are rarely to blame for shortfalls in going digital. People are where the problem can usually be found. The solution lies in human-centric change management. It's the only way financial institutions can truly transform to meet the challenge of changing consumer expectations and increased competition.

Banks and credit unions of all sizes have been investing heavily in ambitious digital transformation programs in recent years. The results, however, have been decidedly mixed.

For financial institutions that get stuck with the old ways of working, it’s easy to blame the technology, the complexity of existing processes or the scope of the overall change program. But the difference between transformation winners and also-rans is more likely a focus on the people-centric enablers of change. These include requisite talent, clear communication, effective training and cultural alignment.

To put it more bluntly, many transformation initiatives fail because bank and credit union leaders fail to articulate a clear vision, communicate it persuasively, or inspire and equip the people and teams necessary to turn it into an operational reality. These factors comprise human-centric change management, a proven enabler of better transformation outcomes.

Human-Centric Change Works Inside and Out

It may seem somewhat counterintuitive that people are the key to unlocking the value of digital transformation, with its focus on automation and advanced technologies. But without effective leadership and communication, behavioral change, and fresh thinking, new ways of working simply won’t take hold — no matter how smart the technologies or streamlined the processes.

This is true for all kinds of digital transformation — both internal and external. In fact, internal change management can be seen as a mirror image of customer-centric engagement strategies.

You have to communicate with customers and “train” them to use a new mobile banking app, in-branch kiosk or self-service chat. Clear marketing messages can help customers understand what’s in it for them and why it’s worth doing things differently.

“Bank and credit union leaders must ‘market’ new ways of working to employees, just as they market new products to customers.”
— Fabrice Albizzati, Ernst & Young

It’s the same with employees. Bank and credit union leaders must “market” new ways of working to employees, just as they market new products to customers. That means making clear why and how new systems, collaboration platforms or agile work styles are important and beneficial.

Strong incentives may be necessary to drive and sustain behavioral changes. That means banking providers must invest in change-management capabilities along with their investments in expanded digital channels, the personalization of experiences and automated processes.

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Traditional Banking Business Model Will Change

Change management is especially important for traditional financial institutions now as fintech startups and major technology firms disrupt the market. At the same time, consumers are looking for their relationships with financial services providers to deliver increased trust, more personalization and improved financial wellness.

Consider that our research shows how shifting trust dynamics will reshape the U.S. financial landscape and prompt the movement of $11.3 trillion in assets during the next five years. Approximately 70% of consumers across the mass market, mass affluent and high net worth segments are interested in new types of product and service offerings, such as subscription models tied to specific life events, like buying a home, getting married and retiring.

These are market shifts of unprecedented scope. Banks and credit unions must rethink their fundamental value proposition to consumers and the business model through which they deliver that value. They simply must master the ability to change if they are to seize the opportunities and defend against disruptive threats.

4 Steps Define the Path to Effective Change Management

The following four recommendations can help banks and credit unions develop and scale the capabilities they need to drive successful change.

1. Assess the change capabilities you have today and what you need for tomorrow. A comprehensive audit can identify gaps and clarify needs in a range of areas. Among the most important ones to focus on:

  • Cultural and leadership alignment among different business units, functional areas and product lines
  • Current levels of employee engagement, motivation and sentiment, including traits the organization would like to keep and reward
  • Existing behaviors, particularly for processes and operations most likely to be affected by digital transformation
  • Current talent levels and skill sets, with mapping to likely future needs
  • Leadership’s ability to create, articulate and advocate a vision for change

Initial assessments can clarify the potential impact of leadership and teaming strategies versus learning and development offerings. Similarly, analyzing employee sentiment may reveal how best to motivate people and identify the most influential operating model levers.

2. Focus on skills and talent. The right talent and skills includes technical expertise in areas ranging from data science and analytics, to marketing and project management, to risk management and compliance. It also requires identifying which leaders are best suited to kick-start change.

Employees must be ready for changes in both what they do and how they do it. This includes working remotely, collaborating on cross-functional teams, sharing data more openly, and adopting new tools and processes.

Banks and credit unions must also prepare to compete intensely for scarce resources, such as application developers, artificial intelligence specialists and data scientists. The “war for talent” requires a rethinking of hiring, recruitment, and retention strategies and tactics.

It’s worth noting that generational shifts in the workforce mean that new hires may be looking for a greater sense of purpose, clear development paths and work-life balance in their packages, alongside more traditional inducements of salary and benefits. Forward-looking business and HR leaders develop personas and “worker journeys” to attract such people.

Finally, extensive learning and development programs will be necessary to reskill and upskill existing workers so they can perform higher-value work. Such training should focus on those whose jobs will be affected (or eliminated) by robotic process automation and artificial intelligence, but not exclusively so; plenty of other workers would benefit from reskilling, with the goal of creating benefits for the company as well as the employee.

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3. Start small to scale big and go fast. Implementation teams must develop plans for testing, initial deployment and, ultimately, scaling. Experience teaches that scale starts small, typically with targeted pilots in one region or with a contained set of users.

Pilots that embrace a test-and-learn approach allow stakeholders to make adjustments quickly before rolling out more broadly across the enterprise.

Speed also counts. Initial sprints with select user groups help establish the mechanics for success, which usually include:

  • Real-time reporting to provide stakeholders timely updates
  • Ongoing engagement with affected individuals to prepare them to support and reinforce the deployment
  • Iterative change deployment, including planning and execution
  • Communities of practice to reinforce mindset shift and drive feedback to product and development teams

Early adopters can quickly provide valuable lessons learned for navigating common challenges. They also help accelerate change by modeling new target behaviors for the rest of the organization.

4. Equip the organization to play the long game. More banks and credit unions recognize that they are playing a long game with digital transformation. It’s an ongoing pursuit, rather than a one-off project. They should take the same long view of the organizational ability to sustain change.

Some forward-looking institutions have established transformation and change-management offices so there is leadership and accountability relative to ongoing change. They also use talent and technology road maps to ensure people and teams are fully equipped going forward. Further, they set clear criteria and metrics for success, monitoring adoption and refining plans based on feedback.

The bottom line is that digital transformation is really business transformation enabled by technology and driven by people and talent. Change management is how banks can get the second part of the equation right.

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