The COVID-19 pandemic has changed the way people work, shop, communicate and bank. The immediacy of the change, and the need to respond to the digital needs of consumers and businesses revealed a gap between those organizations who had embraced the process of digital transformation and those that did not.
While you can argue about the degree to which digital transformation has occurred, it is clear that the world has embraced a digital lifestyle more in the past few months than had been the case for years in the past. As Ron Shevlin, Managing Director of Fintech Research at Cornerstone Advisors aptly points out in his excellent article for Forbes, “Digital transformation (especially in banking) doesn’t occur in only 3 months.”
Shevlin argues that there are four prerequisites for digital transformation in banking:
- Overhaul of legacy technology
- Maturation of artificial intelligence
- A new generation of senior executives
- More ‘shocks’ to keep complacency at bay
From my perspective, the one component that supersedes all others is the need to have leaders with future vision and the courage to act. Unfortunately, as I mentioned in my article, “Cautious Banking Leaders Ambushed By Their Strategic Blindspots,” many leaders have a ‘willful blindness’ that leads to underestimating the threat of disruption while overestimating the difficulty of response.
The differentiation between winning and losing post-crisis will be that the winning organizations didn’t simply respond to the current crisis that confronted them, but had a clear vision of what the future business environment may be. Preparation for several alternative scenarios will be needed since there is no crystal ball or playbook that can tell us what the future may bring and when the ‘new normal’ may take shape.
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Look Beyond the Crisis
Most financial institutions responded to the challenges and opportunities that have occurred since March with amazing agility. The implementation of new digital account opening capabilities, the support of small business PPP loan processing and the communication of digital options to previously non-digital consumers occurred despite the disruption in the way teams worked and conducted business.
It is clear that what has happened in the past few months has tremendously impacted the digital transformation trend lines of change going forward. Not just in banking, but in all industries. From online shopping to telecommunications, entertainment and even the delivery of healthcare, the past will not be a good indicator of the future.
It is time to move beyond crisis management and on to envisioning the future of each organization. This vision will not need a clear picture of what’s going to happen in the industry – what is needed is a vision of how each bank and credit union will create and deliver financial services in the future in light of what we assume the future will bring.
Leaders Must Refine and Retool
The vision for the future must come from the top, but must be reflective of changes that are needed across the organization. While 30 to 40 years of banking experience may have been an excellent foundation for leading when times were prosperous and change was incremental, this experience has less value in a post COVID-19 world.
Many organizations lack the talent to fully understand what is required to become an organization positioned for a digital future. This digital talent is requisite to see beyond the legacy banking business model and legacy culture most banks and credit unions have become accustomed to. In addition, leaders need to fully understand the collaboration across the institution that will be impacted by the changes required.
For leaders to retool, they will need to look beyond the banking industry. In a world where virtually every business and every region of the world are interconnected, it is imperative to understand what the leaders in other industries are doing as well as how financial institutions in other countries are creating a vision for the future – many organizations (BBVA, CaixaBank, ING, AliPay, WeBank, DBS, etc.) have prepared for the digital shift for years.
The foundation for this retooling will be intellectual curiosity – the need to seek insight from others who may better understand technology, innovation and digital capabilities. These conversations will draw on the communication skills, authenticity and motivational skills learned over the years, but will also require a heavy dose of humble pie and an open mind. In some organizations, an entirely new leadership team may be required.
According to bestselling author, Lolly Daskal, who wrote the book, ‘The Leadership Gap’, there are eight keys to leading through crisis:
- Brainstorm. Use internal and external teams to explore a range of future potential scenarios.
- Discover Opportunities and Threats. With each scenario, understand the risks and rewards.
- Maintain a North Star. Stay true to your organization’s values, mission and priorities.
- Be Agile. Be proactive and move confidently in the direction agreed upon.
- Learn from the Present. Use current trends to shape future plans.
- Commit to Collaboration. In times of change, collaboration creates commitment.
- Connect Vision to Purpose. Despite a vastly different plan for the future, remain aligned with your organization’s mission.
- Have Courage. Get out of the comfort zone and embrace the change ahead.
Include Your Board of Directors
According to an article in the MIT Sloan Management Review, boards of directors can be a valuable asset during a crisis and beyond. “Being removed from day-to-day operations,” the article states, “independent directors can help management teams battling in the fog of war to pinpoint the critical factors for survival while uncovering opportunities that will allow the company to emerge stronger in a radically reshaped world.”
Obviously, the value of the board is highly dependent on the composition of the board relative to the task at hand. Unfortunately, many boards of directors still lack depth of knowledge in the technology and digital worlds. In some organizations, the board has been in place for so long, they have some of the same legacy cultural issues the organization has itself.
That said, if they do their role as intended, they can be a valuable sounding board and can push the leadership team to search out new solutions and supplemental action plans. They can challenge leadership to go beyond their comfort zone and can enlist outside help. They can also keep the leadership team focused with an unending push for speed.
Probably most importantly, the board of directors will need to evaluate financial risk in an unknown future. It will be incumbent on them to help move away from a quarterly perspective to a longer term view that allows for business plan transformation.
A New Normal Beyond the Crisis
We are not out of the first phase of this coronavirus crisis. We don’t yet know which changes that have already occurred will continue into the future, which changes will accelerate, and which will revert to what once was.
No matter which way the trend lines point, banks and credit unions will need to develop and refine their short-term tactics and long-term strategies. From remote work, to a doubling down on innovation and new technologies, to a complete upheaval of delivery strategies, leaders will need to get out of their comfort zones and embrace a future never imagined.
During more prosperous times (earlier this year), the timeline for implementation of a digital transformation strategy was thought to be 3-5 years. That perspective is no longer viable. Consumer and business customers expect much more. They expect what they are receiving from digital-first organizations.
As with any change initiative, communication will be the key to success. Communication within the organization, communication with peers and competitors, and communication with organizations outside the industry.
It is a time to learn and grow. It is a time for leadership that will move beyond what was known in the past to a still undefined future. It’s a time for courage. That is the only way to ensure that all parties are in alignment and that each person knows how they can help the business survive in the short and long term.