Why You Need a Chief Digital Officer to Drive Digital Banking Success

Financial institutions can't leverage new technologies, deliver a killer experience and create competitive differentiation without the right person to shepherd their digital transformation strategy. Meet your new "Chief Digital Officer."

In less than a decade since the iPhone burst onto the scene, digital banking tools have become some of the most popular apps people use today. According to data from Citi, only social media and weather apps are more widely used, and this explosive growth isn’t going to slow down any time soon.

In 2018, financial institutions will spend $390 billion in digital transformations. By 2021, that number is projected to swell to $668 billion. As more banks and credit unions automate and digitize their offerings, the more critical the people developing and supporting these digital frameworks become.

For quite a while now, it’s been common for most financial institutions to have a single point person responsible for keeping the technology train kept moving, typically either a Chief Technology Officer (CTO) or Chief Information Officer (CIO). However, technology and innovation are no longer mere components of a financial institution’s infrastructure. Rather, they’ve become the central drivers of business strategy.

Reality Check: Having a single executive in charge of both technology and digital transformation is a recipe for failure.

Don’t get me wrong, the banking world still needs CTOs. It’s just that digital banking — given all its complexity and nuances — should be treated as its own entity, with its own Chief Digital Officer (CDO).

Your CDO should have a strong grasp of consumers’ needs, preferences and expectations, and they need the ability to design financial products that meet them. Your CDO will also need to have strong HR/people skills — a knack for hiring and developing talent, as well as for fostering a dynamic, collaborative, and creative environment.

Normally, a CDO could report to your organization’s CTO or CIO, whose job it is to oversee all innovation and technology at the financial institution. However, it is possible for a CDO to be on equal footing with the CTO, and therefore report directly to the CEO.

Finding The Right Talent That Fits Your Needs

PwC identifies five archetypes for a Chief Digital Officer — descriptions of typical roles CDOs might play. “Each of these archetypes fulfills a more or less specific need,” PwC explains, “depending largely on the company’s current Digital IQ and its digital strategy and ambitions.”

The archetypes are not intended to describe specific characteristics of the CDO any particular company should hire. Instead, they are best thought of as the “primary colors” each company can mix in the right proportions.

1. The Progressive Thinker. This executive’s mission is to think imaginatively about how the business could be transformed through digitization, and to provide the inspiration as the company moves to a fully digital strategy and operating model. This is a CDO who can bring the inspiration and expertise needed to further digitize a company’s current strategy.

2. The Creative Disruptor. Offers a more hands-on approach to the continuous development of new digital technologies, business models and solutions. They should work directly with the CEO on a business-driven approach to generating the competitive differentiation that will lead to revenue growth and increased profitability, often by incorporating ideas and technologies from outside their traditional industry structures and conventions.

3. The Customer Advocate. Focuses on the development of a convenient, engaging, and seamless customer experience using design thinking across all channels, digital and physical. As such, he or she is responsible not just for the online sales function, but for the follow-up maintenance and post-sales service operations as well.

4. The Innovative Technologist. The goal of the innovative technologist is not typically to disrupt the company by introducing ways of doing business from other industries, but rather to work within industry boundaries while leveraging digital technologies to gain competitive differentiation. They promote the use of new digital technologies to transform the organization’s entire value chain, providing the groundwork for new digital business models while improving internal efficiency and finding ways to cut costs.

5. The Universalist. Manages all aspects of digital transformation and oversees the full the spectrum of digital strategy — from business models and the customer experience to digital technologies and marketing. A universalist should also be in charge of the internal organizational and cultural change management process.

“Technology accelerates you in the direction you’re already going. If you’re going the wrong way, you can start going really fast.”
— MIT Media Lab Director Joi Ito

Your organization needs a solid understanding of what it wants to accomplish before selecting one of these archetypes as its next CDO. Do you need someone who can leverage the latest technological innovations and build your organization’s digital transformation roadmap around them? Or do you need a visionary thought leader who has free rein over innovative projects that will touch every part of the business? The archetype that fits the best depends entirely on the needs of the banking organization, and it’s crucial to fill the position accordingly.

Finding the right CDO is perhaps the most important personnel decision a financial institution can make today. The CDO will be the foundation on which the entire strategy and team is built. Every personnel, structural, and operational decision that follows will be in their image.

Pick the wrong CDO and it could spell disaster. If the CDO’s values and vision for the digital transformation are not consistent with that of the financial institution, the organization will end up with a far bigger problem to manage than what it started with.

“Technology accelerates you in the direction you’re already going,” as MIT Media Lab Director Joi Ito says. “If you’re going the wrong way, you can start going really fast.”

Tending ‘The Digital Garden’ With Experienced Hands

There’s a common fallacy about digital transformation in the banking industry: that building digital banking tools is like building a house; once it’s constructed, the project is finished. The only thing you need is great people to build the tools, and once it’s done everyone can move on.

The reality is that creating digital banking tools is not at all like building a house. A better analogy would be tending a garden. A great digital banking tool is a feedback system constantly in development and requires regular maintenance. No matter how sleek and well designed the tool is when deployed, the project isn’t over when you hit the “launch” button.

While automation tools can perform some tasks, a digital transformation without dedicated specialists constantly monitoring the tool and providing extensive technical support is going to fall short. Any digital tool can’t be viewed as a panacea, but rather a vehicle to deliver a higher level of service to customers.

When consumers are engaging with banking providers through digital tools more frequently than other channels, it should be obvious why every institution needs a CDO to shepherd their digital transformation initiative across every level of the organization. The only way to properly usher in the level of holistic transformation necessary is to have the right personnel implementing, overseeing and enhancing it.

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