A new research paper from Atos “Realization for Change: Accelerating Action Now” provides some interesting insights into digital transformation in financial services, several of which are seemingly contradictory. So, what further light do these contradictions shed on the present state (and the future) of digital transformation in financial services?
3 Cross Currents: Disruption, Empowerment, and Threat Assessment
A total of 800 respondents in financial services, capital markets, and insurance were surveyed in May and June of 2021 on a variety of topics. Their answers revealed current attitudes about digital disruption, insights into key factors that are driving transformation, and important distinctions on the nature of collaboration as it relates to transformation efforts. Three particular areas stand out as the answers and attitudes are seemingly in conflict. Specifically, opinions regarding changing business models to address disruption possibilities, focusing on employee empowerment, and the degree to which challenges directly threaten core business models are all hard to reconcile at first glance. A deeper look reveals some interesting insights.
1. Reacting to disruption challenges: Answers to the independent questions on the possibility of disruptive challengers and plans to alter business models seem to be at odds. In the survey, 55% named innovation and competition from disrupters as one of the greatest threats to their business. On the other hand, 42% reported that ambitions to fundamentally change business models are the lowest priority in the next 12 months. Why the seeming mismatch?
The latter answer is a healthy response on the part of leaders. Disruption is rarely so radical and immediate that fundamental business model change is called for. Further, the most effective transformation efforts are more of an evolution than a revolution, making the most of positive elements of a business model and enhancing them with new products, processes, and technologies. A fundamental change to a business model is only recommended when it is essential. In most cases, it’s best to take smaller steps rather than giant leaps.
2. Enabling stakeholder empowerment: One of the key elements of digital transformation is empowering employees and other stakeholders in order to accelerate innovation and more nimbly respond to shifting dynamics in a business environment. In the survey, 83% agree that they need to invest more in empowering their employees, but only 27% are rethinking leadership structures to fulfill that ambition. What does this mismatch reveal?
Unfortunately, a reluctance to address leadership structure is often an Achilles heel for transformation efforts. Too often, business leaders look to technology as a standalone agent for change, but the reality of transformation is that change efforts must go far beyond technology to include the people, processes, and organizational structure of the enterprise. Failing to address how leadership structure affects results is like planting a tree and failing to give it water. Transformation efforts will yield poor returns or fail unless all elements of the business value equation are addressed.
3. How real are the threats: 79% of survey respondents maintained their business model couldn’t be disrupted or compromised in the next three years, but is this an accurate picture of reality? Experience suggests not.
Inaction is a dangerous strategy. Too many businesses assume the moats and walls that surround them are insurmountable, yet history has proven time and again that these defenses can be more fragile than they seem. Just as ladders and siege strategies rendered moats ineffective and gunpowder proved more than capable of toppling battlements, the legalese, regulations, and brands that businesses hide behind may ultimately prove to be paper-thin and transitory.
Rather than relying on these perceived defenses, it is far better to heed the 55% that understand disruption is a threat and embrace a transformation mindset in order to get ahead and be better positioned to act when — and if — real challenges arise.
Go Broad and Deep for Digital Transformation
No one would argue that the transformation of financial services and insurance industries over the past several years has been insubstantial or that the pace of change in the future will slow in the future. However, the ways in which the understanding and implementation of transformation are perceived and expressed reveal a great deal about the realities on the ground. If the elements described above are any indication, the 800 respondents to the Atos research questions may be about to face many more difficult challenges in the future.
“Realization for Change: Accelerating Action Now” is a new research report from Atos that is chock full of additional insights regarding the state of technology and advancement in financial services, capital markets, and insurance. The full report is available here. If you’d like to learn more about the current state of digital transformation in the financial services industry, download our white paper co-authored with Google Cloud, “Is Digital Transformation in Financial Services Dead?”
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