The Secret to Effective Digital Transformation in Financial Services: A Transformation Mindset is Essential for Success

When it comes to digital transformation, there’s a pervasive fallacy that new technologies (e.g., public cloud) and common practices (e.g., agile development) will, on their own, usher in changes that lead to outstanding outcomes. But the truth is these individual technologies and processes are simply options in a toolset that must be applied in the right combination under proper guidance.

Experience has shown that individual tools may well have negative impacts if they are deployed without a broad and deep commitment to transformation. After all, you can’t build a house using a single hammer. The secret to success is to embrace a “transformation mindset” across the whole organization that combines several critical areas to drive results.

Five Key Elements to a Transformation Mindset

If you look at a time-lapse video of a caterpillar turning into a butterfly, you’ll recognize that profound transformation requires a great deal of time and effort. Unlike a caterpillar, however, organizations aren’t biologically wired to enable transformation. In fact, organizations often fight transformation to protect the status quo. That’s why it’s absolutely critical to distinguish what is required to establish a successful transformation effort. 

The five key elements to building a transformation mindset are:

1. Business First, Transformation Second: It may seem obvious, but too often, business leaders bank on technology being the answer in and of itself. Instead of taking the time to develop alignment and a path toward success for the business, leaders plunge headfirst into transformation. To achieve success, it’s fundamental to first establish clear business goals and objectives and, from there, find the area (or areas) where you can “win.” With that plan in place, it’s then possible to craft a digital strategy that aligns business goals with a digital roadmap.
2. Power to the People: No plan can succeed if your team doesn’t have the necessary enablement and accountability. With business and digital plans in place, make sure to address the “people” roadblocks that may impede your team. Find the right people to lead transformation efforts and empower them — and existing teams — to collaborate as you recruit personnel to fill gaps and meet future needs. 
3. Success by Design: Optimal organizational design is necessary to align with goals and outcomes. Your organization will only attain success if hierarchical, siloed business units are eliminated or, at a minimum, bridged so that the multidisciplinary teams can form and evolve organically.
4. Winning Incentives: Too often, cooperation and collaboration are undermined by legacy reward systems that fail to support the new structures and processes that are integral to success in digital transformation. To stimulate change, you must build incentives and rewards that will encourage transformative initiatives.
5. Change is Hard: Change is rarely easy, and the status quo is almost always the default response of existing personnel and teams. Recognize that transformation will affect every area of the enterprise and take the time and resources needed to address the fact that change can be disruptive. A thorough and expansive change management program is often the secret sauce that turns transformation efforts from good to great.

Common Digital Transformation Roadblocks for Financial Service Companies

A modern proverb states that “the road to hell is paved with good intentions,” and the same can be said for failed transformation attempts. It’s not enough to mean well — the true measure of success is found in outcomes. Here are several examples of the challenges that financial services companies face in their digital transformation quest:

1. Having a “Can’t” Instead of “Can” Orientation: Too often, a culture where business and IT point fingers at each other is the norm. Lines of business think IT is more like a tax than a help, and IT, for their part, points out that businesses need to find ways to generate revenues as a result of their spending. In a healthy environment, both teams pull on the oars in a coordinated and complementary fashion.
2. Not Looking at the Big Picture: Failed or suboptimal transformation efforts have a way of building scar tissue. The team gets too acclimated to losing and builds up a muscle that is satisfied with incremental growth. A new approach recognizes this condition and addresses it directly, building plans and processes that explicitly acknowledge how things will be different from here on out. 
3. Running in “Body Shop” Mode: It’s far too easy to fall into the habit of expecting the addition of superstar talent or that having team members with key skills (like data science) will set the stage for success. In fact, the path to outstanding outcomes is more likely to involve creating milestone-based commitments and then crafting hybrid teams that march together to meet objectives. 
4. Losing the Security Forest for the Trees: With ransomware proliferating and the cost of data breaches accelerating, security always needs to be a primary component of any technology initiative. However, traditional solutions often adopt a fortress mentality that begins and ends with “no,” hampering digital transformation efforts from the outset. An alternative is to define security requirements upfront and integrate these demands into the transformation roadmap.
5. Aiming at the Wrong Target: In many traditional firms, technology is viewed strictly as a cost center: a necessary cost of doing business that contributes little or nothing to the bottom line. However, a transformed company recognizes technology as a driver of opportunity and revenue. This change in perspective opens up a world of possibilities that replicate the dynamic power of a fintech disruptor.
6. Failing to Make It Meaningful: Transformation efforts need not be so radical at the outset that they upset existing operations and processes, but they should be significant enough that they have the potential to deliver meaningful results and, at the same time, demonstrate to the organization that transformation is a priority. Your team will recognize if a transformation program is simply a “check the box” effort, making it highly likely that initial results will disappoint and sustained momentum of change will fail to materialize.
7. Lacking a Definable Vision: It’s worth repeating: if the line of business fails to define its strategy at the highest levels at the onset, results will be hard or impossible to achieve. Get the business plan set up first and then decide the most effective ways digital transformation can be leveraged for optimal results.

A Transformation Mindset is the Missing Ingredient

Digital transformation has taken some hard knocks as of late. Critics decry it as so overused and under-defined that it has become a commoditized term like “Kleenex” or “Google.” But the public cloud’s technologies are actually providing the digital firepower that makes it possible for an enterprise to profoundly and dramatically alter the very basics of how business gets done. 

This energetic cycle of growth and adaptation is endlessly repeatable under the right circumstances. The sheer number of fintechs and their success speak to the opportunities available that can harness the potential of digital transformation. Just remember that the key ingredient to ensuring similar outcomes for the enterprise is adopting a transformation mindset.

Ready to learn more? Download our recent white paper, “Is Digital Transformation in Financial Services Dead?” to uncover the challenges and results of digital transformation in four specific areas of financial services. 

Maven Wave helps drive the future of financial services with innovative business outcomes — fueled by Google Cloud — with risk top of mind. Google Cloud drives business transformation across banking, capital markets, insurance, and payments to support data-driven innovation, customer expectations, and security and compliance needs.

Contact us today to learn how Maven Wave and Google Cloud can lead the digital transformation in your financial services enterprise.