Why Banks and Fintechs Need to be Strategic with Digital Transformations
This article first appeared in FinTech Futures, North American Edition and was written by John Brennan, CSO at ECI.
According to a study from the Everest Group, 73% of enterprises’ digital transformation (DX) efforts have failed to provide any business value. Yet, there’s an overwhelming agreement by analysts on its necessity.
In fact, IDC forecasts $6.8 trillion will be spent globally on DX by 2023, with 65% of the world’s GDP being digitalised by 2022.
There are many reasons why DX shortfalls occur, painful lessons many in fintech know all too well. A significant one is companies not understanding their needs or what the technology can offer.
This, in turn, results in organisations buying more than is needed, a situation that has led to a glut of unused technology. Research from G2 indicates 30% of software tools are underutilised or completely idle and 25% of a company’s spend is wasted on products with overlapping features.
Companies are buying tech without understanding how it will deliver benefits. Investing in hot technology because everyone else is, or just for technology’s sake, is a recipe for disaster – you need to understand your goal and requirements.
And the trick to doing DX justice is remembering you’re not just solving technology issues; you’re handling business ones.
Here are a few tips to consider when developing a strategy for digital transformation.
Support and ownership
You can gather up your company leaders or stand before a board, detail the need for change, and paint a convincing DX picture that has heads nodding in agreement. But this is not the same as getting a commitment for the massive changes necessary to take a project to a successful conclusion.
Leaders often get cold feet when they see the full extent of the effort needed and how it impacts an enterprise, particularly in the early stages.
The key to success in fintech is getting busy managers and employees at every level to take personal ownership of their role in DX. This will likely entail a lot of education to win them over, particularly on how it will improve market position.
Examples of parallel situations, especially those involving competitors, are effective. You need to build a shared vision and passion for its success across your company. So, everyone must understand that even though the specifics of how to achieve DX may not be known upfront, it is the future, and your company is committed to it.
Still, you cannot force this commitment on people. It’s a company-wide effort, and if not enough stakeholders buy into it – sincerely understanding why it’s necessary and achievable – it will stall, the results will be delayed, and decision-makers may pull back.
Have patience and persevere.
Small, fast steps
Once a digital transformation project is approved, IT pros need to avoid rushing in and trying to transform everything at once. Start small with a proof-of-concept or pilot. Experiment, test, and “fail fast.” Then, when this smaller project or phase has reached its projected value, higher-ups will be more than happy to expand.
Taking small, fast steps delivers other benefits. You can better control costs as experimentation occurs instead of tying up a good sum of the budget. If you get it right, then continue moving forward at a controlled pace; you’ll be able to cost-effectively scale with each success. And ROI always speaks loudly to the c-suite.
Keep in mind that being able to determine that an approach didn’t work also has its own value. It can keep you from going down a rat hole and wasting additional resources while directing efforts to areas more likely to deliver promising business outcomes.
Just remember to learn and pivot fast.
Learn and understand
With DX, the actionable data you can cull holds incredible potential. It can help a company make better decisions and pinpoint areas of focus.
While widely understood, most organisations don’t quite know where to start or what to do with this data. Research from Seagate and IDC shows organisations are gathering just over half the data available to them, and of that, 43% of what’s collected isn’t used.
This is complex, and a lot is at stake, so one option is to seek help from tech companies with a thorough understanding of fintech processes and the pitfalls to avoid that could cause serious problems. Their prior experience will determine the best way to generate actionable insights and how it can be used to improve decision making.
The long run
DX is not a dash – it’s a course that needs the endurance to run. The promise of DX will not be realised overnight, but when done right, it’ll clearly show your goals are achievable and impressive enough to justify any effort.
Expect growing pains. Know there will be a learning curve, and experimentation is needed. Keep in mind technology is not the end-all – results are. So be strategic in how you approach DX and focus on resolving business issues – that is what will lead to a major competitive advantage and greater growth in the long run.