This year it’s clear that digital transformation is maturing into an enterprise-wide movement, moving beyond IT to impact the entire organization. Brian Solis, principal analyst at Prophet’s dedicated digital analyst group Altimeter, has documented the constantly evolving enterprise across industries in his annual “State of Digital Transformation” report. Based on survey research with over 500 digital transformation strategists and executives, this year’s report has several key findings:
- A successful digital transformation needs to encompass the breadth of the business and is best served by a leader with broad organizational purview.
- Ownership is moving to the C-suite and managed by cross-functional, collaborative groups.
- While there is a growing acknowledgment of the importance of human factors in digital transformation—like employee experience and organizational culture—most transformation efforts continue to focus on modernizing customer touch points and enabling infrastructure.
- Cultural issues pose notable difficulty for digital transformation, with entrenched viewpoints, resistance to change, and legal and compliance concerns stymieing progress.
How Financial Services Companies Are Driving Digital Transformation
Financial services companies demonstrate many of the overall trends highlighted in the report. Their focus on transformation is driven by a pursuit for growth in new markets (54%), increased competitive pressures (42%), newer regulatory and compliance standards (40%) as well as evolving customer behaviors and preferences (39%).
However, where financial services firms stand out is in terms of the senior-level commitment to digitally transform their business, along with a sharper focus on customer experience as a key lever in this transformation. Unsurprisingly, financial services firms also face heightened legal, risk management and compliance concerns surrounding their digital transformation initiatives.
Key Findings on Digital Transformation in Financial Services
1. CEOs and C-suite Executives: More Likely To Be Involved in Digital Transformation Initiatives at Financial Services Firms
43% of respondents from financial services firms cite that the C-suite is represented in the digital transformation steering committee, work group or cross-functional team, vs. 32% of respondents from other industries. In addition, 44% cite that such teams report directly to the CEO vs. 32% across other industries.
This matches what we’ve seen anecdotally among our financial services clients: CEO’s have made digital transformation a key, enterprise-wide priority as they increasingly face new entrants seeking to disrupt core areas of the financial services value chain.
A clear top-down mandate is a strong step in the right direction. However, as Tony Fross, partner and co-lead of our dedicated organization & culture practice at Prophet, describes in his recent post ‘The Body, Mind and Soul of Digitally Evolved Organizations’, corporate culture is often the greatest impediment to transformation. Leaders will need to go beyond asking for change and systematically rebuild their organization with a different set of assumptions about where and how value is created in financial services.
2. Customer Experience: A Central Focal Point For Financial Services and Their Digital Transformation Efforts
As financial services move from intermediaries to a more direct model of interaction with customers, they have had to grapple with streamlining a highly disjointed, manual and impersonal experience.
This appears to be changing quickly. 66% of respondents from financial services indicated that “integrating all customer touch points (social, mobile, web, commerce, service efforts, email, etc.) to deliver an integrated, frictionless and omnichannel customer experience” was a top priority (vs. 57% for respondents across other industries.) Furthermore, 46% have already completely mapped out the customer experience journey within the last year and have used the data to define and prioritize digital transformation roadmaps, leading other industries who are at 35%.
In our experience, the companies that achieve transformative improvements in experience don’t simply stop at the foundational step of developing a streamlined end-to-end experience that’s anchored in customer insights. They go beyond with an agile product management organization that is capable of constantly iterating and improving the experience faster than competitors – and customers’ expectations.
3. Legal, Risk Management and Compliance Concerns: The Most Prominent Challenge With Digital Transformation Initiatives
When asked about “the most difficult challenges you or your company come up against in digital transformation efforts,” 35% of financial services respondents cited legal, risk management and/or compliance concerns (vs. 26% on average).
Anecdotally, we have witnessed this challenge often while working alongside our clients on major transformation initiatives. We have typically encouraged our clients to move forward in one of two ways. First, we have encouraged them to ascertain whether such concerns can truly be attributed to a verifiable set of guidelines or policies rather than simply a perceived concern that might mask an inability or unwillingness to proceed down a particular course. This happens more often than we would expect. Second, we have encouraged clients to adopt a more agile governance model (as my colleagues Nick and Mike describe in their post here) to embed key legal, risk and compliance representatives within sprint teams, working off a common backlog.
Overall, while financial services companies recognize the importance and need for digital transformation, it will be the companies that are structured to work dynamically and adapt swiftly that will be best positioned to shift accordingly in the face of constant change.
Learn more about how we can assess where your financial organization sits on the path to digital transformation, and where it can go next.