Three ways banks can kick-start the Continuum
Posted on: Sept 23, 2019 by Ivo Luijendijk
Last year, Atos published its ‘Digital Business Continuum’ whitepaper, which covers digital transformation strategies for companies facing potential disruption due to emerging technologies and new players on their markets. Now that PSD2 is in full swing, there is no industry for which this rings more true than banking. Banks truly need to continuously transform themselves in order to remain relevant.
It’s fair to say that banks are used to a state of ongoing adaptation, due to (amongst others) the continuous inflex of regulations and political agenda’s, the maturing of automation technologies that allow their back-office processing to become more intelligent, to new communication tech opening new avenues of interacting with the bank’s (potential) clients. If we look at this last example a bit further, we see that first, there was the high street branch. Since then we have seen ATMs, phone banking, contact centers, internet banking, and mobile banking. Soon, there will be virtual assistants too. Yet, this change has been gradual and driven in a large part by technological developments.
Today, the pace of change has intensified. And it is not all to do with technology. Yes, technology is one foundation for industry transformation. But another is the customer.
As customers, we demand convenience, speed and seamless service. (I like the convenience of ordering a taxi on my phone and having the money come out of my account while a receipt is added to my expenses app.) We don’t think in silos.
But whilst banks crave platform-based architectures to offer customers this new style of service, they are actually saddled with technology silos. That is because the linear changes highlighted above saw technologies simply layered on top of each other.
This stack made the ‘universal banking model’ possible. But it’s also incredibly difficult to break apart now that new business models and competitors are emerging. FinTechs have looked at the complexity of big banks and said, “No thanks”. They have started with a blank slate and built businesses on platforms. They are also replacing these platforms regularly (in some cases every three years) as soon as they need to move on.
This is the Digital Business Continuum in full effect.
But let’s be clear here. The Digital Business Continuum is not focused on these emerging organizations. It is focused on digital transformation in huge organizations.
As I read the Atos whitepaper, it reminded me of an interesting piece on Chris Skinner’s blog. It covers four potential business models that large banks could adopt. In the author’s view, one of the most successful will be “to combine open distribution with the provision of a few strategic services sitting on top of a vertically integrated infrastructure”. In other words, brand what you do best and drop what you don’t need to do, while building an open network with other providers. All so you can serve your customers better.
So what does the Atos whitepaper teach us about achieving this?
The first is resource allocation. Typically, banks are relatively static organizations that keep resources and structures in place for lengthy periods. This makes it difficult to change by, say, moving staff from a branch to a digital role. Lloyds Banking Group in the UK and Crédit Agricole in France have announced Digital Academy-type initiatives so people become organizationally mobile. As the whitepaper points out, this is just one area of resources that needs to be addressed and changes must be pervasive.
The second area is leadership. The whitepaper highlights how change, particularly continual change, requires purpose and leadership. Banks are often run on a command and control basis, arranged by product groups and organized by channels. This has made for a complex environment in which it is difficult to shift from a product to a customer-centric customer approach.
The third area is governance. Banks have an inherent bias in respect of risk. Continual transformation demands a change in attitude towards success and failure. The whitepaper explains that “risk management” very often actually means “risk avoidance”. It also suggests that, ‘When learning from failure, the attitude should be one of “how can we do this better next time?” rather than one of “how can we avoid doing this in future?”’
These starting points are a great way to kickstart the bank’s digital transformation, but should not be seen in isolation. But they are also sure-fire ways to kick-start continual transformation so the bank—with whatever business model it decides to adopt—can thrive in a constantly changing world. After all, like Darwin already said: It’s not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.