Just found an interesting document from Harvard Business Review with the title: How financial services views the digital agenda.
It is the result of research conducted by the Harvard Business Review with the Genpact Research Institute, looking at the impact of dgitilaisation in finance, and confirms something I have been saying for years. A majority of respondents voted that they have not unlocked the power of digital to deliver positive business outcomes. This is due to key barriers, such as the inability to experiment or the burden of legacy systems and processes, that are preventing the effective use of digital technologies.
In addition, less than half of financial services sector respondents believe that their companies have a clear, enterprise-wide digital strategy, and many report split ownership between the C-suite and business line owners for creating that strategy. It is the absence of a clear digital transformation strategy amidst a backdrop of fragmented leadership, as opposed to just a need for the latest technology, that is preventing firms from rising to meet the challenge of capturing digital’s potential to promote customer engagement, grow revenues, and improve efficiency.
The key findings of the survey are that:
- Only 20% of financial services respondents (vs 21% of all respondents) say their organizations are reaping the full value from digital. In the next two years, however, 55% of finance organizations expect to deliver significant impact.
- Companies aren’t delivering digital-driven value to customers as they cannot optimize end-to-end user experiences beyond the web-enabled front end, especially with intractable legacy systems and processes. Only 15% of financial services firms say they do this well.
- While digital leaders grow and outcompete, financial firms see a lag in the use of digital to have a major impact on customer loyalty (50%) and revenue growth (51%) in particular.
- Financial firms cite key barriers as an inability to experiment quickly (56%), legacy systems and processes (55%) and change management (41%).
- They are, however, less troubled by insufficient technical skills (24%) To deliver digital success, financial services providers want to build capabilities for customer-focused problem solving (76% rate it among the top-three most important digital skills), and to adapt to change (73%).
- A Lean Digital approach combines customer-focused design-thinking methods with Lean principles, digital technologies, and domain expertise to deliver digital that works.
The report concludes that although many financial services firms are on their way to embracing digital, only a minority, 20%, believe that they are harnessing these technologies successfully. And only 15% believe that their organizations are capable of optimizing end-to-end customer experiences that go beyond web-enabled user interfaces into their middle and back office operations. However, for those succeeding in their digital initiatives, a vast majority say digital technology has had significant impact on their companies’ cost to serve (90%), customer loyalty (75%), and revenue growth (75%), indicating a clear opportunity for the financial services industry.
Despite the current state, this study shows that financial services respondents have high expectations of digital to help them strengthen competitive capabilities end to end over the next few years. But all groups, even the digital leaders, face barriers, including the need to better align back and middle-office functions to support customer expectations. In addition, some long-standing industry hurdles including legacy systems and processes, an inability to experiment, and change management issues are still commonly cited across the industry. However, the familiarity of these challenges does not make them any less severe in a time when nearly any industry has the potential for massive disruption through digital means.
In many cases, technology alone isn’t the first step. Firms focused on “fixing” legacy systems as a prerequisite to digital transformation are falling behind. Digital leaders haven’t focused all of their efforts on solving these intractable barriers, but rather are creating a companywide vision for digital, improving collaboration across functions, and developing the ability to experiment quickly with digital technologies. These activities stand as clear differentiators between firms that realize benefits from digital and those that don’t.
As more financial services firms adopt digital technologies to support decision making, reduce cost, and improve the customer experience, they should look to the traits exhibited by these digital leaders to introduce new capabilities, overcome barriers, and accelerate the pace and impact of digital transformation across the industry.