What strategy? Best practices for financial firms to go digital
In forging their digital path, banks, asset managers, advisors, insurance companies, and private equity firms need to spend time understanding what’s at stake, and what they stand to gain. This is the fun part. Digital can help actors reinvent traditional business models, become flexible, and put customer-centricity at the heart of their global strategy. Early birds who are already undergoing transformation have quickly realized that tech tools are the best thing since sliced bread. The Chairman and CEO of BBVA championed digital systems and platforms to drive their new business model, reducing costs by 8% and increasing net profits by almost 1/4.
At the same time, actors in the finance industry have quickly realized that there is a smart way to invest in digital. Effective strategies that truly cut the mustard are those that are integrated into the firm’s global strategy, comprehensive and embraced by a receptive company culture that encourages innovation. Hiring the right talent or finding the right external team to partner with is key to ensuring a smooth and sustainable transition. Those who don’t take the time to strategize are toast.
Already exhausted by all the sandwich metaphors? Hold tight, our best practices guide will help your planning process to make going digital a piece of cake.
Understanding the opportunities and the challenges
The hardest part of any journey is taking the first step. Crafting an effective roadmap to digitalization isn’t difficult, but it takes preparation. Managers need to educate themselves on the plethora of options available for transformation, from CRM systems to App development. The scope for integrating digital into a firm’s overall strategy depends largely on what your objectives are given available resources. Firms should make a list of priorities when deciding on which tools to incorporate, from must-haves to nice-to-haves. This will help the process of hiring the right talent or partnering up with an external team that can meet your expectations.
When defining your path to digitalization,
ask yourself questions such as:
- What are my firm’s objectives in going digital?
- Do the firm’s digital pioneers have senior management and stakeholder support?
- How will I measure the value of my digital investment?
- Do we have sufficient resources to allocate to digitalization?
- Have we understood the impact digital can have on our business areas?
When brainstorming ideas, consideration should be given to the evolution of your business processes in the long-term, to ensure that any digital platforms or tools you implement now have the capacity to evolve alongside your firm’s activities.
Consider both internal-facing and external-facing digital avenues
There are two broad aspects to consider: digital tools to determine your customer interaction points (external facing) and those that address inefficiencies or challenges within your organization (internal facing).
Top tip: Don’t second-guess what would work best for your team. Ask them! Chances are they will have a ton of ideas on how their work could be made more efficient.
To understand what your firm needs, take some time to get to know how your teams work. Look out for any repetitive tasks that drain your employees’ time, or multi-team processes that could be streamlined or automated. You can bet your colleagues will be happy to tell the ways in which you can make their life easier! Another big advantage with getting your team involved early on is accountability. When departments feel like they have contributed to the planning process, they will feel more invested when it comes to implementing. 43% of institutions admit that the most difficult challenge to overcome in digital transformation is resistance to change. Seeking meaningful input during these early stages is invaluable for driving necessary change in company culture.
A well-defined plan for your digital transformation journey is a good start, but it is not the complete solution. The next stage in developing your strategy should be conducting an audit on your current state of digitalization, using heat maps or maturity graphs, to understand the best way to execute your approach.
Conduct an audit and benchmark your activities against your competitors’
You need to understand your current position before you can plot a course. By performing an audit on your current digital activities and tools, you will be in a better position to identify gaps and allocate sufficient resources.
Of course, it’s not only your own situation analysis that is of interest! Your competitors’ strategies, both direct and outside of your field, are also important in understanding the direction the market is going and to analyze which initiatives have been successful.
Use a heat map and an Impact and Priority Ranking
Use strategic planning techniques such as heat maps to get a visual representation of the extent to which individual aspects of your business could benefit from a digital boost. You can construct your heat map by assigning numerical values to factors such as potential ROI, current digital maturity, alignment with existing business objectives, and readiness for change. The total score can be reflected in a ranking visualized on a colour spectrum, which is then used to chart the heat map. This is also an excellent way to communicate the benefits and opportunities in digital to stakeholders or the management team. You can complement your heat map with an additional Impact and Priority Ranking (IPR) which tracks the impact of digitalization with its priority. For example, repetitive tasks carried out by employees which are time-consuming or have frequent instances of human error may qualify as high on the IPR list.
To discover more digital opportunities and case studies in the financial industry, read our Insights post on Digital Disruption in the Financial Industry.