Joy Macknight

Digital transformation should not be driven by the need to cut costs or compliance – it is a radical rethink in products, services and processes to best serve customers and employees. EY’s recent report provides six tips for success.

Banks continue to struggle in digitally transforming their operations, despite being on the journey for multiple years. In its recent Banking Transformation Report, EY found that 38% of global banking transformation leaders say transformations underperform against key performance indicators (KPIs). In parallel, 67% experienced at least one underperforming transformation in the past five years.

Yet, a similar percentage also say that an organisation’s ability to transform is extremely important to its long-term survival.

Where is the disconnect? Jan Bellens, EY’s global banking and capital markets leader, believes that today’s banking executives do not meaningfully understand the concept and are primarily driven by an imperative to cut costs or meet a regulatory directive.

Instead, the report advises that transformation should be viewed through the lens of customer experiences, both internal (employees) and external.

EY suggests five questions that banks should be asking as they look to redefine transformation:

  1. Is our transformation strategy bold enough?
  2. Does our transformation strategy, plan and actions preserve or improve margin and operating leverage in times of uncertainty?
  3. Are customers, employees and business partners at the forefront of our transformation plans?
  4. How do we create a culture of continuous transformation?
  5. Are we providing our leaders with the training and coaching to rethink transformation and understand what success looks like?

The most frequently cited cause of unsuccessful transformation is an unclear vision. Less than half of employee respondents say they understood and believed in their organisation’s transformation vision and strategy. Much of this confusion is down to executive management’s failure in agreeing and then actively and consistently communicating a transformative vision aligned with the bank’s strategy.

According to EY: “It is crucial to success that the executive management team and senior managers agree on the transformation strategy. If not, transformation will be undermined by misaligned individual objectives and priorities. Personal and functional KPIs may need to be revised to create a culture of accountability and ensure everyone contributes to the transformation agenda.”

Securing adequate financing is another barrier to delivering a successful transformation. Only a minority (41%) of executives say that money is made available to fund new innovations and ideas. Therefore, banks must rethink how they evaluate and fund transformation, according to EY.

At a high level, the consultancy firm outlines six tips for success in transforming an organisation:

  1. Redefine transformation, with a focus on fundamentally improving customer and employee experiences.
  2. Inspire and lead from the top, so that executive management determines and communicates the bank’s transformation vision and strategy.
  3. Rethink transformation ideation and investment evaluation, ensuring that the impact of initiatives on customer and employee experience is considered, as well as financial performance.
  4. Reposition for agility at scale, focusing on core technology, culture, team structure and governance as enablers for rapid change.
  5. Reorchestrate talent and invest in people, paying particular attention to diversity and the value proposition for current and future employees.
  6. Re-evaluate tracking and performance monitoring, making use of multiple financial and non-financial metrics.

To truly succeed, the transformation process should never end. Yet not all banks think this way. According to EY: “The first and most fundamental step required for banks to transform successfully is for executives to grasp the holistic nature of the change their institutions must undergo.”

Joy Macknight is editor of The Banker. Follow her on Twitter @joymacknight

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