I blogged in March (Transforming the bank – three phases of change) about the method to make systems change happen to transform the bank. In another conversation, I then realised that there are three phases of organisational change to transform the bank.
The first phase is a recognition that the world is transforming in a digital revolution, and that this is not just an evolution. Many executives I meet think that digital is a channel, and that it’s merely doing what we’ve always done cheaper, faster and better with technology. My issue with this is that if you always do what you’ve always done, you’ll always get what you always got … but less and less all the time. Think of it this way, if you don’t change, then you’ll be static. That may sound grand, but it’s more like if you sit in the middle of the road, then you tend to get run-over. It’s not a good place to be.
For the banks that do not see this as a digital revolution that requires fundamental change to the business model of the bank, that’s exactly what I expect to happen to them. To get run over. In the bank case, it means they will be acquired over the next ten to twenty years, as they lose market share and momentum. This is because the business model is a fundamental rebuild of the bank from the ground-up for the digital distribution of data, rather than the last century model of a bank built for the physical distribution of paper.
So, my first test of whether a bank gets it is to wonder if they have the whole leadership team on board or are they delegating digital change to a project, a function, a budget, a person. Have they delegated the future of the bank to an accountability away from the CEO and their direct reports, or is the CEO and their team making the change happen?
Any bank that treats digital transformation as a delegated project is going to fail.
Now, let’s assume that this is accepted and understood, the second phase of transforming the organisation to digital is even harder. It’s working out how to rebuild the bank from the ground-up and making that happen. What to do, how to do, doing it and doing it better. These are the four phases that I’ve seen digitally transforming banks moving through and it takes time and it’s not easy.
The key to this phase is to give the executive team the latitude to do it. Many leaders are so focused upon the boardroom, investor and shareholder needs, that they just don’t have this latitude. The banks that are successfully transforming have breathing space to not focus upon cost, income and shareholder, but rather focus upon customer, systems and change.
So, my second test of whether a bank gets it is to see whether the bank is truly changing in a cohesive, enterprise operation or whether it is being run product-by-product, function-by-function. The bank that is transforming the whole organisation in a co-ordinated manner is going to succeed. This is because a lot of the next decade of competition will be between the BigTech’s and FinTech’s and banks, and the bank that is not rationalised to be a co-ordinated enterprise will fail.
Finally, the third phase is making the change happen. Having worked out what to do and how to do it, this is the doing it and doing it better phase. It’s when the bank is transforming the organisation and not just the systems. It’s when the bank is changing the culture and mindset, not just the systems and structures.
Again, it is demonstrated in banks re-skilling staff, reducing staff numbers, shrinking their physical footprint and building a digital platform. It is when you can see in practice that everyone is being encouraged to challenge and change; that innovation is no longer a token word but a real way of thinking; of open banking being seen as an opportunity and not a threat.
My final test here is to test the bank as to whether it is still a control freak, wanting to build everything themselves and avoiding partnering with others, to one that is a curator, offering its banking platform to work with start-ups and third parties with no fear of compromise, but excitement at opportunity.
These three tests are not comprehensive or exhaustive, but they are good tests of the culture and the mindset of the bank for true organisational change and not just doing what they’ve always done.
In summary, transforming the organisation to be digital is just as important, if not more so, than changing the systems to be digital.