FinTech, RegTech, blockchain, machine learning, artificial intelligence, and more–a whole host of technological advancements are disrupting the financial services industry today, at an unprecedented pace. In a hyperconnected world of omnipresent devices and networks, the very notion of banking, insurance, asset management and securities transactions is fundamentally changing.
As the consumerization wave sweeps across industries, it aims to reimagine itself for the digital era. Digital transformation (DX) is the latest buzzword, with organizations seeking to overhaul their business and operating models for sustained relevance in a dynamic marketplace.
Be it enhancing the customer experience by provisioning on-demand digital tools and mobile apps, reducing time-to-market for new offerings, or complying with regulations, BFSI is looking to leverage IT aggressively for superior business outcomes.
The results of such initiatives leave much to be desired. A poll of 450 Western CIOs, CTOs and other senior executives carried out by NoSQL database vendor Couchbase recently revealed, that 90% of DX projects fail to meet their stated goals.
Why digital transformations fail?
To start with, there is a lack of organizational consensus on what digital transformation truly means for the company. While the CMO might see digital as a tool for deepening customer engagement, the CIO could look at it as a means of reducing costs and boosting operational efficiency.
Second, the lack of enthusiastic sponsorship for such projects reflects excessive caution among some CEOs, who tend to worry about the unknown consequences of embracing digital.
Third, many BFSI transformation programs suffer from time and cost overruns due to a lack of focus and discipline, in terms of experimenting with a defined set of innovative ideas. Dabbling in too many pilots only dilutes management focus, apart from burdening both IT and business users.
Fourth, I’ve seen some financial services firms ring-fencing their DX initiatives, buying into IT’s contention that it can incubate disruptive IT programs within specific functions or line of businesses faster. While running such digital “accelerators” as standalone entities outside of the main business may have its advantages, the inability to seamlessly integrate these digital capabilities with the rest of the organization can adversely affect enterprise innovation.
Fifth, the success or failure of any DX project inevitably depends on a corresponding transformation of the organizational structure and culture. If deep-rooted employee behavior and long-standing business processes are not reimagined the way they need to be, then revamping the technological architecture would yield only limited benefits.
The bottom line
CEOs of Financial services must realize every digitalization project is a business project first and foremost, and not a pure IT implementation. The business goals and strategy must drive IT initiatives, and not the other way round. Unless this critical shift in mindset happens, the industry would struggle to realize faster ROI in its digital transformation projects.