Technology is evolving at an extraordinary pace; driving historic changes in consumer behavior and expectations globally. These changes are predicted to accelerate even more over the coming years as consumer preferences toward electronic channels and maturing technologies disrupt current financial industry business models and services.
Protiviti published a compilation of essays recently, in which our experts share their ideas on how financial firms can embrace these disruptive technologies and remain competitive while maintaining sound risk management. This post reflects my thoughts on the purpose and approach to digitalization initiatives from a technology perspective. For the thoughts of my colleagues on issues ranging from new forms of payment to regtech and blockchain, download the free paper from our website.
Now more than ever, the right investments made in technology and innovation have serious and material implications to the long-term success and viability of a business. Missing opportunities to capitalize on new technology to enhance capabilities, products and services could result in lost market share, reduced ability to participate in the upside gains of new business models, inability to capture the customers of the future, and in the worst case, extinction altogether. Institutions that are able to re-imagine their business, maximize investments in technology and evolve their business effectively to harness the current innovation cycle will be positioned well to define who the next generation’s winners will be.
Typically, firms have approached digital innovation or large-scale technology change projects facing their organizations with a “build versus buy” philosophy. Today, with the emergence of innovative fintech companies, which are more nimble and faster to market than legacy financial institutions, the transformation decision has expanded to encompass “build, buy, invest or invent.” Each option must be evaluated in the larger context of the ultimate business strategy and desired target state of the company. Navigating through the options, complexity and uncertainty to ensure optimal choices are made is no easy feat. Further complicating matters are budgetary constraints, leaders who don’t understand how technology can enable the achievement of business objectives, and turnover of executive leadership driving the multi-year transformation.
Similarly, business change projects have primarily focused on three elements within the organization: people, processes and tools. For digitalization in today’s environment, this approach needs to ensure an agile, actively managed and risk-aware approach around six key elements:
- Strategic alignment
- Customer experience
All of these aspects need to align to drive business value and outcomes and be orchestrated meticulously for a digital transformation project to succeed. Few companies are integrating and delivering all six aspects well across the dimensions of their digital transformation and innovation projects. Consequently, such projects often fail, or the desired outcomes aren’t realized, due to the high interdependence of the elements working in unison. This results in delayed projects and large investments where the business is realizing value far below expectations, which leads to a loss of board advocacy and support from the business. This in turn leads to reduced future investment, placing the organization at even more risk. In contrast, successful companies are able to work across those six dimensions seamlessly in a manner that is more efficient, risk-sensitive, regulatory-compliant, well-controlled, and enabled by leading technology and data, to emerge as the digital leaders of the future.
Technology is the future, and the ability to enhance and unlock new capabilities through digital channels can drive tremendous value for industries. Being able to discern value-added investments in innovation that complement the business and preserve the value through the transformation process versus just chasing the “new shiny objects” will be increasingly important. Furthermore, the ability to effectively measure against value drivers such as revenue growth, simplification, speed-to-market and competitive positioning will help to validate return on investment. In reviewing the upside potential, it is also important to be aware of the risks and consequences if digital transformation programs aren’t implemented effectively.
By understanding and implementing digital transformation programs effectively around these six elements, financial services organizations can drive business outcomes, realize benefits, and better mitigate risk through their digital investments.
Download Protiviti’s Digital Innovation white paper here.