Over the past two decades, technologies have significantly transformed the business landscape, and developments in the digital space are moving forward with exponential speed. Surprisingly, however, the financial services industry has been slow to adopt digital compared to other industries. Many organizations do not see themselves as digital leaders and are instead trailing the spectrum in customer engagement, analytics, mobile and social media because they are focused on changing regulations, fluctuating markets, security threats and political instability. The financial services industry has recognized it needs to step up its efforts to drive the digital agenda despite these headwinds.
This recognition is primarily due to a renewed focus on—and competition for—the customer. Financial services customers have not lagged in taking to new technology. There are almost as many mobile subscriptions in the world as there are people—6.8 billion compared with the global population of 7.1 billion—and 40% of the world is online. And there are no signs of slowing. It took Google six years to reach 50 million users, while Google+ needed just 88 days to reach that number. It is estimated that 40 million apps are downloaded a day.
With the unprecedented level of access to information that digital enables, customers expect a new level of service. Relatively new innovations such as cashing checks via smartphones and filing claims online are the new normal and demanded of all providers. And the entire financial services industry is reassessing their business models. The threat of not keeping up makes a firm susceptible to losing entire lines of business to more agile competitors. Addressing the digital agenda is no longer just a novel differentiator to gain a slight competitive edge. It is a priority to survive.
To drive progress on the digital agenda, companies must remove internal barriers, such as corporate structures that are structured to support legacy business models and technology adoption approaches that are reactive by design. In an environment where technology becomes obsolete as soon as it is developed, agility is the key. Financial services organizations require a leader with vision who can embrace the fast-paced opportunities of the digital enterprise and overcome traditional reluctance to change in an industry where risks associated with chasing trends is high.
A new role is being embraced by leading institutions in this space as we continue to move forward into the digital age: The Chief Digital Officer (CDO). The role of CDO has emerged as firms have recognized the need to focus a set of responsibilities formerly distributed between the CIO, CTO and the CMO. The CDO should bring deep knowledge across customer experience, analytics, technology and marketing. When empowered properly, a CDO can apply insights effectively to significantly impact the enterprise.
The first 90 days on the job are some of the most important for a new CDO. During this period, he or she will need to:
-- Develop an understanding of the business strategy and serve as an agent of change that challenges the status quo, but do not bulldoze over an organization’s longstanding culture.
-- Build strong coalitions across operations, IT (specifically delivery and architecture), analytics, customer and marketing.
-- Quickly understand the brand and its differences across different product suites. Determine if it can be enhanced through transformation projects.
-- Develop a clear picture of the digital future for the organization. Consider market forces, such as high customer expectations shaped by nontraditional financial services providers like Google, Yahoo and PayPal. Build the case for change and share it with leadership.
-- Design a pragmatic roadmap for implementing the vision. Be open to evolve the program based on input and changing market dynamics, but never lose sight of the overall goals.
-- Provide flawless execution by being on time, within scope and on delivery. In partnership with operations and IT, deliver quick, early wins flawlessly to build trust.
-- Listen, learn, assess and iterate. Commit to regular reviews of the roadmap and learn from each launch. Apply lessons learned to every evolution of your plan.
There is no single solution when it comes to “going digital.” Issues around user security, consumer protection, reputational risk and regulatory demands have made the financial services industry generally cautious about making advancements. However, neglecting digital technologies is essentially turning one’s back on the future.
Having a robust digital program may seem to be an insurmountable challenge, but it starts with small steps – the first being leadership alignment and the appointment of an effective Chief Digital Officer who brings experience in customer, analytics, technology and marketing. This leadership role is one of the foundational aspects of leveraging digital to enable sustainable growth.
David Deane is Principal and Todd Purcell Senior Manager at Ernst & Young LLP