The top four cultural barriers banks face in their race to digital transformation

Digital AdoptionFree-Photos / Pixabay

Why are digital business transformations failing to deliver value? Another survey, this time by McKinsey, revealed only 14% of IT leaders have seen sustained performance improvements from transformation efforts, and only 3% successful at sustaining change.

So what’s driving this? Bankers are too busy managing the third-party and first-party data and the associated tech complexity to actually implement the use cases they had in mind for the bank’s digital business transformation.

If the majority of resources are required just to stay upright, then banks clearly need help in their transformation. Why don’t they get more help? When asking bank CIOs, the reasons in rank order are insufficient personnel, then digital skills, and funding, followed by fourth in the list, “unable to source needed digital capabilities from vendors or contractors” (12% of CIOs, per Gartner). This last one caught my attention since Publicis Sapient specializes in these digital capabilities, yet given item three on the list is the lack of funding this budget for vendors may be moot. The CIOs are first overcoming these barriers through stakeholder engagement. Way down on the list in seventh place is by engaging more consultants. I’d like to argue that this is a mistake. Self-serving perhaps. But not just consultants to build digital capabilities, but also consultants to help foster cultural change.

I picked this image, imagining a bank CIO keeping objects spinning in the air while on a tightrope ‘crossing the chasm’—an all-engrossing and near-impossible task—to convey how this role does not currently allow for actually driving growth. While the resource barriers cited are significant, I believe the focus should be equally on the culture and mindset barriers to digital transformation.

For banks, the top four cultural barriers to digital transformation in the Gartner survey were:

  1. Business culture blocking change
  2. Organizationally we are not innovative enough
  3. Weak management understanding of digital business
  4. Weak change leadership, planning or execution

If your bank culture blocks change, start by asking why. Evidently, humans do not like change. Surprise! Banks are conservative cultures that reward consistency, predictability, and careful risk management. This has become a verb—”banking on it”. This kind of culture is going to attract people that self identify with these qualities and want to be recognized and rewarded for them. People don’t change much, so this quality is a fixture of banking. Banks need to convey how these very qualities are necessary for a successful transformation if the bank is to deliver consistent, predictable results, manage risk, and sustain the conservative and reliable quality that allows customers to trust the bank with their money. Communicating this counter-intuitive idea could help align teams to embrace change.

Banks and cultural digital transformation

Can a bank import the right culture? If anyone choosing banking is inherently change-averse, can a bank acquire a fintech to tip the balance towards change-makers and risk-takers? The track record of BBVA + Simple, or Northwestern Mutual + Learnvest, and the many other fintech acquisitions suggests this does not work. If Chase has over 250,000 employees, the fix is not acqui-hiring a startup team of twenty-five.

How about hiring change agents to lead the bank through its transformation? This could help with items three and four on the list of barriers—boosting understanding of digital among management and strengthening leadership. Banks face significant challenges in recruiting for these roles. These are unicorns, so non-traditional candidates may actually be more effective.

Leadership is key to cultural

Given the allergy to anything new, allies among the establishment are critical. If a member of the old guard is at the forefront of change, this will influence holdouts. Typically those leaders are close to retirement age, not wanting to rock the boat, and more likely to maintain the status quo. What would be their motivation? I struggle here. Should it be the intellectual challenge of being an old dog learning new tricks or the pride of ending a career as a dynamic leader? Can it be financial incentives, with executive retirement packages having more strings attached to performance in the final years?

While bank leadership readily answers a survey acknowledging cultural barriers to change, this is not their core competency, in fact, it is an area in which to ask for help. Start by appointing a Chief Culture Officer, with Investors Bank as a model for success. This New Jersey-based bank created the role and found that helping execs experience the merit of kindness and empathy in their own personal development was then something they wanted to scale. A culture of kindness actually drove business efficiency as employees in this environment more quickly came to an agreement. The softer quality of cultural barriers means they get less attention and funding than the more concrete demands. Demonstrating the business value of a strong culture can help change that.

 

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About the Author

David Poole
David Poole is the Head of the Financial Services Center of Excellence at Publicis Sapient, the digital business transformation hub of Publicis Groupe. David consults on digital business transformation through innovation, thought leadership and customer insight with fifteen plus years of experience. David has been a speaker on the future of payments at industry events including Money 20/20, FIMA, NextBank, and CXFS. He is a change agent with 20+ years of experience as a researcher, and planner.

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