When combined with the right decisions about which roles to play and what digital enablers to develop, the portfolio of businesses becomes a bank’s value generation engine. A GAFA (Google, Amazon, Facebook, Apple) approach will support greater cross and/or upselling, customer acquisition and retention, new revenue streams, customer engagement and cost optimization. This approach could potentially not only drive revenue growth, but also cut the cost-to-income ratio of a retail bank from 65-70 percent to less than 40 percent.
The successful implementation of a digital transformation agenda requires banks to manage four interacting steps:
- Confirm the strategic direction by balancing and evaluating choices to reach a single vision, making choices in terms of investment allocations across go and be digital components
- Create necessary cultural foundations; speed to vision, break silos and foster inter-functional cooperation, consider business as portfolio of options, accept failures if justified, embrace fintechs, etc…
- Design the digital agenda by creating a blueprint and north starfor the digital transformation. Typical outputs include Rotation-to-New metrics; a prioritization of business initiatives, customer journeys and E2E processes; the identification of the preferred allocation of investments; and the setup of the ecosystem and fintech programs.
- Enable fit-for-purpose digital governance, which may evolve over time as the intensity of the digital transformation increases. This ecosystem governance is very important.
Executing these steps may seem like a straightforward process, but it is actually complex and challenging.
One of the biggest challenges is investment prioritization and ongoing management. Critical decisions include:
- How much can be invested in digital transformation
- What is the right balance between GO Digital and BE Digital activities, which depends upon market opportunities, digital maturity and current activities in place
- Where to invest in GO Digital, in areas such as digitalizing the current product segment platforms, creating new experiential services, and augmenting the business model with totally new revenue streams
- Where to invest in BE Digital, for example in powering up the API framework, investing in culture and governance, or continuing to digitize E2E processes
The organization must also be very clear about partnering with fintechs and GAFAs, identifying the right partners and the right projects to create superlative experiences for customers. In my next blog, I will talk about some of the elements needed to execute these initiatives successfully.