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Chief digital officers can bring innovation, but the company has to get behind their ideas

The number of companies employing a chief digital officer (CDO) to drive their technological development is soaring, and the financial services sector is getting in on the act. With a real understanding of both technology and emerging consumer trends, this new breed of executive may finally bring true digital innovation to the industry โ€“ but even the best CDOs still face an uphill struggle where the commitment to change is not embraced at an enterprise level.

On the one hand, the industry's leaders finally appear to have grasped the importance of digital technology and want their institutions to lead the way into more efficient working practices and new ways of serving their clients. Already, many have used their IT structures to build more customer-friendly interfaces on apps and websites, while significant strides have been made in terms of digitising document trails and back-office functions.

Yet these changes have mostly been transformation rather than innovation, and there is often a gulf between the vision at board level and its implementation in practice. All too often, major investments in software or IT infrastructure fall far short of their potential because workers across an organisation hold on to their old ways of doing things, resisting and working around the technology rather than exploring it and seeking new ways of working. Some IT projects also suffer from a lack of vision and imagination, meaning that they simply digitise current work systems and strategies. That may save enough money to justify the investment, but it doesn't help a bank or other financial services organisation to reach new markets or make significant gains on its competitors.

Building an entrepreneurial culture in a large, established company is not easy, of course, and this is why many firms across all industries are turning to individuals with suitable cross-sector expertise to find the best ways to tap into and exploit the digital revolution. The number of CDOs across UK firms doubled between 2013 and 2014, and then doubled again between 2014 and 2015.

The CDO's job is not just providing more efficient ways to do a firm's current work, but harnessing technology as a strategic enabler for true innovation and new ways of performing tasks. One of the ways that they are doing this is by using advanced and flexible digital systems to analyse and improve workflow processes. In the financial sector many firms already have enterprise content management (ECM) systems built from a single enterprise information platform to cater for all of their digital needs. They were initially implemented to digitise paper-based processes and bring a variety of content formats onto a single system, but these platforms are capable of much more.

Because today's ECM solutions are easy to deploy and provide complete content and information management functionality, at the centre of an enterprise architecture, they can provide significant elements of business process management, workflow engines and dynamic case management functionality. The best ECM solutions provide this functionality with easy-to-use point-and-click tools designed for the business to self-configure. As such, they are a toolset which innovators can use to engineer their own paths to change.

Many CDOs have steered their organisations to use enterprise information platforms, but examples of such solutions being used to drive real innovation remain rare within the finance industry. More often, they have allowed the established players to match new entrants such as the digitally-focused 'challenger banks' which have raised the bar for the use of digital technology to reach customers efficiently. In investment banking circles IT has also been transforming the industry, forcing even reluctant laggards to invest in digital technology to stay in the pack.

With technology and consumer habits both developing with unprecedented pace, there is great scope for true innovation to emerge in the industry now that the importance of digital channels and ways of working has been understood at a leadership level. But the role of a CDO is not only the finding of opportunities and solutions, but ensuring that those digital  platforms they do have are adopted within their organisations and used in an optimal way.

The best CDOs will therefore have to be leaders as well as visionaries. The most radical ideas โ€“ which have the biggest potential rewards in terms of capturing new markets and establishing dominant positions in the marketplace โ€“ will be the hardest to implement, as they meet a natural resistance to change in the workforce. Good ideas alone will therefore not be enough, even where there is a good understanding of both technology and the consumer. The banks and finance firms that lead the way into the digital future will have not only visionary leadership, but a strong enterprise culture of innovation and embracing change.

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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