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Banks creating 'islands of innovation'

15 June 2016  |  11422 views  |  9 Canaru whaf skyline

Just one-in-four European banks have executed a full-scale digital transformation strategy, with many creating disconnected islands of innovation in customer-facing positions, according to research conducted by IDC.

While 96% of the 250 retail and corporate banks across Emea polled had completed some kind of digital transformation (DX) initiative, room for improvement remains, says IDC, which conducted the research on behalf of SAP.

The findings show digital transformation often occurs only in the front office, creating "islands of innovation" that prevent banks from reaping the benefits of digital transformation at an organisational level.

Forty percent of respondents indicate that digital transformation remains a front-office initiative aimed at improving customer experience, while just on-in-five reported any form of back-end infrastructural investment to support the shift to digital.

One in five banks (21%) surveyed currently have a chief digital officer (CDO). IDC believes that one in two will have a CDO or digital leader driving enterprise-wide digital transformation by 2020.

A recent study by Accenture of 53 banks in Europe appears to support the hypothesis that many financial services incumbents are merely paying lip service to digital transformation. According to that study, 86% of institutions include digital as part of their strategy, but only 37% have allocated budget specifically for digital transformation. Confusingly, Accenture reported that 63% of banks have established a chief digital officer, a finding that is at odds with IDC's data.

Jerry Silva, research director, says: "For digital transformation to become ingrained in a bank's DNA and strategy, there needs to be a champion - and that is the chief digital officer. The role of the CDO is still new and maturing, but it should be focused on aligning different segments of the organisation and different technology processes around one common goal - greater customer engagement and retention."

Comments: (9)

Tabitha Cooper
Tabitha Cooper - Nordea - Stockholm | 15 June, 2016, 11:47

Hi, is a CDO role interchangeable with a Cheif Innovation Officer - or do you see these roles as distinct and separate? Thanks

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João Bohner
João Bohner - Independent Consultant - Carapicuiba | 15 June, 2016, 13:02

@Tabitha,

I think these roles can not be separated. A new acronym has to be created for these two roles, and including a third which would be the "Business Process Architect."
Not knowing the business, innovation and digitization are useless ...

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 15 June, 2016, 19:00

From "islands of information" at one point in time to "islands of innovation" now. Is that progress or what?!

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Tabitha Cooper
Tabitha Cooper - Nordea - Stockholm | 16 June, 2016, 08:33

Hello Joao, Thanks for your reply - I suspected that might be the case - but was not sure. Maybe the limitation around the remit of the CDO role is in my perception, but the concern I have around the roles being seen as in effect 'the same' is that I don't see innovation only covering digitalisation. Innovation (especially in this age) can and should be at many different levels, not excluding organisational culture & socially inspired innovation, to identify a few that leap immediately to mind. What do you think?

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João Bohner
João Bohner - Independent Consultant - Carapicuiba | 16 June, 2016, 14:39

@Tabitha,

You're right about innovation.

In my point of view:

"Wherever there is a challenge, there will be the opportunity for innovation, on any level."

And to avoid "prevent banks from reaping the benefits of digital transformation at an organisational level." the role of "Business Process Architect" makes sense.

The digital transformation must be at an organisational, enterprise-wide level!

Now try to find a clear answer to "What is Business?".


So, the chief digital officer (CDO) should be a "Business Process Architect" and an "Innovator", who will depict the current enterprise scenario.

And knowing the "current scenario" AND the purpose of the Business AND the technology available, he will design the "future digital scenario".

Current and future scenario known, an integrated plan from ITC and Business people shall clearly show the path "how to get there”, orchestrated by the CDO.

Task quite easy, no?


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Jerry Silva
Jerry Silva - IDC Financial Insights - Framingham | 17 June, 2016, 16:25

Above all, the CDO must be an agent for cultural change.  This is not just a technology or operational role.  When we look at the most successfully agile banks, transformation is in their blood.  Starting with the the CEO and board, the CDO nurtures that culture across the enterprise.  Within that remit, their can be separate leaders for innovation, enterprise process reengineering, enterprise data architects, etc.

Great discussion,

Jerry Silva

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Jerry Silva
Jerry Silva - IDC Financial Insights - Framingham | 17 June, 2016, 16:27

*there, not "their".   My goodness, I'm typing like my daughter now!

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 17 June, 2016, 17:19

LOL @JerrySilva, child is now *mother* of the man! Going by my daughter, I'm guessing that if your daughter sees your comment, the difference between "there" and "their" would be least of your worries!

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João Bohner
João Bohner - Independent Consultant - Carapicuiba | 17 June, 2016, 18:28

@Jerry Silva,

The CDO has not an easy 'job description'.

For sure 'cultural change' is fundamental, and also to show executives how to get out of the thicket!

As mentioned in Fernando Lanzer’s book Take Off your glasses:

"The simple stuff that needs to be done is often scary stuff, which we would rather not face.
Hence complication is a form of avoiding the simple essence.
Complication is a form of using rationality as a shield to defend ourselves from the emotional consequences of acting."

The CDO also may behave as a "spiritual guide" on the organization. 

So, those are not 'technical issues'.

 

 

@Ketharaman,

Perfectly true!

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