Digital transformation may seem to be an overused term these days, but it is for a good reason. Every single firm is in the process of transforming digitally—even those who claim to be already “digital.” The COVID-19 pandemic not only exponentially accelerated these efforts but also laid bare the consequences of falling behind on digitalization in a new, remote-first era.
While the crisis has provided a catalyst to take action to accelerate digitalization, it also highlighted the need for an ongoing methodical approach. What does being digital mean? What is the end goal/state? What are the benchmarks to strive toward? What are the blockers and what are the steps firms need to take to achieve full digital maturity?
We often find that firms embark on digital transformation journeys before answering some very basic—but critical—questions. That’s why we have adopted a model to help firms better understand their needs and goals, benchmark and track progress, and, ultimately, achieve their desired state of digital maturity. Many firms think having an e-commerce channel, or mobile capability, or replacing a manual step with automation makes them digital. This thinking of course entirely misses the point of being digital.
Achieving a mature digital state means that every step in the business process is digitally handled—end-to-end. Further, digital maturity is about continuously re-imagining the business model, products, and services in a way that delivers—through various channels— an exceptional experience so clients will want to come back, over and over again, to use a firm’s services.
Several consulting firms offer frameworks to assess and benchmark enterprise digital maturity. One of the most popular approaches is to assess digital maturity in terms of outcomes (new products, efficiency, experience), operating model (talent and skills, culture, organizational design, way of working), and technology (AI, cloud, DevOps, integrations, to name a few).
While these frameworks provide a strong foundation, for heavily regulated industries such as wealth management and financial services, there’s a need to further drill down and customize the approach to factor in the unique circumstances of these firms.
In our view, wealth management firms would benefit from evaluating digital maturity for every product on three dimensions:
- and risk/control.
For example, how far along is the experience on the traditional to fully digital spectrum, with traditional being phone, paper, and email based and digital being self-service and collaboration-based through portals, apps, or virtual assistants, with added levels of transparency and predictable service quality? Similarly, is the firm operating closer to the traditional efficiency scale where processes are manual, repetitive, and managed by humans, or are they operating in a straight through processing and rules-based environment, in which you have to touch only exceptions?
Are risk controls more a look back and manual reviews of what’s been done, or are they real-time controls, with systematic tracking and alerting and guaranteed data reconciliation?
With these three dimensions at the core, we assess firms’ digital maturity journey through five distinct stages:
- automated and,
- ultimately, smart.
The assessment process can be time consuming and sometimes painful, as it can reveal critical blind spots. Yet, for firms who are serious about success in digitalization, it is the essential first step. In fact, it is not uncommon for the assessment to reveal a gap between a firm’s perceived vs. actual digital maturity, which—unless identified—can in and of itself be a block for reaching goals.
It is also important for firms to realize that digital transformation is not just about technology; it is about the broader business. Therefore, once the assessment is made, the leadership—including the CEO—needs to come together and agree on the level of commitment required and prioritize areas that are most impactful in realizing aspired business goals.
Digital transformation initiatives are neither cheap nor effortless. These are generally multi-year projects that involve the entire business. That’s why developing a roadmap in collaboration with the CEO and the executive leadership is crucial to success and staying the course—as is not getting distracted by the new technologies that are bound to hit the market throughout the life of the transformation project.
It is clear that we have officially moved from a tech-enabled business to a tech-driven business environment. To that end, an effective working relationship between the CEO and CIO is vital to the success of any digital transformation project. CEOs need to put their vision for the company through the technology lens while CIOs need to play their part to bring their unique vantage points to the table. Working together, they act like a dual-engine fitted plane powering for a long-haul journey!