Three Ways to Justify Digital Transformation Investment to the C-Suite

In October, I had a discussion with Matthew DeMello of the “AI and Financial Services” podcast about the challenges financial services leaders face from a data management perspective. Some of the issues we raised were so immense and costly that we had to reconvene a week later to discuss the larger, elephant-in-the-room question: how can financial services C-suites justify the enormous investment in data management required by a serious digital transformation effort?

I told Matthew that the greatest obstacle banking digital transformation projects face isn’t technology; it’s hesitation. When top banking executives see the enormity of the effort and the price tag – in terms of data management infrastructure and the people perspective – it looks daunting. And since the word is out that so few financial services firms actually succeed in reaching all their digital transformation goals while digital banking and FinTech competitors are thriving, the C-suite wants to know in advance what the outcomes of their investment will be.

Having worked with financial services C-suites on automation and customer experience projects for decades, I’ve found that there are three main guiding principles that help to earn senior management’s faith and trust:

1. Transparency and evidence: As the team leading the transformation effort demonstrates clear, objective, and indisputable evidence that their efforts are showing progress, senior management’s trust and buy-in grow accordingly. Empirical evidence that validates proof-of-concept is the most convincing way to allay concerns and muster support.
2. Demonstrate business ROI: While digital transformation, AI, and digital “user experiences” might seem like new-fangled concepts to some in financial services, they are measured in decidedly old-school business metrics: revenue, profit, efficiency ratio, customer retention, new customer acquisition, etc. This is the lingua franca spoken by banking C-suites, boards, shareholders, investors, and regulators…and smart transformers make sure to speak their language.
3. Universally relevant, pragmatic metrics: This seems like an amalgam of the first two, but it’s more nuanced than that: it means remember your audience, and what they want to hear. An amazing new data science project may be worthy of a Sveriges Riksbank's Prize, but its brilliance might be lost on the Chief Risk Officer of a financial services firm seeking to approve applicants 10x faster without increasing risk. You gain credibility faster and win over internal clients by solving their most vexing banking problems first, and saving the more exotic development projects for later.

When “We Can’t Afford It” Becomes “We Can’t Afford Not To”  

Because they are ultimately held responsible for success and failure, it’s important for members of the financial services C-suite to step back and look at both sides of the digital transformation coin. Yes, it’s prudent to view it as an existential threat – just look at any industry that has been gutted by digital intruders – but it’s just as important to note that in pure SWOT terms, digital transformation in banking poses just as many “opportunities” as “threats,” and probably more.

If financial services firms invest in digital transformation purely as a defensive measure – reacting to industry trends and what their competitors are doing – they may be inadvertently missing opportunities for data management innovation and growth via the creation of new information-based products, services, and businesses.

How can that be, and why is it a game-changer? McKinsey recently interviewed 1,176 business leaders about their company’s future growth strategies and learned something fascinating: 50% of those companies interviewed said that by 2026 half of their revenues are expected to come from products, services, or businesses that haven’t been created yet.

• 80% say new-business building will help them respond to disruption and shifts in demand
• 62% percent of respondents are prioritizing new-business building to generate new revenue streams
• 55% say building new businesses is a top three priority, and 21% say it is their top priority

Clearly these companies are not only thinking out of the box; they are thinking many moves ahead to create entirely new categories of products, services, and businesses.

Proving It with Performance

How will financial services firms – especially the executives on the digital transformation hot seat – pull that off? By creating a culture and the technological conditions that nurture banking innovation, thus making business building part of the bank’s enterprise-wide muscle memory. Success starts by:

1. Rallying people, processes, and technology around a common, synergistic vision for the business
2. Setting ambitious, but attainable goals
3. Unifying the entire organization around strategies that make a commitment to delivering optimal customer experiences the coin of the realm

But before any of that can occur, would-be banking transformers must earn the confidence of those writing the checks. As industrial engineer, statistician, and business theorist William Edwards Deming famously said, “In God we trust; all others must bring data”. That applies doubly in digital transformation, where the high costs are exceeded only by the high stakes.

Since the 1980s, financial services firms have invested mightily to automate the way decisions are made, fusing human heuristic knowledge and AI together to achieve transparent and human-guided outcomes. Depending on the era, it may have been called “decision support,” “decision automation,” “decision management,” or many other names, but it’s always been about “The Decision.”

When banking transformers build the solid business case to bet big on digital transformation, they help make the C-suite’s decision an easy one.

You can listen to the full 13-minute podcast on Spotify or Otter.ai.

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