The role of bank boards has become much more complex with digital transformation.
Online banking and contactless transactions have become a needed norm to keep banks running despite the mandated safety measurements during the pandemic. More than half of the workforce of leading organizations like Bank of America, Wells Fargo, Standard Charter and Nationwide insurance work virtually, amid the pandemic. Some organizations have considered adapting this permanently.
To claim these changes have brought on digital transformation confuse the term digital change for digital transformation. Digital change only creates surface disruption. While it signals the start of digital transformation, it is not the end goal.
Meanwhile, digital transformation goes beyond technology and penetrates the organizational structure and its processes, the institution’s culture, and its entire workforce. It is a modification that comes from the inside.
Bank boards play an integral role in successful effective digital transformation. To do so, leaders should partner digital banking with legacy leadership, encourage open collaboration, and continuously motivate learning.
1. Partnering Legacy Leadership with Digital Banking
Studies have shown that many financial institution leaders are not digitally literate. In fact, only 25% of banks have at least 3 digital-savvy board members. As a result, misconceptions abound with regards to digitization and digital transformation.
One of the most prevalent thoughts is that digital transformation calls for the complete overhaul of legacy leadership and culture. The thinking goes that because these are the barriers to change, they need to be overthrown. But it is not as simple as that.
Legacy leadership and culture provide the backbone of an institution and removing it in its entirety means removing its core principles and values–things that define an institution.
Although it must be acknowledged that a lot of these cultures require an update and change, some can remain. Instead, leaders should focus on sorting out which of these are dragging down the institution and which are of these are fundamental to the institution and would thus, enhance their digital transformation. Effectively governing in the digital age fosters effective digital transformation.
Most companies hire a digital-savvy leader or partner with tech companies to speed up digital transformation.
While specialists can guide the institution, board members must educate themselves on digital trends and technology. Directors can attend relevant conferences and network with digital natives. By doing so, directors gain a holistic understanding on the best strategies to take, the risks. They can also better communicate the why behind all decisions and disruptions to the entire organization.
2. Encouraging Collaboration
To fully incorporate digital transformation throughout the institution’s structure, bank leaders should cease to consider themselves the smartest people in the room.
This means that leaders encourage open collaboration among the heads from various aspects of the institutions as disruptions affect the entire organizational structure, process and system.
Keeping an open ear to concerns and suggestions gives another perspective on possible strategy limitations and details missed. Additionally, involving the various aspects of the institution stimulates everyone to actively implement new strategies, adopt new technology, and keeps them engaged in the digital transformation process.
Open collaboration also means that leaders let go of some control and empower their employees. This way, employees can confidently make quick decisions that keep up with the fast-growing pace of technology, which would otherwise be hindered by hierarchical systems.
This creates transparency and accountability and builds community among everyone. In return, collaboration will help employees be more open and welcoming to the changes that will come about.
3. Pushing for Constant Learning
Remember that technology is not the end all be all.
Digital transformation necessitates constant learning as the world continues to shift. Leaders must approach transformation with a beginner’s mindset and let go of some preconceived notions in favor of new experiences and ideas. By doing so, they make room for innovation and breakthroughs that will give the institution a competitive edge.
Learning also means taking on emotional fortitude–that is, an openness to risks and failure. With this mindset, they understand that the transition does not happen overnight but takes years and years of development and evolution.
At the same time, emotional fortitude means leaders know when to pull back if a certain project or change no longer benefits the company. They are able to objectively discontinue it and learn from the failed step to make better moves towards a better institution.
Disruption from the Core
If banks continue to focus on implementing change from the outside-in, they will never be able to achieve digital transformation. Transformation is a mindset. It is not the technology that brings transformation – but the people, particularly the leaders.
Without the steady steps of leadership during the times of change, potential projects will be poorly executed, modernization will be abandoned. Even worse, institutions fail without steady leadership in a process of change. Effective leadership ensures that cultures evolve, systems innovate, and people change for the better of the entire institution.
To take inspiration, learn more about companies who successfully achieved successful digital transformation.