How financial institutions can avoid the pitfalls of digital transformation

As a consultancy that focuses on execution, we’ve seen the good, the bad and the ugly of digital transformation. Here are some of the pitfalls of digital transformation, and how we avoid them.

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How financial institutions can avoid the pitfalls of digital transformation


As a consultancy that focuses on execution, we’ve seen the good, the bad and the ugly of digital transformation. Here are some of the pitfalls of digital transformation, and how we avoid them.

How financial institutions can avoid the pitfalls of digital transformation

If you search for “digital transformation” and “banks” online you’ll get a barrage of articles on what digital transformation is, why it’s important for banks and how it’s changing banking as we know it.

But many seem to lack one important point: digital transformation is a holistic endeavour. It’s not about improving one piece of the banking jigsaw (that’s “digitisation”), and it’s not about adding one digital platform after another. Digital transformation is the holistic configuration of people, processes and technology within an organisation. This integration delivers a new value proposition that utilises digital business capabilities, customers and managing operations.

For this reason, one hundred-page documents with strategies, proposals and frameworks usually don’t work. Instead, banks need someone who can support them with execution through every step of the digital journey and help them plan, design, build and adopt the cultural, organisational and operational change they will be going through.

As a consultancy that focuses on execution, we’ve seen the good, the bad and the ugly of digital transformation. Here are some of the pitfalls of digital transformation, and how we avoid them at Modes.

  1. Hiring a commander rather than a coach

Teams at banks and financial institutions will often hire digital transformation consultancies believing they need to hire someone who will tell them what to do.

But too often, these are people who will follow a textbook method on what needs to be done and just send over a series of templates, rather than engaging with the team. They won’t adapt to how you, as an organization, work.

Ideally, what your organisation needs is someone who can adapt to reality and takes the time to understand and listen to the problems that are specific to you.

We’ve found that teams at financial institutions often need a consultant that acts as a sounding board, and will focus on guiding the team rather than giving orders. Our organizational design leader, Carina Baldwin, says she focuses on inspiring teams. She wants to connect them with the right people, help them think issues through and present different options whenever they face a challenge.

In our experience, teams need someone who can help guide them and provide feedback on their work, not someone who gives orders.

  1. Burning out the team

When we start working with a financial institution, we meet a lot of teams that are exhausted and burned out. We ask how many projects they’re taking on, and they’ll say something like fifty. When you’re working on fifty different projects, digital transformation ceases to be a priority.

Especially after the Covid pandemic, teams are more exhausted than ever. Digital transformation takes years, not months. Burning out your team in an effort to speed things up might cause more harm than help.

  1. Not setting up two-way conversation meetings

Misaligned power structures are one of the main issues we see financial institutions face when it comes to digital transformation. A top-down approach leads to functional and business leaders that lack the power and willingness to implement the right change.

Town halls are a good example. Although they are an effective way of communicating to a large group of people, they are considered too one-sided. Instead, you ideally want to see teams give feedback and have accountability for their actions. Specifically, we see digital transformation succeed when team members are encouraged to learn from their own experiments.

  1. Expecting a quick and smooth ride

For banks and financial institutions, digital transformation takes years, even decades. Some might argue that digital transformation never really ends. That means it’s often the furthest thing from being a quick and smooth ride.

We live in a world where digital is constantly moving. That means that what customers are willing to pay for is constantly changing. Often, success in the digital economy is not about having a brilliant strategy — it’s about adapting to constant change and being able to execute accordingly.

But being digital requires such huge changes that it takes a long time for established companies to be truly digital. Ironically, digital is about being fast — but it takes a long time to install the right processes.

Teams will often get it wrong. Some strategies might not work. We can’t anticipate all the learning curves, bumps, and blockers that we’ll face when going through digital transformation. That’s how it works, and standards should be set accordingly.

  1. Not hiring when necessary

When implementing new technologies and processes, you need an expert to help you coach your team, set the right operations and know how to progress.

We’ve seen many teams try to learn a system themselves, but this usually turns into burnout and dissatisfaction. Digital transformation is as much about people as it is about technology. The most effective way to transform a system is to have the right person in the right place.

As an organization grows, there is a natural tendency for the complexity to increase over time. Great leaders are aware of this and are able to identify and remove business complexity that doesn’t add value. Financial institutions should lean towards hiring an expert in order to remove complexity.

  1. Not explaining the “why” to the team

You could also call this: setting big, vague goals. When leadership sets unrealistic expectations without clear and achievable goals, it’s a lot harder to get team members to understand and correctly implement changes.

Digital transformation is a vague concept. That’s why many reports and articles on the subject are full of abstract concepts and vague conceptualizations. Your team might also not fully understand the true meaning of digital transformation.

When initializing a transformation project, you want to make sure to connect the views, principles, and values that start from higher up, and then go all the way to the individual. If the team doesn’t understand what you mean by digital transformation, then it’ll be much harder to prioritize projects and align on strategy.

Let’s say you’re wanting to switch project management systems. Instead of monthly reports, you want to use an interactive, real-time dashboard. The best way for your team to be motivated to implement the change is to explain clearly how it will impact them.

Tell them why this is happening: why do we need to start using this new system? You would tell them that it’s to get better analytics, gather better intelligence and value from your data.

How does it help them specifically? They would no longer need to submit reports because the dashboard allows data on demand.

Essentially, it’s important to explain why digital transformation is a top priority. It’s not just about outlining why this approach is better for IT, but also explaining how it drives business goals, how it helps team members, and why it’s being implemented that way.

One of the best ways to keep the team in touch with “the why” is to set up processes so they have constant access to customer insights. As we’ve mentioned above, the digital world is constantly changing, which means teams need to be in constant contact with what the customers are thinking and willing to pay for.

Providing the larger picture and demonstrating the immediate impact to team members helps them understand digital transformation and get on board with your projects.

Our approach at Modes

How do we try to do things differently at Modes? How do we try to help financial institutions through the challenges of digital transformation? Here are a few examples of ways we avoid making the mistakes mentioned above:

Enabling alignment

We’ve noticed that the biggest issue with digital transformation teams is the lack of alignment and communication. We don’t start working with a new client without a strategy and clearly defined objectives. Once those are defined, we get the people involved and start executing on them.

We put a large onus on training and connecting with individuals. We do the assessments in order to see: do individuals have the right skill set? Are they ready to get started with digital transformation? Once we believe everyone is aligned, then we get to work.

Embedding resources

What happens when a firm doesn’t have an in-house expert? That’s where we come in. We can embed one of our own resources — an expert in the particular system — that has financial industry experience. Our expert understands the issues and therefore knows where to look for problems.

One of our values is co-creation: we believe the best things are built when working closely with each other. By involving an expert consultant that understands the system and uses the right practices for digital transformation, we’re quickly able to find the right resources and fix any problems.

Using communication plans

Many people and consultants will talk about the importance of communication. In fact, we often think that resolving communication solves 99% of problems. But enabling good communication is not always straightforward. So how can we help fix this?

We use something called a “communications plan”. It’s a tool that we embed into every project plan, right from the beginning and all the way to the end-stage. We give teams a communication plan, as well as some pointers to guide them along the way.

These communication plans are included in the executive meetings, quarterly town halls, and any regular communications. We aim to make all messaging consistent across every platform. These plans are continuously assessed and are totally embedded in the transformation project.

When do you know that digital transformation has started to work? Our VP of People Experience, Michelle, says you know it’s working “when you start hearing voices”. That means, when you start hearing feedback — whether positive or feedback. When people start talking about digital transformation, that’s when your team is coming to life and transformation is implemented.

At Modes, we don’t just deliver one hundred-page documents with strategies and frameworks —  we help the execution via co-creation, shoulder to shoulder through the whole journey.

If you’d like to hear more about how we could help your organization manage a digital project, get in touch now.

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If you have a digital project in mind, we’d love to hear about it. Let’s connect on how we can help.

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