“It would be wrong to think that there is an end date on our digital transformation. We will never go back to how we used to work.” This is how the head of strategic transformation at Poland’s Bank Zachodni WBK thinks about the bank’s current digital transformation. And in recent discussions with more than two dozens banks globally, I could confirm that most digital banking leaders think along the same lines. These leaders also believe that retail banks organizational structures will evolve following a strategy that must be inherently dynamic to adapt to changing customer requests. Only a federated digital organization will enable them to scale the digital functions across the organization while ensuring consistent quality across the bank. This will likely take years and will need to follow an iterative approach. In these interviews, we identified three main phases in the banks’ transformation strategy and their related organizational structure:
- Tactical transformations are decentralized. This is the first, uncontrolled stage. Individual departments like marketing, customer service, and eBusiness build their own digital assets in their own way for different purposes. They prioritize short-term cost savings and efficiency improvement objectives rather than overarching business or CX goals. The lack of a shared digital strategy results in a high cost of ownership and a failure to share and reuse best practices. Our research shows that such decentralized organizations are also a characteristic of low digital maturity.
- A central structure enables a functional transformation. Adopters, driven by an urgency to accelerate their digital initiatives, move to a centralized model. The head of digital banking tries to ring-fence digital resources and create a digital banking organization with two main purposes: digitizing customer-facing processes via mobile and online banking and accelerating the creation of a digital workforce with the right skills and roles. A growing number of banks are willing to restructure their organizations to reach that objective.
- A federated structure scales digital in an end-to-end transformation. Forrester believes that a distributed model, where digital resources live within business functions, is the way that customer-obsessed businesses will organize. The role of the digital banking organization shifts from managing digital touchpoints to enabling the end-to-end transformation of the bank. Few banks have reached this level of strategic intent, where digital transformation is elevated to a C-level function and the CEO drives the digital business transformation of the entire bank.
My recent report looks at these different phases in more details and helps digital banking leaders understand what organizational model they should embrace to successfully execute their digital business strategy.