by Ian Woodhouse
Head of Strategy and Change
August 21, 2018
Revitalising client service and achieving greater efficiency are now key priorities. Digital and business transformation can help but demands a whole new set of skills from the C-suite, writes Ian Woodhouse
The role requirements of the C-suite are shifting fast. After a period when its members were blindsided by regulatory demands, they must now also focus on revitalising client service and achieving greater efficiency in the face of new competition. Smart C-level executives recognise that taking new technology to the next level will help as more than a third of existing processes can now be digitised. However, mastering these innovative technologies won’t be easy.
Some won’t understand the benefits, will fear the cost or feel threatened by digital progress and will fight its implementation. Even if these very senior figures aren’t fighting it, are they sufficiently experienced and skilled to manage the business transformation the circumstances demand and to develop the right strategy for the future?
Digital transformation requires three very specific and interrelated skill sets of the C-suite and the board: the ability to change and transform the business, managing the successes as well as the failures so they can correct course when things go wrong (as they inevitably do); understand new and emerging technologies and how to deploy them for client and business benefit; and the ability to form and work in partnerships and networks of suppliers – of products and of services.
Directing the transformation is the CEO. With operational experience, he or she also needs to be able to steer the project and take others along with them. Surrounded by experts, the CEO paints the big picture of how the business model evolves to meet the disruption that digital technology is unleashing today and also in the future. This requires working more closely with the COO and the CTO in a front-to-back approach.
To do this effectively, the CEO will need to know where the bank is positioned against its peers in terms of performance and opportunity gaps so that a coherent focus and long-term strategy can be developed, and scarce resources allocated effectively.
It also means finding the right balance between building, partnering and acquiring new capabilities, as well as the use of more firm-wide frameworks, methods and tools to better co-ordinate consistent cross-functional change and avoid piecemeal initiatives and costly duplication.
In addition, the CEO must be able to recognise fresh business opportunities and prioritise accordingly. Few banks will be able to take advantage of all the digital opportunities, so part of the CEO’s role will be to decide the priority focus. This increasingly means starting with the client journey and whichever of the new five tribes of private banking client [link to infographic] the bank is best placed to serve.
While these decisions don’t need the CEO to know the nuts and bolts of the technology, someone on the board should – the chief technology officer or someone specifically tasked with IT oversight at board level. Their role is increasingly to advise and work with the C- suite to look at how the business can benefit from new and emerging technologies.
Being a digital wealth manager means having joined-up technology across all operations from the front to the back. At the front end, it will enable slick client onboarding, smart personalised client relationship management and sophisticated reporting through better data management. At the back end, it will bring industrialised and standardised operations, with easier product development and compliance. All of this will significantly cut costs and improve efficiency and client service.
Linking all this up requires not just the technology know-how but also operational and client experience. In this the chief technology officer should be supported by operationally and client-fluent directors. Picking and implementing the right strategy today demands understanding that client journeys – from their goals, risk appetite and investment objectives to portfolio performance and deviations from them, for example – touch both the front and the back end. Similarly, it means familiarity with compliance procedures and how technology can make them more efficient.
The penny appears to be dropping at some banks. Dirk Klee is stepping up as head of Barclays Private Bank this autumn. His background includes spearheading UBS Wealth Management’s drive into digital, and UBS itself has a new head in Martin Blessing, promoted on the basis of his success at growing business through digital initiatives. But these C-suite changes are the exception, not the rule.
The days are gone when a bank’s IT department ran to hundreds of coders writing patches and new programs to deliver products and services. Today, a digital core allows a bank to work with specialists who deliver cost-efficient software that can be implemented via APIs. Deciding exactly where the bank’s IT focus should be and then finding the right partners to work with is a new skill. There’s also the need to source, work with and manage third parties and oversee implementation and governance.
Critical areas ripe for partnerships include cyber-security, cross-border regulation, data privacy, fraud oversight and detection, as well as suitability. In each case, a bank will have existing departments that will need to be brought onside, their processes examined, adapted and staff retrained or redeployed.
But it’s not just IT. The product and services side will probably also need partners to deliver an ecosystem of services and client benefits to burnish the experience and build loyalty. For example, female clients want networking opportunities and offers suited to their interests, which may not be those of the traditional (currently, mostly male) client base.
Digital transformation offers a new lease of life to many wealth managers. It will help them retain a competitive advantage over rivals offering new services and over new challengers. But the transformation isn’t limited to IT; it will permeate across the whole bank into every corner, including the C-suite and board. Digital knowledge and transformation experience are going to be critical competitive levers. Senior executives ill-equipped will soon find themselves struggling. Now is the time for the C-level to get smart or risk being left behind.