To succeed at digital transformation, focus on customers and innovation

New study of financial services firms shows a clear difference between leaders and laggards.

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When it comes to digital transformation in the financial services industry, there are clearly leaders and laggards, according to a new study conducted by Forrester Consulting on behalf of consulting firm Ernst and Young LLP (EY).

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Companies that deploy broad-based, customer-centric approaches to digital transformation generate the greatest value, the report said. The research suggests that digital leaders know how to create a customer-centric approach that focuses on innovation and increasing revenue.

The report is based on an online survey of nearly 250 senior-level executives at North American financial services firms conducted in April 2018. It underscores the commonalities digital leaders share: A multi-dimensional focus, customer-centricity, clarity of responsibility, and an unwavering commitment to talent.

The digital leaders focus on innovation (65 percent compared with 32 percent of digital "laggards") and keeping up with changing customer preferences (48 percent compared with 35 percent).

An unrelenting focus on the customer allows companies to be innovative while satisfying customer needs and meeting financial criteria such as increasing revenues and profitability, said Yang Shim, EY Americas advisory data and analytics leader for financial services.

"The performance gap is huge between companies that take a more comprehensive and customer-centric approach to digital enterprise transformation and those that focus solely on cost reduction," Shim said.

Digital transformation leaders use an adaptive approach to meeting changing customer, marketplace, and regulatory needs, the study said. It found that the most advanced digital organizations foster a symbiotic relationship between digital transformation and innovation. Companies at the forefront of transformation create defined, repeatable and scalable processes (83 percent), while laggards use a more fragmented approach with no formal coordination or mechanism to scale transformation.

Transformation leaders drive innovation through accountability, coordination, and metrics, with 84 percent appointing executive authorities and creating a separate budget to drive innovation. Three-quarters have a federated team that works across all innovation teams, which creates direct accountability; and 88 percent identify and implement a way to measure innovation.

While both leaders and laggards recognize the need for customer satisfaction (each group ranked it a top-three priority over the past 24 months), leaders stand out by recognizing the need to equip employees with the right tools, facilitate collaboration, and balance internal and external talent to accelerate innovation.

Both groups also plan to focus more on improving efficiency and productivity, and implementing new ways of working. This overlap shows a clear path forward for financial services firms regarding the need to prioritize people -- both inside and outside the organization.

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While having access to information is important, if companies do not provide their workforces with the right tools and insights to enable them to make impactful decisions, they will be at a huge competitive disadvantage, said Kevin Koenig, EY Americas advisory data and analytics leader for insurance. The returns on digital transformation investments reflect the complex links between customer, innovation, and other drivers, he said. The broader the transformation strategies and the more holistic the approach, the bigger the payoff is likely to be.

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