Financial services companies are urged to take a holistic approach to effectively transform their business for the digital era.

This was largely the consensus among senior-level IT executives of major banking and insurance firms during a recent roundtable entitled “The Innovative Financial Enterprise – Transforming the Status Quo into Competitive Excellence” jointly hosted in Hong Kong recently by Enterprise Innovation and HCL Technologies Limited.

“Do not think in silos, think of it as a whole process. Make sure you have the right people in business centers that can work with IT, and then you can be more agile and more innovative,” said Richard Paddock, head of technology at Fidelity Worldwide Investment Hong Kong.

Furthermore, there is no cookie-cutter way of implementing changes that have to be made in a company’s business processes and business model in order to adapt to an increasingly digital world.

[The changes] really depend on the actual solution that you are looking at – whether it is operational changes or pure technology changes. To me, it is quite a blurred line now between marketing and IT and businesspeople. We need all these areas to be thinking about the right solution – and in many cases, it is a digital solution. So if you do not have business people who are IT literate in these areas, it may still not work,” Paddock noted.

All about innovation

The journey towards a digitized FSI business is marked by innovation – a fast-time to market delivering new products and services at the right time, right place and the right customers. Everyone at the roundtable agreed that innovation is an unescapable path towards digital transformation.

“Innovation is doing things in a different way that makes sense from a business perspective. This sounds very generic but I think it is very important that everyone gets to decide for themselves based on their business priorities what benefits innovation should bring,” said Henk ten Bos, CIO and also responsible for the Change Management Office at Ageas Hong Kong. “Innovation can come in different ways and in different areas. Digital is obviously very important for us mainly in supporting our distribution channel in doing their work in a very effective, easy, customer-focused way.”

Jack So, head of market data, Asia Pacific, global technology services at Societe Generale, pointed out that innovation is not just about what one can bring to internal and external clients. It is about “how you deliver it”.

“It is an end to end process. There is a lot of technical and engineering thoughts behind it. It is great to produce innovative services, but most of the time, they forgot how to deliver it. One reason for Apple’s success is how they deliver the products to the end users. We always used these stories to inspire our own engineers because it is a key lesson on how to deliver for internal and external client,” So said Harvind Bhatti, Global Head of CEM & Digital FS at HCL Technologies, agreed. “Innovation is really less about the ‘what’ and more about the ‘how’. I think that is where a lot of people have failed. They have focused on what they can bring to market and it has limits sometimes. But what they haven’t focused on is innovating operations that allows right decisions through analytics to come together.”

For Paddock of FIL Investment Management, innovation in the digital era must be focused around the customer experience.

“You need to look at what the client really wants and consider the end solution. What’s the customer experience?” he asked.

He added: “We see a lot of emerging companies coming into the market – smaller companies who have become very successful in such short space of time because they do not have the legacy and they are thinking about what the customer wants as opposed to what is our traditional business model. A difference can be achieved when putting these two things together. You get real innovation when you’ve got the time and the right skills to be able to focus on thinking very differently around the client needs, as opposed to your traditional day-to-day what you do in the office.”

CIO vs. CMO debate

As an increasingly digital environment makes IT a key enabler for new business models and new revenue streams, companies are encountering a big shift with roles across the organization being redefined and expectation being re-aligned.

The CIO vs CMO debate was raised once again as the growing role of marketing to influence and drive IT spend on new solutions aimed at enhancing the company bottom line. Gartner has cited that 30% of IT budgets are coming from the CMOs. While this may be the case, the execution of the digital transformation largely fall on the lap of the IT department. Debates about scope of accountability – especially KPIs around innovation have become a hot-button issue.

“The way different departments work together has not always been done in the right way. Eventually, we have to work together as a management team,” ten Bos of Ageas said. “Everybody has his own role and responsibility in a company. A marketing guy is not an IT guy and the IT guy is no marketer. On the marketing side, you need very creative people but usually they are not that strong in governance. However, how you make things work in a company is by working together on management level, with middle management, etc.”

Bhatti noted that in a digital business, there should be a strong link between marketing and IT – with both having shared responsibilities. She shared one experience HCL had in helping the digital transformation of a large Pensions, Insurance and Investments provider.

“There were a couple of things that we did to make it happen. One was structurally recognizing that across IT products and marketing, there must be fluidity of budget and not a separation. So restructuring like that work. From a governance perspective and approach, we developed an always on ecosystem based on learn, understand and act…work that into a fast active model through agile. Every organization through some form have implemented agile but have struggled to make an end to end connection from business through to IT like we have

However, she pointed out the necessity of changing the corporate culture where people develop the right mindset.

“It is like yoga, which is both a physical state and a mental state. You can put an agile framework in, but if people aren’t enabled with the right mindset, at the point of execution agile never works. Frameworks never happen from the inside. How do you change from the outside in? There are operating models to do that. But I think it is about operational change at specific points,” she explained.

Managing risks

FSI companies set on a digital transformation must accept that managing risks is part of the process. And this can be a tall barrier to hurdle for a company working an industry with a huge aversion risk in any form.

“If you want to innovate, that is one of the criteria, because if you want to try new things you can’t succeed in something big if you just keep on trying incremental change,” said one senior IT executive of a major investment bank who asked not to be identified.

He added: “In a business that basically makes money out of other people’s money, your focus is you either want to retain the clients or get new ones. Your clients are asking for the innovation and that you are trying to do. It all goes back to the customer whether internal or external, I think those are the key drivers for what you do.

“I mean how do you manage the risks? I think it is always as with anything that you do, you cannot take away the risk. There is no such thing as zero risk. But you can manage it by taking the right steps doing your due diligence, making sure you are doing things for the right reason.”

While FSI companies are weighing the risks, they are confronted by a ticking clock as the market demands for more digital services. And sadly, Bhatti of HCL Technologies observed that the FSI industry is lagging behind other vertical sectors in the race for digital transformation.

“Across all sectors, everyone is really trying to become an engaged, connected and intelligent and faster organization. Regardless of the sector, this is the strong confrontation point because it is forcing that engagement, intelligence and faster connectivity – a fusion between marketing and IT and a push to become more high touch and high tech.

“When I look at other verticals, they’ve had a head start. They had to become closer to their customers. They traditionally have business models that have allowed them to do so. And FSI is really striving to catch up in terms of processes, systems and more importantly skills and culture.”

However, there is a silver lining for FSI companies in Asia, Bhatti noted.

“Here in Asia, I think it is interesting because it is less about unknotting problems but how do we start up without the pitfalls that others who have gone through the digital journey in Europe and North America.