2023 Year End Special Edition Magazine

Peter Zorn
Business Advisor, Transformation
Armstrong Wolfe

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Build Bridges... Not Walls

CIO’s leading effective business transformation

When moving into the role of a CIO, it’ s easy to fall into the trap of diving deep into technology right from the start. In this age of automation everyone is touting the “buzzwords” of the day – cloud, AI, machine learning, blockchain and overall digital transformation. It’s easy to get caught in the “weeds of detail” before taking time to consider the overall direction the organisation should take, especially when it needs to evolve significantly. There are large amounts of funding allocated to a countless array of individual programs, all with varying aims and KPI measurements for what “great” looks like.

While we all accept this is the age of automation and that technology change will be constant, we see digital disruption causing great unrest in an organisation. The term “change fatigue” is often used and statements such as “people don’t like change.” In fact, I argue that what people don’t like about change is that it’s usually forced upon them with little warning, little explanation as to “why” the change is happening and there is a great deal of uncertainty about their individual futures which causes them to naturally resist any change to the status quo. This is where authentic leadership makes all the difference in moving an organisation ahead and building trust. No one knows exactly what the future holds for either a company or an individual, but being open with people about the road ahead will start to build trust among your people. Partnership and collaboration are absolute keys to success both as you look at your internal environment and the external relationships with customers, suppliers and advisors.

Technology, itself, is an enabler to business transformation. But the real benefit of new technologies is when people embrace new ways of working and this happens when they understand how they fit into the new world. A significant piece of any CIO’s role is to make sure the operating model is, in fact, right for where the company wants to go in terms of growth, reputation and talent experience. It is important to be bold when reviewing and challenging the status quo. Believing that what got an organisation to where it is, especially a successful one, must “stay the course” is an idea that must be challenged right to the core of the entire leadership team.

The changing ecosystem that banks operate in, by definition, means that operating models need to be challenged, they are dynamic and best of breed solutions may not come from the tradition approaches that have worked in the past. The issue for many CIO’s and, in fact, many leaders in general, is they retreat from difficult conversations especially in areas where they, themselves, do not have all the answers. This is classic behaviour; when someone does not know the answers, they would rather not have the conversation in the first place which leads to corrosive “water-cooler chat” among staff which can severely undermine any transformation initiative. There are a few key things a CIO needs to focus on today in order to get the maximum benefit from transformation spend.

The first thing to remember is whether talking about cloud, analytics, AI or any other buzzword today, this all forms part of the new digital ecosystem of the bank and in order to benefit from all these new technologies, they need to be joined up into one overarching strategic plan. All financial institutions today need to take an “omni-channel” approach to how they will access their markets – both existing and new in a controlled manner that instils both trust in their customers and buy-in from their employees to make them feel part of something great. Having multiple change management functions, numerous segregated digital initiatives across each business line and allowing budgets to be spent in an uncoordinated manner across countless vendors will cause delays, waste valuable spend and significantly delay, or even erode, benefits.

Challenge the operating models, challenge the approaches taken in the past and collaborate with your people on the ground to have healthy debates about what needs to change. This is where taking a bold approach to transformation by the CIO can help to build a solid reputation and following in an organisation. It is that following by the troops that makes you, by definition, a leader and an inspiration to your organisation and externally to the wider market..

Therefore, as a CIO, your role is critical in setting the strategy and vision for the organisation with the participation of the full C-Suite of executives because this cannot be technology surging ahead in isolation. Your fellow senior executives have some key roles to play in transforming the business as well as the culture of how you do that business. First of all, executives need to understand both the scale of effort required to bring about digitisation across the enterprise as well as an appreciation for what this multi-year transformation can do for the workplace. Perhaps most importantly they also need to accept that they, themselves, will have to change certain things about the way they act and operate in the organisation.

They need to “own” the change; it’s not something you delegate down the line for others to change but leadership stays the same. This “delegation down” leads to a highly cynical environment that will undermine transformation efforts. It’s easy for people to be attracted by the allure of cost reduction through supposed elimination of people but this is flawed in two ways. First, robotics and automation, while eliminating roles, do not necessarily significantly reduce overall headcount; it can be significantly about redeployment. Secondly, overtly going after cost savings as the key driver will cause a knee-jerk reaction for many staff who will either passively or actively resist and undermine the changes. In contrast to a cost focus, highlight the range of business opportunities new technology opens up whether it be around better customer service / a better understanding of customers, better control and capacity which can free up people from constant late nights in the office as well as new roles / skills and technology that people will get to work with which opens up new career prospects for many.

I have seen in successful, large banks where the CIO actually becomes the “beacon of light” for transforming the entire organisation. This role will lead a transformation effort that will be equally important for customers, colleagues and regulators. That is no small task, but there are methodical approaches that will require a systematic and relentless focus on establishing the kind of organisation you want to evolve toward.

Once you gain the understanding and buy-in of the leadership team of the magnitude of the business transformation and understand the broader business opportunities you are striving for, you need to be able to clearly answer “what great looks like”. This is not answering from a historical perspective of what great used to look like, but rather as you look ahead, what will a great organisation look like to customers, colleagues and regulators. Starting with the culture of authentic leadership and permeating all the way through the business so everyone is able to put the service of customers at the heart of everything they do.

Once you have established that, then you need to look at developing the action plan. This may seem obvious, but the devil is in the detail of pulling the entire business transformation plan together with all the enabling programs and looking at it with a new perspective; being open to new ways of doing things and convincing colleagues across the organisation to open their minds to the “art of the possible.” This is not an exercise to pull together a “cloud” action plan, an “AI” action plan, an “Analytics” plan, a “customer journey” plan, etc. It’s about unifying this all under one Transformation roadmap (and I use a capital “T” on purpose!) This transformation plan will need to directly link to what your future “great” organisation will look like.

You will naturally encounter a host of personal interests / “fiefdoms” when you bring different technology experts together which is precisely why you need to bring the entire organisation together to create this Transformation Roadmap so all functions understand the answer to the question, “What’s in it for me?” Remember, as the CIO and as a leader enabling the transformation, you will impact every function and business line across the enterprise – if it’s done right.

Many people will feel uncomfortable being challenged, especially if they have long tenure. From a psychology perspective, no one wants to be told what they have been doing in wrong (even if it was) and therefore it will be important to get the cross section of leaders / functions to understand how things could be better and the role they play in it. If you are asking your company to spend hundreds of millions of dollars over several years impacting tens of thousands of people, you need to be able to articulate the business imperatives; answer the question of “why” this is important to undertake in terms of business benefits, protection of reputation and building trust in the market both inside and outside the company. Logically these will need to be linked to KPIs but make sure these KPIs match the objectives of your transformation; the KPIs of yesterday often do not work in todays environment. Be able to relate the programs to the following groups (at least):

1. The Businesses – what will it mean for the revenue growth, capacity & scalability? How will it speed the process of opening new products / markets? Are there current risks that will be mitigated? How will they build trust among regulators and customers?

2. Operations – what will the impact be on processing staff? Will there be more predictability? Less overtime due to system failures? Better ability for staff to service clients through quicker, better information provisioning? Do they know their key role in protecting the reputation of the bank?

3. Finance – How will finance need to change processes / procedures to accommodate the “as a service” models that are incoming? Changes to budgeting cycles? More predictability in spend?

4. Compliance – How will the new technologies and processes improve compliance in light of regulations / reporting? Will there be improvements in report production? Accuracy? AML? What is their role in transforming the bank to the institution it wants to become?

5. Audit – What items on the current outstanding audit list will be addressed? When will they be addressed? Are the penalties for the current delays in fixing audit issues?

6. HR – What do you need to do to prepare staff for the changing environment? Changes to your recruitment process in terms of key skills? New skills and role frameworks? New career progression paths? How can they improve retention of talent in an increasingly competitive market? How are we improving the employee experience?

7. Regulators – What can you do to improve relationship and trust with the regulator? How to keep them abreast of the upcoming changes every step of the way so you treat them like a partner (and allow them to learn from your efforts.)

The list goes on – most notably adding your customers to this list but I treat that as a separate issue given the importance and magnitude of the Voice of the Customer. From the above list of stakeholders, you can start to qualify the parties that need to be in the room when you create your roadmap and overarching “T”ransformation program. On top of this, these stakeholders will need assurances on the value of the spend to achieve the objectives, a keen eye on security, control and governance. Answering the stakeholder question, “what’s in it for me?” early-on will save time later given there is far less risk of a spanner being thrown in the works because an area was not consulted / part of the solution.

Once you’ve convinced your leadership colleagues of the scale and importance of your business transformation program and you’ve carefully mapped out the broad group of key stakeholders to build the roadmap, there are two main tracks of work to support the underlying transformation program: your customers and crucially, your staff and by that, I mean all staff. Trust, authenticity and openness are going to be key aspects for success here.

Given the money you are asking for and the time you know it will take to evolve your organisation, it’s key that you ensure all investment decisions can be related back to the customer. Henry Ford coined the phrase, “your customers are the ones who pay your salary… your company is just the money handler.” This is a key concept to keep in mind as there are countless initiatives undertaken with grand targets that never achieve the expected results and have no way of linking the project to a customer benefit. Admittedly some of these benefits may be unseen to the customer directly as they may be around capacity, control or compliance, but even these keep you operating in a safe manner that allows you to better service your customer. All investment spend should have a direct tie-back to a customer benefit and the sponsor of the project should be able to explain the benefit in layman terms. An easy acronym to link customer benefit to is what I call the “4C” framework:

1. Customer – is the client going to see a direct benefit in terms of service, timeliness, price, trustworthiness or any other benefit that would actually impact how they would assess you on service;

2. Capacity – are you able to service more clients, quicker, in a scalable model whereby dramatic increase in customer demand would not impact the level of service you provide;

3. Control – are you able to articulate how you maintain the appropriate controls and safety over customer transactions / asset servicing and ensure you maintain a solid reputation in the market and can you demonstrate this to the regulators;

4. Cost – are you able to drive down cost without sacrificing quality or delivery to the customer and in a way that the customer actually sees some of the cost benefit.

The following diagram is a simple, visual summary that shows the result of putting the client at the heart of every decision you make. Through this, it’s also a solid way to evaluate the thought process you need to go through to embed new ways of working.

At a very simplistic level, here’s what you need to consider:

1. Engage actual customers with colleagues to make them real. Understand what they both find valuable (and frustrating) and get employees to understand how to increase that value and sense of purpose to achieving the vision. This will also help you to convey how specific programs will directly impact the customers.

2. Thoughtfully re-design E2E processes and eliminate waste through collaborating across the whole value-chain guided by the VoC. It is common to employ technology solutions to automate broken processes. Here is your chance to purposefully design processes, eliminate wasteful steps and ensure you are using automation at its most effective.

3. Design KPI’s and performance frameworks that stimulate innovation and demonstrate the success of new value-add processes. Most KPI’s today are designed more around control than quality of service. Be sure the measurements you employ relate to how well you are serving the customer and by default, your business. Support and encourage colleague involvement through the definition of KPI’s to determine “what great looks like” because they will have been directly involved in designing the new processes they are measuring.

4. Coach, train and encourage your colleagues through active participation in this transformation process which will increase their skillset, bring the customers to life and increase engagement through empowerment.

5. Through understanding customer needs, the processes that add value and the measurement of success, behaviours shift to one of collaboration and leading by example at all levels. By default, you are embedding new ways of working and a continuous improvement culture.

Once you have a framework for pulling your whole ecosystem into a comprehensive transformation program, you have built a roadmap, you have engaged all your key stakeholders in a meaningful way and you have a framework to translate the Voice of the Customer into something that can produce measurable results, it’s now time to focus on the single most important aspect – your internal colleagues at every level of the organisation. You, as their leader, have the single most important role to play in executing a successful multi-year transformation program.

Earlier, I mentioned “change fatigue” and the idea that people don’t like change. However, we now live in a world where constant change and disruption is a fact of life both at the enterprise level and all the way through to administrators who make the organisation work. Therefore, while it may seem obvious, it is essential to embark on a systematic, relentless campaign of inspiration, connection and engagement. In most organisations there is way too much “information” and not enough “inspiration.”

Recently, a CIO was concerned because people were resisting a large infrastructure transformation program and he did not understand why people were not jumping on board. When asked what he had done to get people excited about the changes and the role they had to play in the quarters ahead, he stated, “I told them at the Townhall, it’s on my blog and there are posters everywhere. I don’t understand what people are missing.” His frustration was normal, but we started to dive into the issues of job security, a lack of understanding about new roles, uncertainty about the skills required for the future, cynicism of management and a general lack of any benefits being clearly communicated. It’s useful at this point to share a brief, but essential diagram on the three steps required to bring about transformation of mindset and how you get people to “pull” change toward them.

This is an extremely simple diagram to understand, yet strangely, it’s usually one of the key things missing from an enterprise-wide business transformation program. It is very deliberately colour-coded in red, amber and green because there are certain checkpoints, without which, you cannot proceed to the next stage. Like in the CIO example above, he wanted to rush right into telling everyone what he was going to do and expected everyone to simply accept this and change their ways of working. Once you and your C-Suite leaders have defined what great looks like and you create a high-level roadmap relating all major initiatives back to the customers, it’s now time to inspire your colleagues. Ask yourself, “When was the last time you were inspired at work?” When was the last time you were inspired anywhere for that matter? Inspiration leads people to want to do more, to want to take part and to understand how they will benefit from such changes. This is colour-coded red because until you can answer a series of questions that relate exactly to “What’s in it for me” for colleagues across the business, you cannot proceed to engage….yet.

While an inspirational vision will help set the tone for the organisation, different people are motivated by different things depending on age, proximity to head office, culture, length of service, etc. Therefore, you must take that vision, segment your audience and connect that vision to something that will resonate with them. This is not difficult, but it does take effort, diligence and a true understanding of the impact on your people. Only once you complete this amber step can you move onto engagement. The first two steps can be done relatively quickly and are timebound. The engagement, along with monitoring and course corrections, will last for years which is why you must approach this with a relentless, systematic approach that grows engagement from the time people initially hear about something through to their full engagement, understanding how they will benefit and all the way to many of them becoming role models or change champions for the new ways of working required to fulfil your transformation ambitions.

To bring things full circle, just as you need to inspire the troops across the entire organisation, you need to inspire your leadership team through their understanding of the magnitude of the transformation effort and you need to inspire the external market / regulators about your future. I would summarise a set of actions to think about which you can tailor in your mind to the tasks you have at hand.

1. Understand the full ecosystem that operates around you and begin to formulate ideas around how to expand your traditional operating model to capitalise on your market and customers. This will mean approaching things differently that you did in the past, investigating partnerships and collaborating among teams;

2. Inspire your leadership peers through getting them to understand the enormity of the transformation ahead, the art of the possible for your future business and what will be required from them because they will need to change their ways of working if they expect others to do the same – key to building trust both inside and outside the bank;

3. Build your roadmap in a consistent, cohesive approach across the entire internal ecosystem covering all businesses and functions to avoid wastes of time, competing programs and duplication;

4. Put the customer at the centre of all your decision making and be able to trace the reason you are investing to some customer benefit (akin to the 4C framework) – ask yourself, if you were a customer would you see this as an improvement;

5. Purposefully design your processes and ensure your performance measurement drives the right client centric behaviour having defined what “future great” looks like;

6. Embedding new ways of working and getting people to “pull” change toward them is your responsibility. Take this opportunity to inspire your people, connect messaging to something relevant for them and actively engage in a systematic, relentless and authentic manner. In my experience this is one of the most important aspects. This is your opportunity to motivate them and get them wanting to be contributors to the transformation effort.