4 Pillars in Digital Transformation Journey

To build a digital transformation strategy, Boston Consulting Group recommends that banks and credit unions focus on four priorities — or pillars:

1. Reinvent the consumer journey
2. Leverage the power of data
3. Redefine the operating model
4. Build a digital driven organization

Boston Consulting Group identifies three digital operating models:

1. Digital as Business as Usual Plus. The management team stays in place and the focus is on bite-sized advances. Funding usually comes from the P&L change budget.

Pros: Quick early wins and cost savings.

Cons: It’s tough to change a business model that remains siloed within an existing business unit. Since P&L remains in the specific market or line of business, there’s little incentive to reach across business lines. And legacy systems remain an issue.

Most appropriate for: Banks and credit unions in the early stages of digital transformation.

Hiring strategy: Retrain existing talent and add external talent where needed.

2. Digital as New Line of Business. The bank or credit union creates a new business unit and names a head of digital. The division owns the digital projects but uses shared services from IT, HR and others.

• Pros: This model can have a more dramatic impact on consumer experience than digital as business plus. There’s also more accountability since you can blame the head of digital when things go wrong. It’s relatively easy to scale by rolling out initiatives across the organization.
• Cons: A new line of business means a more complex organization. Digital will also compete with other business units for IT services. And legacy systems will remain an issue.
• Most appropriate for: Banks and credit unions that have already progressed in digital transformation.
• Hiring strategy: Retrain existing talent and add external talent where needed, only on a bigger scale. You will also need to add new physical spaces that foster innovation and collaboration.

3. Digital Native. This is a new digital bank with its own P&L and technology stack. The focus is on acquiring new customers.

• Pros: New economies and new capabilities can have a rapid impact. There’s no legacy systems to get in the way. The new institution can use off-the-shelf products to launch fast.
• Con: The existing bank remains and it’s difficult to encourage existing bank customers to move to the new bank.
• Most appropriate for: Banks and credit unions that have already progressed pretty far in digital transformation.
• Hiring strategy: The sky’s the limit. Since the best talent typically wants to work with innovative digital platforms, hiring will be easier.