Strategic and business planning for digitalisation transformation: Insight of the Boulder Digital Transformation of MFIs programme – Week 3

Strategic and business planning for digitalisation transformation: Insight of the Boulder Digital Transformation of MFIs programme – Week 3

Author: Violette Cubier

This week’s module was on strategic and business planning for digitalisation transformation. The module was presented by Glen Tugman (Senior Consultant at Optimum Talent) and Jeremy Pallant (Senior Banking Specialist at IFC), and consisted in videos, live discussions, the study of a business case and exercises to apply the different models presented in the module.

Glen Tugman started the module with a reflection on why formalising a digital transformation strategy is so important:

1. First, because it allows setting a direction, and to make sure to prioritise the initiatives that have the most impact on an institution and on the key business drivers that really matter (which might include: client retention, growth in number of clients, growth in portfolio, financial performance, efficiency of internal processes…);
2. Second, because having a formal digital transformation helps creating alignment and synergies, while avoiding repetition/replication within an institution;
3. Third, because it simplifies decision making and reduces the temptation to dedicate resources to projects with a lower impact;
4. Lastly, because it helps communicating consistent messages (internally and externally), therefore creating confidence and increasing chances of success.

Financial institutions must transform in response to the rapid changes in customer expectations, increasing penetration of smartphones and new business models and technology that are emerging. Transformational change is however difficult to implement, in particular decisions related to allocating resources. Effective planning is also challenging because customer expectations and technology are changing so rapidly.

Hence, the proposal of Glen Tugman and Jeremy Pallant to simplify business planning by using business planning models. Two models particularly caught my attention:

1. Strategical Framework model

This model focuses on identifying trends, opportunities, dependencies and constraints for a particular digital project. Trends might for instance include changing customer demands, increased smartphone use, new business models and technologies (apps, cloud, software as a service, artificial intelligence). Opportunities usually consist in new customer segments, new value propositions, new delivery channels or different relationships with customers. Dependencies refer to all key resources and skills, partners, infrastructure that are necessary to run a project and are very often overlooked before launching a digitalisation project. Constraints usually lie in four areas: regulation, financial resources, human resources, and capacity for change.  

•  Business Model canvas

The Business model canvas is a strategic management tool that helps companies refine their business model and assess the impact of new initiatives using nine building blocks. It facilitates business decision making by highlighting elements that are the most critical for success, and dependencies between different elements.

The tool is useful to reflect on the key elements of a business model before embarking on a digital transformation journey: what are the customer segments, the value proposition, the delivery channels, the relationships with customers, the revenue streams and cost structure, key partners, key activities to undertake and key resources to be able to implement such activities?

Lessons learned on strategic planning

Brainstorming of one of the groups during the live session

Based on the case study (digitalisation transformation of an Asian bank) and on discussions held during the live session, some key lessons can be highlighted for a successful digital strategy development:

• Careful strategic planning is crucial to avoid launching projects that are not creating real value (or very little value) for an institution. Projects triggering growth and ultimately increasing revenues are often the ones creating the most value, while the net value of projects intending to cut expenses / increase efficiency of internal processes can turn out to be much lower than expected;
• Investing massively in the core banking system / back office solutions is very often a prerequisite to a digital project. Even though frontend apps/services are very attractive and exiting, they might sometimes only represent 10% of the total required investments, and middle and back office 90%. Back office investments really need to be taken into account from inception;
• Financial institutions tend to focus their attention and resources on technology, and to neglect other crucial resources to run a digitalisation project, such as human resources (training of existing staff, recruitment of skilled / specialised employees);
• Financial institutions tend to underestimate efforts and resources that will be required to conduct cultural change and to communicate digitalisation projects internally. Investing into collaborative technology (communication infrastructure, video-telepresence conferencing systems, and enterprise portals…), can really facilitate enterprise coordination.

To read the learning on week 1 click here

To read the learning on week 2 click here