Fund executives setting plans for 2017 convinced they can succeed by doubling down on what worked in the past may be reading from the wrong playbook.
According to a study released earlier this year, Forrester / Odgers Berndtson study, "The State of Digital Business 2015," most companies remain unprepared for digital transformation.” Within the wealth management sector the expansion of robo advisor technology is just one signal that tech-enabled breakthroughs are redefining the funds business. As wealth transfers from Boomers to their Millennial kids, and the workforce shifts as Boomers retire, the power center for managing money – whether advisor-led or self-directed – is shifting to a generation of digital natives.
In spite of the acknowledged lack of readiness, executives expect the majority of their sales to be digital by 2020. If you anticipate joining this camp, how will your digital transformation keep pace?
If your transformation plan to capture share of an expanding digital sales pie is not well underway, and you feel behind the eight ball, that may be for good reason – transformation takes time. And it demands operating along a new set of practices.
Transformation is within reach of any CEO and his or her team. Consider these factors to accelerate progress:
The CEO must be the Chief Growth and Transformation Officer
Hiring a Chief Digital Officer or Chief Innovation Officer or someone else carrying a fashionable CXO title assigns daily responsibility to close the digital gap. This can be a good move. The CEO cannot be everyplace at all times, and besides, micromanagement from the top of the c-suite is deadly. When it works, this added role introduces skills, fosters enterprise-wide partnerships, signals commitment inside and outside the organization, and creates the digital blueprint for internal buy-in. But the CEO alone has and must use his or her authority to make the tough calls.
The CEO is also the Chief Culture Officer
Culture is not the job of HR. Culture is the sum of hundreds of choices everyone makes every day. People respond to the behaviors of their leaders. What do transformation behaviors look like? Think about orchids in a greenhouse. Like orchids, new and different ideas are fragile and require special care. They may need protection from the outdoors –- the conditions through which a mature business can operate, but which will kill transformational changes. The CEO must implement governance supporting both transformational initiatives in incubation, and smooth transfers to integration at the right time.
A lot has changed, but strategy is still the starting point for execution that gets results
Good strategy means having a clear view of where you are, an intended destination, and a map of the terrain with a logical path to get there. Good strategy allows prioritization of short and long-term moves, including the digital transformation agenda. Strategy gives all members of an organization a common view of goals.
Strategy must evolve from what it has become in too many companies -- a financial extrapolation supported by sales-y PowerPoint and macro-economic assumptions. Strategy happens in the nitty-gritty details of execution, not in decks.
Govern to engage and create accountability
It’s a great idea to ask a direct report to lead digital transformation, but what about the rest of the c-suite? Put a governance process in place that fosters constructive dialog with all directs to the CEO, including P&L leaders and functional heads. Governance must reinforce that every member of this team has “skin in the game.” No one is exempt from being part of the solution. No bystanders or anonymous choristers are allowed.
Update the risk/reward equation
Face it – our businesses were built to be predictable - to control risk while delivering projected returns. But nowadays, avoiding deviation from the status quo may be the riskiest path. To paraphrase Joi Ito, director of the MIT Media Lab, speaking at an event this past Spring: To the corporate leader, downside risk is determined by aggregating variables that are stress-tested through complex analyses in an attempt to account for unknowns. And the potential of digital is full of unknowns, so it can easily be discounted down to just assumed incremental impact.
But here’s a different view: To a venture capitalist, the maximum downside is the loss of 100% of his or her investment, which is meted out in small chunks as milestones are passed, so exposure is clear, measurable, and contained. And the upside is viewed as low-odds, but exponential in its eventual potential.
Food for thought: reframing the risk/reward equation can be a liberating and responsible course of action.
Digital transformation is a non-starter without the right talent
Seek evidence beyond the skills that seem urgent now but come with an expiration date -- what matters is hybrid thinking, continuous learning, and a delivery record of meaningful results. Is “fit” simply a euphemism for “people like me”? Go after your complements, and even some people who don’t fit your mold, but for whom you are committed to make room. The homogeneity of faces on the “Team” section of corporate and startup websites reinforces the untapped opportunity to invite others in and reap the results.
Measure advisor and client outcomes
What gets measured gets done. And, the wrong metrics stifle transformation. Applying yesterday’s metrics with blunt force can be a death sentence. The CEO must take a stand on how to gauge progress. Implement metrics that: 1. Align to strategy, 2. Reveal how well you are delivering on expectations of advisors and clients 3. Relate to drivers of the P&L and overall franchise health now over the next three to five years.
Generate speed and momentum through constant progress in small chunks
This beats delayed, all-at-once precision that misses the market. Iterate, iterate, iterate, as fast as you can. Make prototypes and show them to advisors and clients. Test and learn. Be flexible to new data and insight. The word “failure” does not appear in this playbook. “Failure” is something you bring upon your team when you don’t take learning from a study, a test, a prototype, an advisor or client conversation and have it fuel the next improvement that moves you closer to success. “Failure” is what happens when the water cooler talk echoes with, “that doesn’t work so we killed it.” A culture of “failure” has gum in its gears.
Pursue three stages to find your digital leverage
Step one: Identify the sources of revenue and the drivers to win the business. Step two: Define the profit model. Step three: Go for scale. A successful financial services CEO set up this one-sentence approach during early days of digital transformation: “Find the unit profit model and then see if you can scale it.”
Collaborate
Some people are wired to collaborate. Others are expert at advancing their own goals through silos. Evidence of growth effectiveness: an environment where colleagues proactively build on each other’s ideas for shared success. Make collaboration a hiring competency that is taken seriously. Make it an expectation and demonstrate commitment through your own behavior.
Finally, get out there and get your hands dirty
Learn by doing. Fast and valuable knowledge exchange takes place when corporates and startups interact. Corporates will find the speed, iteration, and absence of failure as a concept inspiring. Startups are always looking for mentors and advisors with financial, marketing, and operating experience. This quid pro quo can be the basis for a mutually beneficial and mind-expanding relationship. Make the meeting ground any space that is not a corporate conference room.
Want to know more? Amy Radin will be presenting on the topic of Leading your organization to deliver growth through innovation in the era of fintech at FundForum NextGen Distribution, taking place in Boston 25 - 27 October.