Navigating challenges in Banking Digital Transformations: practical lessons from complex turnarounds

According to Mckinsey, only 30 per cent of banks that have undergone a digital transformation report successfully implementing their digital strategies. Additionally, more than half of digital banking transformations exceed their initial timeline and budget—or fail. In this context, it's likely that most banking Digital Transformations in progress are currently facing various challenges.

The common challenges that lead to failure and best practices for success are widely documented. While delivering banking technology and digital transformations is extremely hard, turning around troubled transformations is even harder. In this article, I will focus on lessons learned from my experiences turning around complex projects, focusing on eight structural elements to be considered when interventions are required. These elements are Erosion of trust; Team dynamics; Vision, Objectives, Priorities and Strategy Alignment; Solution Alignment; Governance and decision-making; Talent and skills; Financial impacts; and impacts on people.

Let’s dive into each of these elements.

?

1.????Erosion of trust

The erosion of trust is a foundational challenge for any turnaround effort.

As the initial fissure among team members and other stakeholders widens, a breakdown of trust propagates through the other structural elements of project dynamics leading to compounding issues in communication, collaboration, and decision-making. Team members and stakeholders hold critical information while doubts begin to replace constructive dialogue. In turn, productive debates start to fade, giving way to a culture of blame which further corrodes teamwork and the ability to turn around issues. In addition, interventions in project delivery often translate into micromanaging activities and reducing the autonomy of team members, further damaging self-esteem, morale, and engagement.

Leaders in intervention roles must understand these dynamics and take intentional actions to contain erosion and rebuild trust from early on. Moreover, as past issues are uncovered, leaders have a central role to provide transparent communication, enabling problem-solving and setting the tone with a “no blame” orientation to create a safe environment for all the involved resources.

I once had a difficult challenge managing a complex turnaround where I had to report the plan and progress to a global leader who used to operate with a punishment mindset. In these reviews, with many other executives on the line, for every new issue uncovered, he used to yell over the phone: “Bring me who was responsible for this mess, and I will fire them myself”. Naturally, most of the other executives involved in the earlier phases of the program never showed up in these reviews and the lack of their engagement made my team’s effort much harder to identify and fix the issues.

To contain the erosion of trust, the intervention team must act quickly and pragmatically, prioritising the most high-impact problems and taking immediate containment actions while refining a thorough assessment of the situation. In parallel, they must engage all relevant stakeholders and clearly articulate the action plan to address critical concerns and rebuild dialogue. ?And finally, they must manage senior leadership anxiety and establish mechanisms to shield the team as much as possible from day-to-day massacre from external distractions.

In one of my interventions, trust between the consulting and client leadership teams was significantly eroded due to a history of missed milestones across multiple streams of work under the broader program. To contain the erosion of trust and pave the way for the turnaround few issues had to be quickly addressed:

·??????There were no single points of escalations for each stream, so accountability was diffuse and open issues were difficult to track.

·??????Teams were organised around technical components disconnected from the business processes leading to a disjointed and complex solution, planning and execution orchestration.

·??????Some of the leaders were in their roles due to their technical (e.g.: API management) or functional expertise (e.g.: customer onboarding, contact centre) but did not have the soft skills required to lead cross-functional teams.

·??????The reporting systems failed to provide clear visibility of the physical progress of the work against value drops aligned with the business and did not allow for the timely raising of risks and issues to the appropriate stakeholders.

?

By establishing clear roles and responsibilities and reorganising the work to align with the business processes touched by the transformation, we streamlined and simplified the communication paths within and across the teams and stakeholders. We also made targeted replacements to ensure team leaders were properly equipped to manage the multidisciplinary nature of the work and the day-to-day relationship with other stakeholders. We uplifted the reporting mechanisms to ensure a connection between the executive visibility and the actual progress of work on the ground. Finally, we centralised the handling of the senior management pressure on myself and a right-hand member of the team. The combination of these actions also reduced entropy and ad-hoc requests to team members, which greatly contributed to keeping them focused on the right side of solving issues.

?

2.????Team dynamics

In continuation of the previous point, when facing delivery issues, team dynamics should be another priority element to be checked on. Dysfunctional teams often lead to troubled engagements and troubled engagements typically result in a profound impact on team dynamics.

In complex delivery, cross-functional teams must collaborate on problem-solving to build a new solution. An example of disrupted team dynamics occurs when poor communication and ambiguous roles and responsibilities are in place, leading to the team members quickly diverging in direction. Challenges also may arise when technical and non-technical team members struggle to understand each other’s perspective, or conflicting priorities between areas are not properly arbitrated. As work progress, misalignments quickly become apparent, and dysfunctions multiply.

The assessment must also cover external factors impacting team dynamics. For instance, in a remote/hybrid work configuration, certain key roles may require different infrastructure settings for connectivity or equipment for them to perform and collaborate effectively. Another typical example occurs when team members are juggling multiple roles and there is external pressure coming from their other reporting lines that conflict with the priorities of the team.

Lack of trust, poor communication, ineffective collaboration, and misaligned priorities often lead to short-sighted decision-making, hidden issues and ultimately, failure. Therefore, when delivery issues arise, leaders must quickly dive into the team dynamics to identify and correct the course. There is no “one size fits all” solution when it comes to dysfunctional teams, and leaders must apply wisdom to intervene properly. This may lead to reorganising the work, resetting priorities, clarifying roles and responsibilities, coaching team members, improving meetings and ceremonies dynamics, shielding the team from external distractions, or even replacing team members in extreme cases.

?

3.????Vision, objectives, priorities, and strategy alignment

Shifting from the team dynamics, another key aspect is the alignment of vision, objectives, priorities, and strategy.

While widely acknowledged as a success factor for digital transformations, the prevalence of transformation failures due to misalignment with the strategic vision suggests that translating these elements into specific transformation components remains a challenge for many banks.

As an example, years ago, I intervened in a complex program tasked with delivering a new enterprise data warehouse (EDW) for a large bank. The overarching vision aimed to enable a single source of truth for the organisation, with the objective to build an enterprise data warehouse. Despite this clarity, the lack of well-defined priorities and a targeted strategy led to months of aimless conceptual discussions. The team struggled to shape the solution, resulting in a diffuse scope definition and accumulating delays. To address this issue, we decided to reset the transformation roadmap around business domains with a well-defined prioritisation list. As expected, this action was a complex task, requiring senior leadership engagement on the business side and multiple rounds of discussion and negotiations. The eventual outcome was a critical realignment of priorities and strategies, which was instrumental to set the direction for the involved teams and laying the foundation to address the remaining challenges.

Another perspective on this topic relates to how to maintain alignment in long-term transformations. Banks often break down large initiatives into multiple manageable streams handled by squads or product teams working in a distributed and autonomous way. As the transformation progress, banks must continuously review these streams to ensure they remain focused and aligned with the vision, objectives, priorities, and strategies for the transformation.

To illustrate this, many years ago, I led the assessment of the IT effectiveness of an important bank in Brazil. Among the findings, we identified a strong correlation between visibility and the performance of initiatives. Fragmented initiatives that stayed “under the radar” of the organisation had a high rate of delays and failure, while initiatives with direct involvement of strategic decision-makers had significantly higher rates of completion and success.

In the name of agility and autonomy, many initiatives from the business were broken down into smaller pieces and directly fed into the delivery teams, who had the autonomy to decide and absorb work under pre-defined thresholds. In theory, this model should empower teams and improve alignment with business needs. However, the model was also used as a side door for any change request and to appease business requests outside the priorities established by the strategic portfolio, deviating resources and undermining overall effectiveness.

4.????Solution Alignment

Building on the importance of strategic alignment, another common cause of project derailment is the misalignment of the solution. This manifests in multiple forms, such as inadequate design, overengineering, poor user interface or addressing the wrong problem. Typical challenges also occur when vendor solutions are reshaped to accommodate commercial conditions, deviating from the intended purpose. While most troubled project assessments focus on execution aspects, such as planning, estimating, scheduling, resourcing, scope, and risk management, it is critical not to overlook the alignment between the solution and its intended purpose.

Many years ago, I joined a turnaround effort for a core banking transformation, where a new business loans platform was several months behind schedule. Adapting a European retail banking solution for a business bank in the Brazilian market resulted in an overly complex solution beyond originally envisioned. The delays in the implementation led to additional issues, since regulatory changes and new business demands needed to be absorbed into the platform being built, increasing pressure on calendar and costs.

At the time, the political and financial implications of writing off the original base platform choice were deemed unacceptable; thus, the approach was to double down and re-steer the implementation towards completion. The scope was renegotiated to the minimum set of features needed for go-live and the team was reorganised around functional themes (product catalogue, origination, accrual and calculations, payments, data migration, etc). After 9 months of intervention, and a rigorous recovery plan, the solution was finally implemented into production.

In another instance, I joined a major digital transformation facing challenges with a new onboarding and origination platform. The platform was aimed to provide a class-leading digital experience for customers' onboarding and account opening. However, the system had several design flaws, including cumbersome screens mimicking paper forms, a process demanding multiple document prints and scans for signatures, a slow performance due to excessive traffic between the front-end to back-end, and inadequate user feedback leading to confusing usability. A complete overhaul would take significant time and additional costs.

The decision, in this case, was to follow an incremental approach, prioritising user, and customer experiences. We started by addressing user feedback and simplifying the navigation of critical screens. Subsequently, we released new versions every 6 – 8 weeks, each focused on reducing onboarding and account opening time and incrementing user adoption. Customer experience experts collaborated with the development team to define the improvements and targets for each iteration. Clear priorities were shared and agreed upon with users, and a dashboard tracked results after each release. Weekly steering committees led by the bank’s executive sponsor discussed findings and lessons learned. In less than a year, the account opening time was reduced from 60 minutes to 11 minutes and adoption surged from 15% to over 95%.

5.????Governance and decision-making

As made evident through the examples shown in this article, poor governance and decision-making played an important role in the described issues. Not surprisingly, interventions in troubled projects often add multiple layers of governance creating double and triple-checking points at every level. However, in my experience, the addition of extra layers rarely brings the expected benefits. Interventions for re-steering must focus on resetting the governance with particular attention to streamlining communication, providing visibility, and enabling better tracking and decision-making at the right levels and with the right involvement of stakeholders. Any extra layer during the turnaround period must be directed solely to the specific needs of out-of-ordinary decision-making and executive support. ?

A good example of targeted intervention in governance and decision-making is illustrated in the case of the onboarding and origination platform mentioned above, where the direct participation of the bank’s executive sponsor in the weekly reviews was critical for timely decision-making and arbitration of conflicts. In that situation, no governance layer was added. Instead, the participants and the agenda of the steering committee were made fit for the purpose of the platform implementation.

A much less effective, but frequent, situation occurs when multiple added checkpoints are enforced with several members of the team to monitor progress without active decision-making or problem-solving. These situations often relate to a poor underlying program/project management foundation, where a lack of tools and standards makes the collection, integration, consolidation, and publication of reports a costly and ineffective activity. By fixing the fundamentals, leaders help the team to be more focused and productive. By blindly adding layers of control, leaders hinder progress and contribute to distracting teams from the correct priorities.

6.????Talent and skills

Another critical and tough element to overcome in turnarounds is the lack of talent and skills. The absence of the right skillset can hinder the accurate assessment of issues, especially in technology-rich or functionally complex solutions. Another challenge is the time needed to locate and onboard skilled resources. Furthermore, recovering troubled projects often demands more senior and numerous experts than originally estimated, resulting in increased fulfilment and cost challenges.

In my experience, a perfect solution is rarely available for turnaround teams. Leaders often face the difficult task of selecting one of six strategies moving forward: jeopardise other initiatives to reallocate talents, reskill/upskill internal resources, reorganise the work/team to maximise the effectiveness of existing skilled resources, rethink the technical solution, phase the delivery to balance the load on skilled resources, or externalise the work. ?

To support this decision, however, finding the right experts to provide a robust and fast assessment of the underlying issues is critical. As an example, many years ago, I was involved in the turnaround of a project to implement an analytical engine aimed to feed account managers from a bank with a daily list of customers to contact and offer products and services. The list should consider the customer's recent interactions with the bank and the offerings should be associated with their profiling and preferences to increase the probability of conversion.

The original solution couldn’t reconcile the functional requirements with the strict processing window, and the project was severely in jeopardy. The team struggled for several weeks to find a path to resolution, with an obvious deterioration in the relationship with the sponsoring area. Ultimately, it was required a very senior expert in high-volume high-speed data processing solutions to challenge the underlying architecture of the engine. With the input provided by this expert and his oversight to guide the design of the revised solution, we were able to successfully re-implement the solution retaining most of the same original team members. Anecdotally, the revised architecture was simpler and cheaper than the original one. ?

This case illustrates the importance of acting fast to mobilise the right skills in turnaround assessments, particularly in large programs of work where every day of delay may cost dozens of thousands of dollars. Real experts may have higher costs, but they usually pay off with better decisions and more effective solutions.

7.????Financial impacts

The cost of turnaround is usually one of the first questions asked by the senior leadership teams. When addressing turnarounds, leaders must work closely with finance and the business senior executives to find mechanisms to appropriately fund the turnarounds.

The typical turnaround effort requires the recognition of the sunk cost and revised cost-to-complete, with a typical spike in cost during the intervention period. Some of the most challenging decisions I faced in turnaround experiences were caused by constraints related to the financial modelling to fund the intervention efforts in the projects, which greatly limited the ability to make short-term investments to quickly change the course of engagements.

Senior business leadership support is critical to enable a “do the right thing” approach when these constraints are in place, so leaders must be mindful and carefully balance short and long-term considerations when deciding the turnaround approach.

8.????Impacts on people

Finally, turnarounds must consider the impact on people. These efforts are characterised by high-pressure, high-intensity and, in many cases, uncertain timeframes. This is particularly relevant as these efforts often require significant engagement from most of the same team members already working on troubled projects. When intervening in a project, leaders must take careful consideration of the emotional and psychological state of the team and plan for additional actions to balance workload and improve morale and engagement. They should also add contingency plans for increased team turnover.

A challenging situation occurred when I was leading a turnaround of a new platform implementation with a high dependency on experts in the technology components. As the implementation was behind schedule for several months, the team had to be scaled to compress the execution. Part of the original core team was at the point of burnout, so careful management of workload translated into a realistic forecast on timelines and budgeting, and the involvement of the leadership team to provide individualised support for the team members became crucial to mitigate the risk of losing the resources. We managed to finally deliver the platform despite losing some of the key resources, however with a high cost in people and team burnout.

?

In conclusion, while delivering technology and digital transformation is hard, intervening in troubled transformations is even harder. Technology and Digital Transformation leaders should identify early signs of derailment and take decisive corrective actions as soon as issues are identified. The costs of late intervention are often high, and certain early decisions are too hard to be reversed, as illustrated in some of the examples mentioned in this article.

The challenges of digital transformation in banking are evident and statistics show a significant number of projects facing setbacks. Turning around troubled initiatives require careful consideration of multiple key structural elements—trust erosion, team dynamics, alignment of vision and strategy, solution congruence, effective governance, talent and skills, financial management, and human impact. Navigating these elements can help leaders to build robust roadmaps to overcome obstacles and achieve meaningful improvement on challenged banking technology and digital transformations.