Setting the vision and strategy for digital transformation

In my previous article “A pathway to digitally transform how banks operate” I outlined prevalent transformation challenges and introduced a framework to revolutionize banking operations. This second installment in the series dives deeper in to crafting an effective transformation vision and strategy, drawing insights from my own experiences.

So what distinguishes a vision from a strategy? I like this definition from Simon Sinek:

“Vision is a destination – a fixed point to which we focus all our effort. Strategy is a route – an adaptable path to get us where we want to go.”

Reflecting on my leadership in large-scale transformations, success often hinged on the clarity and alignment of vision and strategy. A clear vision with a confused strategy, or vice versa, hindered progress. However, while a flawed strategy can be adjusted, an unclear or uninspiring vision poses greater challenges to overcome.

Crafting a clear and compelling vision

A vision is critical to success, serving as the guiding beacon during tough times—a north star for the organization. It inspires, motivates and clarifies purpose. Typically, behind most visions is a visionary leader who utilizes their imagination and wisdom to paint an inspiring picture of the future. The journey towards a clear and compelling vision typically involves four stages:

1. Creation: This is the inception phase, often initiated by a visionary leader or team. It involves recognizing unmet customer or business needs and envisioning a brighter future. Key personal qualities required at this stage include analytical skills, a big-picture perspective, ambition, imagination, and creativity.
2. Syndication: The vision is shared and refined with a small group of trusted colleagues or friends. Feedback is sought, and the vision statement is iteratively honed. Effective storytelling plays a crucial role during this phase, as it helps in garnering support and buy-in.
3. Definition: This stage involves bringing the vision to life through various mediums such as persuasive narratives (e.g. a press release set in the future), storyboards, promotional videos, or prototypes. Creating a tangible representation of the future experience helps in inspiring others and gaining momentum.
4. Refinement: The vision should be refined based on learning, feedback, and changing circumstances. It's crucial to stay ahead of evolving trends and ensure that the vision remains relevant and inspiring. Incorporating insights from the evolving target operating model and user experience helps in refining the vision further.

When defining the vision I've found that merging a storyboard with a prototype yields excellent results. Typically, I kickstart the process by selecting a widely recognized use case or scenario. Using Excel, I craft a preliminary storyboard outlining the envisioned experience, detailing key aspects like involved personas, step-by-step narrative, necessary capabilities, and displayed data. This draft is then shared with design leads for refinement, leading to the creation of initial designs that evolve into a clickable prototype, complete with a supporting narrative and prompts. Early engagement of lead developers and the marketing team ensures a collaborative approach. As we refine the prototype through iterative cycles, starting with a small group, we gradually prepare it for wider promotion, ensuring alignment with the envisioned transformation journey.

When executed effectively, a bold and inspiring vision serves as a powerful motivator for all stakeholders involved. As the destination for digital transformation becomes clearer, it's essential to chart out the best route to get there—a strategy that adapts and evolves as needed.

Forming and adapting the strategy

There is no one-size-fits-all approach to crafting a successful strategy. Numerous factors contribute to the uniqueness of each digital transformation initiative, including the organization’s objectives, industry dynamics, digital maturity levels, customer expectations, organizational culture, resource availability, regulatory requirements, and external partnerships. For instance, while one organization may prioritize fostering an agile and adaptive culture, another may already possess such attributes and focus on different areas in their strategy.

What is particularly important, and in my experience what can often lead to failure, is trying to do everything that can be done all at once. Strategy is about making tough choices, and ensuring that teams have focus and clarity. If you say yes to more things than you say no to, then it’s more likely to lead to mediocrity than to success. I’ve found this very hard to do in practice (nobody wants to say ‘no’) but it’s essential to prioritize and focus on the things that matter most.

While each strategy is inherently unique, certain foundational elements should be present in every strategic plan. I’ve found that the key components that are critical to a successful strategy, and which I will expand on further below, are as follows:

1. Understanding the current state and designing the future
2. Setting strategic objectives
3. Adopting an outcome based roadmap
4. Leadership and the organizational culture

It's essential to view strategy as a dynamic process—an adaptable path guiding us towards our desired outcomes. Just as navigating a car requires constant vigilance and adjustment to changing road conditions, so too does managing a strategy demand ongoing attention and flexibility.

In a world marked by volatility, uncertainty, complexity, and ambiguity (VUCA), establishing robust feedback loops and fostering a culture of continuous learning are paramount. This ensures that we remain agile and responsive, ready to pivot our strategy when circumstances shift, or new insights emerge. By embracing this iterative approach, we can effectively navigate the complexities of our ever-evolving landscape and drive meaningful progress towards our goals.

1. Understanding the current state and designing the future

An essential component of a successful strategy is a comprehensive understanding of the problems that need to be solved in order to achieve the vision. Below is a list of the types of data required to understand the current landscape effectively:

Client / Customer Data:

• Customer type: for individuals this includes age, income level, location and other demographics, and for businesses it’s the industry, company type, size & location.
• Transaction history: Frequency and volume of transactions, products and services used, channels used, volume of inquiries and interactions.
• Customer experience: Journey maps, surveys, reviews, complaints, and suggestions.
• Digital behavior: Preferences for digital channels, platforms used, frequency of online banking usage, preferred devices, etc.

Market Data:

• Industry trends: Technological advancements, regulatory changes, emerging digital banking services, and products.
• External providers & competitor analysis: Offerings, pricing options, market share, customer satisfaction levels, existing ecosystem map that includes external partners.

Operational Data:

• Products & Services provided: Trade management, settlement, customer support, etc.
• Internal processes: Workflow efficiency, business processes, query management, transaction processing times, resource allocation, controls & audit reports
• Employee experience: Journey maps, surveys, interviews, pain-points and ideas.
• Metrics: Transaction volumes, key performance indicators, root cause analysis
• Compliance and security: Regulatory and compliance requirements, cybersecurity measures, data protection protocols.

Financial Data:

• Revenue and costs: income sources, infrastructure costs, vendor costs, expenses, employee costs, unity costing, financial targets.
• Risk exposure: Operational risk, credit risk, market risk, reputational risk.

Technology Data:

• IT infrastructure: Existing systems, software platforms, capabilities, and limitations.
• Data analytics: Customer insights, predictive modeling, behavior analysis.
• Emerging technologies: Artificial intelligence (AI), machine learning (ML), blockchain, cloud, robotic process automation (RPA), biometrics, etc.

Ideally, all of this information would be readily available at the outset but, in reality, this comprehensive data is often lacking. In such cases, the extent to which assumptions can be made in lieu of reliable data will be a critical business decision so long as the riskiest assumptions are captured, challenged and ultimately validated.

With a thorough understanding of the current state and a clear vision of the future, the next step is to begin to define a Target Operating Model (TOM). This model serves as a blueprint outlining how the organization will operate to realize it’s vision. It encompasses various components including structure, processes, skills and capabilities, technology, data, governance, and performance metrics necessary to deliver value.

During the initial TOM phases, it's important to agree and articulate the level of ambition and define, at a high-level, how the organization will function in the future. This involves outlining value propositions and service blueprints that will form the foundation of the digital transformation strategy documentation. This is perhaps the most critical stage and so leaders must balance carefully the desire to begin executing on the strategy with the need to ensure that the solutions identified will address the problems of today and the future opportunities. Where decisions are required that would be prohibitively expensive to change at a later date (a point of no return), it’s essential that the time is taken upfront to gather the necessary data so that informed decisions can be made.

As the strategy moves into implementation, the TOM evolves into an iterative process. Each iteration refines the model based on insights gained and lessons learned, and this must in turn influence the strategy so that it can be adjusted as required. Further elaboration on this iterative process will be provided in the next article titled "Defining a Target Operating Model that will Delight Customers."

2. Setting strategic objectives

In a previous article, I highlighted common challenges encountered when transforming banking operations, one of which was the tendency to prioritize outputs over outcomes, hindering accountability and impeding learning from failures.

To address this issue effectively, I've found the OKR (Objectives & Key Results) framework to be highly beneficial, albeit challenging to implement at scale. OKRs offer a robust method for aligning team and organizational goals with overarching strategic objectives. Here's how they work:

• Objectives: These are ambitious, qualitative descriptions of what an organization or team aims to achieve within a specific time-frame. Objectives should be clear, inspirational, and aligned with the organization's mission and strategy, providing direction and focus. As a guideline, a team should ideally have 2 to 3 Objectives.
• Key Results: Specific, measurable outcomes that indicate progress towards achieving an objective. They quantify the desired outcomes and define success criteria. Key Results are typically set with a numerical target or milestone and are used to track and evaluate progress. It's recommended to have 3 to 5 Key Results per Objective.

The OKR framework serves as a powerful tool for aligning objectives throughout an organization, spanning from broad company-wide initiatives to specific goals set by individual teams and employees. When embraced on a company-wide scale, OKRs offer focus, alignment, autonomy, and empowerment. However, to fully realize their potential, accessibility and transparency are essential. Without adequate tools, managing OKRs can become burdensome. Figure 1 provides an example of how the OKR model can be used to align the vision, strategic objectives and team level objectives.

Moreover, the sustained success of OKRs relies heavily on fostering open and honest communication, providing constructive feedback, and recognizing achievements. Teams may require initial training and support to transition from a mindset focused on outputs to one centered on outcomes.

While OKRs commonly cascade from top-down, the most effective implementation balances this approach with a bottoms-up perspective to encourage innovation. I advocate for a method that initially cascades OKRs from top-down, followed by a feedback loop allowing teams to contribute insights and propose adjustments. This necessitates strong alignment and collaboration both between and within teams, particularly in cross-functional settings like product development. For instance, in a product development team comprising developers, designers, and product managers, each member's OKRs must align seamlessly with those of their colleagues, ensuring a cohesive approach across functional disciplines.

When applying OKRs to a digital transformation strategy which often encompasses a portfolio of initiatives, it can be useful to incorporate the concept of “Three Horizons” to ensure that the organization is not only focused on short-term goals but also investing in innovation and future opportunities. The Three Horizons framework, divides initiatives into three time horizons:

• Horizon 1 (H1): Focuses on optimizing existing processes, products, and services to enhance efficiency, reduce costs, and improve customer experiences. Solutions like Robotic Process Automation (RPA) deliver quick wins.
• Horizon 2 (H2): Targets emerging opportunities and initiatives with significant medium-term impact. This may involve digital trends, market opportunities, or partnerships to innovate existing capabilities.
• Horizon 3 (H3): Emphasizes long-term innovation and disruptive ideas with the potential to transform the organization's future. It requires a culture of experimentation, and typically includes emerging technologies such as blockchain.

OKRs mapped to each horizon should reflect the nature of the objectives. While H1 focuses on immediate business results, OKRs aligned to H3 prioritize learning and hypothesis validation. I’ve often found H2 & H3 being used mistakenly as term to describe initiatives that are likely to take a long time without any consideration for the inherent VUCA associated with digital transformations. As a result teams follow the same approach as they would do for H1 and experimentation isn’t considered, perhaps it’s deemed a luxury compared to more pressing tasks. In addition the H2 & H3 objectives are based on outputs instead of outcomes e.g. ‘deliver system A by x date’.

When balancing the resources across the three horizons the allocation will depend on factors such as ambition level, risk appetite, and financial considerations. When managed effectively, this model enables organizations to balance short-term optimization with long-term innovation, driving sustained success in digital transformation endeavors.

3. Adopting an outcome based roadmap

A roadmap is a document that is intended to help teams communicate how the vision will be achieved. It is a strategic artifact and is not, as is frequently the case, to be conflated with a release plan or project plan. These are important documents too of course and will be covered later on in this series, but they are more tactical in nature and are better suited to outlining specific delivery dates.

The primary focus of a roadmap is to articulate the value proposed to be delivered to both customers and the organization, fostering support and coordinating efforts among stakeholders. Here's how to construct an effective roadmap:

• Alignment with the vision: Start by elucidating the 'why' behind the roadmap. It's crucial to provide the big picture and strategic context before delving into the specifics of how to achieve it.
• Commitment to outcomes over outputs: Every item on the roadmap should directly tie to at least one of the OKRs. This ensures alignment around common goals and prevents the roadmap from being driven solely by specific deliverables that may not contribute to the desired results.
• Provide a sequence: Roadmaps should outline a timeframe for achieving each OKR. Typically, the timeframe is shorter for nearer term outcomes (e.g., a specific month) and longer for more distant goals (e.g., a specific quarter). Some organizations simplify this by using three categories: Now, Next, and Later.

While additional information such as key dependencies and risks can be useful, simplicity is often more effective. It's crucial to recognize the need for flexibility in response to unforeseen circumstances (VUCA) and to avoid making promises that cannot be fulfilled. Over-commitment should be avoided, and effective prioritization is essential.

By incorporating these elements into an outcome-based roadmap, organizations can effectively plan and execute initiatives, fostering alignment, accountability, and ultimately, achieving meaningful results that contribute to overall strategic objectives. Figure 2 provides an example of an outcome based roadmap.

4. Leadership and the organizational culture

Having crafted a compelling vision and a comprehensive strategy, the digital transformation leaders now need to focus their efforts on disseminating the strategy with the wider organization. For communicating the strategy, the test for this should be whether, when asked, employees can describe the strategy accurately. Without a thorough grasp of both the vision and strategy, there's a risk of teams veering off in disparate directions. To mitigate this risk, a multifaceted approach to communication proves most effective. This approach may encompass a range of methods, including All-Hands meetings supplemented with visual presentations, targeted departmental meetings, interactive training sessions, leveraging internal communication channels, and the creation of clear and concise documentation. Through this diverse array of communication avenues, leaders can ensure that the strategy is not only understood but embraced and actively supported by every level of the organization.

Once teams have developed a good understanding of the strategy, the leaders must also ensure that these teams are positioned to be successful. This entails shouldering the responsibility of recruiting, developing, and retaining talent within these teams, while also striving to motivate and inspire the organization. Furthermore, leaders must foster an environment where employees and teams can flourish.

I've had the privilege of working under exceptional managers and alongside talented individuals from diverse backgrounds around the globe. Conversely, I've also encountered environments where workplace practices and behaviors fostered negativity and discontent. Such environments erode psychological safety, a crucial element for encouraging people to freely express themselves, share ideas, and pose questions. Psychological safety is fundamental for creating an inclusive atmosphere where diverse perspectives can flourish, nurturing trust, collaboration, and innovation. Some of my most rewarding experiences in the workplace stem from collaborating with a dynamic team comprising individuals with varying skills and backgrounds, united in solving common challenges.

In forthcoming articles we will delve in to the operating model, organizational design (including roles and responsibilities), and governance that’s required as we begin to implement the strategy, but early on in the transformation journey it’s important to establish the key principles and values to be adhered to. These play a crucial role in shaping the culture, mindset, and behavior of an organization undergoing digital transformation. They provide a guiding framework that informs decision-making, shapes priorities, and influences how individuals and teams collaborate and operate within the organization.

Here's how values and principles ought to fit into a digital transformation strategy:

• Guiding Principles: these are aligned to the vision and help organizations make more informed and effective decisions. As an example, in an initiative that I worked on where the organization planned to leverage AI at scale to automate processes and to also provide real-time transparency of work, the need to protect and expand data consistency and data lineage along the transaction life-cycle emerged as a critical principle. This is one of the principles that guided decision-making by providing a benchmark against which available options were evaluated.
• Core Values: Reflecting the behaviors desired across the organization, core values are pivotal for the success of digital transformation. These values ought to align with those of the company as a whole but may be extended to include values that are vital for digital transformation. These may encompass diversity, equity, and inclusion (DEI), collaboration, transparency, resilience, continuous learning, data-driven decision-making, and customer-centricity, among others. It's imperative for leaders to facilitate discussions and consensus-building around these values. Additionally, they must lead by example, consistently promoting and reinforcing these values through clear communication, recognition, feedback, training, and development initiatives.

By actively championing and upholding guiding principles and core values, leaders can cultivate a robust organizational culture. Such a culture empowers teams to drive meaningful change and contribute effectively to the success of the digital transformation journey.

The next article of a pathway to digitally transform how banks operate will delve deeper in to “defining a target operating model that will delight customers”. This will build on the information shared in this article providing more insights and practical guidance to revolutionize how banks operate.

Please participate in the conversation, provide your insights and share this article with others.

Read the remaining articles in this series:

Article 1 - A pathway to digitally transform how banks operate | LinkedIn

Article 3 - coming soon...