02 December 2020
5 min read
Digital transformation - two words that, depending on your nature, may terrify or delight you. Yes, it's a significant undertaking and usually requires high upfront budget and effort. However, depending on your current state of play it may actually prove to be the most cost effective and expedient approach too.
There are two fundamental approaches organisations often consider when they are facing the challenges of an underperforming system. (By system, I mean the combined force of your structure, processes and technology):
Both approaches have their merits. And of course, different businesses have varying baseline states, meaning their journeys and final destination may look very different.
A patchwork quilt of dated systems can result in a creaking technology backbone being held together with duct tape.
When systems have been designed for another decade, often their entire operational foundations are unable to support today’s business models - let alone those of the future. Inefficiencies run much deeper than a business often realises with patches and manual workarounds hemorrhaging money in the form of staff time and IT budget being used to repair, rather than improve.
In theory the upfront cost of adapting existing technology is much less, but a patchwork quilt of dated systems can result in a creaking technology backbone being held together with duct tape. This patchwork of interconnected systems means that small updates often require a deeper fix than originally planned for. And unintended knock-on effects to other parts of the system can again require extra budget to put right.
This can have a serious knock-on effect - a less than satisfactory experience felt by the client, which risks their loyalty and potential referrals. A slow, cumbersome onboarding or review process is unacceptable by our fast-paced consumer standards. If this contributes to the loss of even a small portion of current or potential clients, that could cost a business dearly. Indeed, those could be the potential gains to be achieved from delivering a competitive service and proposition that earns an outstanding reputation.
Although a digital transformation programme can often require a substantial budget, the long-term cost is far more comparable when you factor in the true costs and returns delivered by each approach. Especially, if the system you are maintaining is eventually replaced anyway.
The daily anguish caused by inefficient technology and processes is enough to drain the most optimistic of characters. It’s a drag - on time, on patience, on morale. In an industry survey we conducted recently, the main cause of dissatisfaction with technology was around a lack of integration across systems and processes. With companies having to cater to a more demanding client base and operate within a complex regulatory environment, is it not too much to ask that your technology supports your organisation, rather than working against it?
Adapting your existing systems can no doubt alleviate some of this frustration, however it’s rarely enough to fully resolve more fundamental issues and allow your business to operate at its full potential. Although the upfront effort is modest in comparison to a full re-architecture, it can be a bit like swimming against a current. As time passes, the aging of systems accelerates and the effort to counteract it can be fruitless if not addressed in the correct way.
Adopting new technology and rebuilding from the ground up on the other hand, requires an extraordinary amount of effort, both in the short and long. It can be all-consuming and seem to last a lifetime in the moment. However, there are some unexpected benefits apart from having a shiny new desktop screen.
Those who start out with a mandate from the top, a clear strategy defining what they are trying to achieve and what outcomes they require, build stronger organisations who share a common purpose and vision - they know where they are going and why. It also produces a powerful internal culture. And when an organisation does start to experience the payoff of the system they were building, they almost always agree it was worth the trials and tribulations of the journey.
Which way is the right way?
Think ahead to 5 or 10 years from now - will your current system be able to support you to compete in the market, even with its major gaps plugged? Will you be able to run a cost-effective business whilst competing with the most ambitious and digitally focused investment managers? If it’s not a clear cut ‘yes’, a deeper reflection of your approach may be required.
Whether you adapt, adopt, or even ignore, conducting a serious analysis of the true costs and value to your business is essential to determining your approach.