Well, it depends where you are starting from. A start-up – first fund raise? Or a large multi-asset manager or servicer with legacy systems traceable back to the 1980s?
Surely the latter case is already there? Everything is “computerised”, isn’t that it? Job done! No. The old world of siloed functions and localised data (often copies) and low usability does not hack it. “Computerised” is not another way of saying “digital transformation”. (Just as “digitised” does not mean “automated”).
Why is “digital transformation” in vogue?
On the back of aspirations – promoted by “Big Four”, and some basic common sense:
- Efficiency
- Reduced operational risk
- Compliance (DORA, NIS2…)
- Scale
- Agility
What characterises “digital transformation”?
- Business processes are supported: workflows, traceability, resilience…
- All stakeholders have access to and can contribute to the process and the underlying data (subject to permission policies)
- Data is “managed” – a big topic in its own right. We have moved on from “end point applications” which record the data supporting a few business processes. Localised data is now a “view” of a wider, enterprise dataset.
- Supply chain integration – this is as relevant to investment servicing as it is to manufacturing and retail
- Access & identity management: data protection, resilience, and business continuity
- Management information – metrics, process mining…
The reality: turning the Big Four strategy deck into tangible improvements
Looking at all these characteristics it becomes clear that getting from current state to future state may involve many stages. Big Bang is not an option for most enterprises. More appropriate is a phased progress towards a vision of what future state looks like.
Top-down vs bottom-up?
Life is never that simple. Most businesses will have autonomous or semi-autonomous divisions/units/regional operations/… So let us add a third approach – “Federated” which at a “local” level offers a split between top-down versus bottom-up approaches.
Top-down = Enterprise “scope”/ambition – good to have at all levels – ideally, link the levels up to the “global” view. But a federated model is more likely – hoping to join the dots later or at least apply an overarching governance framework to federated activities.
Bottom-up is inevitable – starting with a clearly defined set of processes to act as a pilot or exemplum is the usual way to make a start. In parallel, someone can be looking at an overall data model or map enterprise business processes but even at a small enterprise level (sub-1000 employees) this can take a long time and the business does not stand still for this exercise.
Contingent liabilities: this is not just about IT!
“IT” is the enabler. The bigger issues are adapting Ways of Working: People & Organisation. POPIT – remember this? These are the challenging areas and where “Change Management” trumps “IT Projects”.
How do you know when you have got there?
Stepwise… some quick wins… should give hope that the longer journey is delivering on the promise. No first steps will deliver a complete scorecard of “transformation” objectives, but any first steps should be chosen to illustrate whatever priority “benefits” are targeted. Every step forward should serve to encourage others and build belief that the effort is worth it. Between ourselves, you never get there! It is a continuing journey. The trick is to have a clear enough view of the destination and be fit enough to cope with the terrain.
Digital Transformation: Is it worth it?
Enterprises in investment management/servicing have not been early adopters but momentum is growing. There are contingent benefits which the “leaders” have recognised: staff attraction and retention – few smart people want to work with frustrating “systems”, client satisfaction and retention: being responsive and able to meet their needs – recognising inefficiencies and managing those out of processes.
It is never easy. It is never smooth and without significant challenges but, there are opportunity costs of not trying.
The 50,000 feet view of enterprise health would look at many classic metrics – client acquisition, staff turnover, profitability… but this type of snapshot or time-series trend does not necessarily recognise what is supporting the enterprise and the way it operates. The underpinning or “plumbing” is better thought of as “generational”. Enterprises can appear healthy for a period on legacy infrastructure, but eventually you reach a cliff-edge when the market or the key people driving the market move on from them. The tide goes out and where are those shorts?
“Technical Debt” is one dimension of “Enterprise Redundancy”. Perhaps a harsh view, but it is a tough world.
The leaders in our market invest in technology, sure. As important, they invest in their organisation. Supporting efficiency, effectiveness, economy (where appropriate). Removing friction in their operations and supply chain. Enabling scale. Enabling self-service platforms for stakeholders. Building in resilience and traceability. They recognise the need for flexibility – change is a constant. Good data and process governance will support enterprise agility.
Business Schools and Big Four share papers on massive digital transformations in huge global Fortune 500 enterprises. These case studies do not resonate with the investment management/servicing sector – unless those are subsidiaries of global or large regional banking or insurance enterprises. Scaling down the rhetoric from a global 40,000 employee enterprise to a large or tier 2 regional, independent investment manager/servicer with 400-4,000 employees is an art in itself. The same principles apply, but the messaging and stories need to be aligned with the culture of this type of enterprise.
The Business School pin-up case studies may appear unrecognisable – on a level of spend if nothing else. Further, these ventures are not without their “wrong turns” and disappointments. Plan B or Mk III is not often brought out in the well-crafted case study, but you can be certain that exercises of this nature are not all plain sailing. The scale of these big marquee projects may mask the relevance to your enterprise. The “happy stories” may mask the root and branch change to ways of working. But over time, these digital transformation initiatives will find expression in the investment management/servicing sector.
{Link to A1.2.2.1 – SNow 4 Tips}
