In recent Digital Transformation consulting engagements with small banks, there was a consistent chorus to simplify methodologies used for much larger ones. While right-sizing the methodology is key to the different context, digital transformation success still hinges on alignment within the bank itself, which means a comprehensive architecture approach is still essential, e.g.:

Business Architecture: The Foundation. Clearly defining the bank’s business capabilities (e.g., customer acquisition, lending, risk management) and how they map to both strategic goals and the necessary technology systems is vital. This establishes the blueprint for change.

Portfolio Management: Prioritizing for Impact. Digital initiatives cannot be ad hoc. A portfolio management process ensures each project prioritizes value delivery, aligns with the business architecture blueprint, and ties neatly to the bank’s broader goals.

Tactics and the Long View: Quick-win tactical projects are important, but it’s critical to embed them within a holistic, long-term vision. This prevents silos and fosters a sense of how each change builds toward the bank’s desired digital future.

The Power of Outcome-Driven Transformation

Smaller banks may have fewer resources, but they can often be nimbler than their larger counterparts. Emphasizing tangible outcomes can fuel speed and engagement:

Breaking Down “Value”: Don’t just say “lower costs,” quantify it. Will transformation shave 20% off processing time? Reduce fraud losses by 10%? Specificity drives better decision-making.

Metrics That Matter: Define upfront how digital initiatives will be measured, whether through traditional financial metrics (profitability, etc.) or leading indicators like customer satisfaction scores or employee engagement in the transformation process.

The CISR Advantage: CISR’s framework (operational efficiency, customer experience, growth) provides a great starting point to showcase to smaller banks how to categorize and track the value of digital change:

1. Value from Operations: This is about enhancing operational efficiency and speed while reducing costs. Companies achieve this by developing modular components, automating processes, and fostering openness and agility. The effectiveness of businesses in creating operational value is, on average, assessed at 54%. This foundation supports the broader objectives of digital transformation by making

organizations more responsive and cost-effective.
2. Value from Customers: This area focuses on increasing revenue through cross-selling and introducing new offerings, alongside boosting customer loyalty (“stickiness”). Strategies to enhance customer value include offering more choices and deepening customer insights. There’s a notable synergy between customer value and operational efficiency, exemplified by self-service options that benefit both domains. Companies were, on average, 40% effective in generating customer value.
3. Value from Ecosystems: The ecosystem approach expands revenue opportunities through collaborations with ecosystem partners and enhances value derived from customers and operations. High value from ecosystems is typically realized by companies that leverage partnerships to establish themselves as go-to destinations, thereby expanding their reach and retaining innovation. Companies with an ecosystem business model tend to outperform others in creating ecosystem value. Key tactics also include the use of digital connections, like APIs, and leveraging ecosystem data. On average, companies were 30% effective at creating value from ecosystems.
These areas represent interconnected ways in which companies can leverage digital capabilities to enhance efficiency, customer engagement, and collaborative innovation, with varying degrees of effectiveness reported across different value creation domains.

Beyond Methodology: Building a Digital DNA

Resizing methodologies is crucial for smaller banks, but true digital transformation necessitates a more profound shift than just adopting new tools. It’s about infusing a “Digital DNA” across the entire organization, built upon these key components:

• Strategic Alignment: Digital transformation cannot happen in a vacuum. Begin by assessing the bank’s business architecture and current digital portfolio against its strategic goals. This pinpoints areas where change will have the most impact.
• Unified Planning and Execution Avoid disjointed efforts with a unified roadmap. This roadmap should integrate both the necessary business architecture changes AND the digital initiatives themselves, prioritizing projects with high strategic payoff.
• Iterative and Agile Development: In the rapid-fire digital landscape, agility is key. Smaller banks can leverage this to their advantage, adopting iterative development cycles that embrace experimentation, learning from feedback, and continuous improvement.
• People and Culture at the Core: Technology alone won’t transform a bank. Prioritize a digital-minded culture through training, upskilling, and by celebrating innovation. Only then will technology be fully leveraged.
• Stakeholder Engagement: Active involvement of employees, customers, and other stakeholders isn’t a “nice to have,” it’s essential. This engagement drives understanding of needs, fuels better solutions, and builds buy-in necessary for change.
• Measuring Success and Continuous Optimization: Don’t measure for measurement’s sake. Transformation success hinges on using KPIs directly tied to strategic goals, customer value, and the operational efficiency gains promised by the digital shift.

This integrated approach ensures technology is a means to an end, that change is embraced, and that the bank can evolve alongside the ever-changing digital world.

 Authored by Alex Wyka, EA Principals Senior Consultant and Principal