Chasing the Digitally Driven, Part 3
(Mark Dangelo is president of MPD Organizations LLC, featuring books, industry reports and articles. He is a strategic management consultant, outsourcing advisor and analytics specialist with extensive process, technology and financial results and is a frequent contributor to MBA NewsLink. He can be reached at mark@mpdangelo.com or at 440/725-9402.)
Digital Yin and Yang–the darkness and the light. Some describe this as striking a balance of duality between complimentary forces. Similarly in a world now encompassed by enormous data output and precision decision making, there are emerging taxonomies or disciplines which are balanced by privacy versus profitability, marketing versus identification, protection versus accessibility, accountability versus irresponsibility and fraud versus ethics (i.e., digital integrity).
When these discrete continuums (along with others) are assembled, they conjure a “picture” of how particular digitally driven enterprises operate utilizing a cultural profile to achieve results and repeatability. Simple enough, no?
No. With speed of digitization, nothing is as it appears and its complexity (along with hidden implications) are anything but straightforward especially for organizations unaccustomed to rapid change. The light-speed of digitization is everything but business as usual.
Yet, it is assembly of these complimentary and competing attributes that make digital adoption (and subsequent adaptation) so difficult especially within highly regulated industries such as financial services. Underpinning this evolving digital picture are the realities of organizational capability, acceptance and readiness–aka its culture and complexity of interworking.
As inferred by the failure rate and ephemeral adoption of innovative digital solutions, per Harvard 90 percent of enterprise initiatives fail and per Stanford 90 percent of the startup technology used fold, the ability to cope with widespread and growing digitization impacts are materially influenced by personnel and the organizational practices for digital risks and rewards.
Unintended Amazonian Consequences
Last month, Amazon took heat for something it firmly believed was one of its strongest assets–a peer-challenged culture of success. Amazon was portrayed in a New York Times article (Inside Amazon: Wrestling Big Ideas in a Bruising Workplace) as callous, back-biting, intolerant, demoralizing, peer disingenuousness, psychological conformance and downright meanness (especially if you became ill).
Conversely, between the negative testimonies were traits of rapid results, innovative solutions, driven individuals, successful (with significant rewards for star employees), tip-of-spear enterprises, an organization free of red tape and fast action to define new markets. Below it all, suitable or harsh, resides an organization driven by measurement and internal competitiveness encased by 14 guiding principles of leadership.
Moreover, in reviewing numerous non-NYT articles on Amazon, the portrait that emerges is an enterprise firmly on the digital cutting edge and one that minutely measures performance at all levels–warehouses, Amazon Web Services, employee performance, delivery rates and fulfilments.
The rationale for discussing Amazon’s digital efforts represent lessons to be learned from designing a constantly adapting enterprise necessary to competitively “keep up.” It also provides critical insights for financial services when pushing decision making down into structures and cultures that have traditionally been subject to strict governance practices.
Beyond Technology, It Is About Culture
These lessons when applied against financial services industries whose public reputation is still very low, highlight six critical areas where culture can impact the ethical integration of digitization solution sets.
–Whereas procedural changes will be needed to integrate internal, joint venture, partner and third-party digital technologies, staff and tightly coupled outsourcers must have a working knowledge of what is being changed, why and its impact to day-to-day and corporate strategy.
–Landmines of discrimination, lending practices, product promotion, rates, credit worthiness and insurance and closing costs can be created when the need for urgency outdistances the ability to understand the implications of digital solutions.
–Accept that digitization of everything is a journey, and not a readily implementable end-state. Cultures honed on periodic large initiative sprints may lack the flexibility, rewards, motivations, political dynamics and review processes necessary for a patchwork of programs some outside the direct control of internal leaders.
–Not everything can be accomplished “tomorrow” even if it is a great idea–conservative cultures just cannot adjust. Moreover, upstream and downstream impacts of regulated enterprises cannot be underestimated, but incorporation of market facing and operational efficiency digital solutions cannot be ignored. An aggressive balance needs to be postulated within budgets, reward processes and between peers to ensure that the best possible outcome is achieved in the shortest timeframes.
–Accept that because a competitor offers a digitized solution does not mean a culture should clone a response just because it was that way in the past. Digitization has a “nasty habit” of creating innovation even among the most conservative or well-run institution (and their regulators). Factor in consumer behaviors and technology advancements across interconnected machine interfaces and we now understand why even the Fed is looking at updating “what is” secure payments across all of its venues.
–Within a regulated financial services entity, enterprises may need to move into grey areas of offerings–but regulatory involvement should be sought out even in the absence of specific laws in advance of release. While this may seem counterintuitive or risky, it may be needed to address non-traditional competitors and is likely the best way to show good-faith and impetus to change irrelevant or overly restrictive regulatory compliance laws. For financial services cultures and its regulators, it is no longer about the compliance fight, but the global market’s growth and the ethical stimulation of consumer demand.
For leaders within and across financial services, many are assessing and planning for change using successful digitization pilots, while conducting readiness and performance evaluations against leaders such as Google, Amazon, Apple and others. The old is the old, the new is something else.
Embracing Digitally Unintended Outcomes
Some authors have termed an enterprise’s ability to adapt to digitization as “cyber cultures.” With increased frequency, the days where respect driven by office size, organizational structure and profitability are shrinking. If we look within our own corporations, we notice that those with access to and protection of information are commanding greater respect without all the trappings of traditional employees who “climbed the ladder.”
An outcome of Digitization of Everything is that it’s made a shambles of traditional organizational design and brought to the surface that those who command information or its creation are far more in demand than managers who still seek command and control. It’s this chaos of design and politics that threatens inaction even when the best efficiencies are made available.
Late last month, Brand Finance reported nearly $71 trillion (i.e., half) of corporate valuation consists of intangible assets across 58,000 firms. What this rapidly growing number eludes to is that corporate cultures must be more about information and digitization rather than traditional benchmarks, asset management or historical communications and investor reporting. While some economists will cringe, consumption and economic prowess is about information and how it is captured, managed, manipulated, archived and destroyed.
To combat this unintended consequence of cultural chaos introduced by digitization, proactive and leadership organizations have begun to embrace change using emerging management practices. A few of these include: Anticipate errors in roadmaps, while reacting and adjusting without repudiation. Mistakes will be made when using untested, new or unfamiliar solutions within enterprises that spend years using the same software banking vendors. Iteration is good, short delivery positive, but discrete multi-year maps may not provide the value they once achieved. Employee hiring, satisfaction and evaluation is moving from the mechanism of pigeon-holing candidates to ones of behavior and flexibility–and above all a passion for change and life-long learning.
Famous management consulting leaders for decades advocated, “If you can’t measure it, you can’t improve it.” True, yet as we have seen with Amazon and before that GE, creating and following data using unadapting algorithms can lead to cultures where non-conformance is rooted out and disposed. Yet, relevant innovation along with embracing the unknown (i.e., non-conformance) is what has made firms very successful. In a rapidly digitized world, what we think we know from past actions is what causes the most growth stagnation.
Old engagement and cross-division boundaries are disappearing, while personnel integration with systems are rising (i.e., a seamless blending with the very systems they use). Just as Bloomberg ran a 30,000-word article (The World Belongs to People Who Code. Those Who Don’t Understand It Will Be Left Behind), implications of a digitized culture will pride itself on delivery, information accuracy, software expertise and big data against a lack of structure, office space and a distrust of traditional authority.
Within financial services, these unintended consequences will be hard to internalize. Why? As banking balance sheets shrink, there is limited desire to veer from the norm and challenge procedures and hierarchies, which some credit for a return to stability (and reinforced by regulation). In many cases the unintended consequences of digitization are too much to accept–a Queen of Hearts scream of “Off with their Heads” reverberates down the Mahogany halls.
This disbelief of events by some in financial services is precisely why in a post-recovery world many Fintech startups have found homes with non-banking institutions seeking to break the casts surrounding lending, securitization, insurance, credit scoring, closing, servicing and capital markets. Digitization for financial services, like the presidential politics unfolding, is less and less about dynasties or birthrights.
Digitization is the future of financial services and if the culture is ready, it is a critical factor for an enterprise’s deployment, success and profit.
And, by the way (full disclosure), for the past 15 years I have been Amazon personal, professional and digital devotee. I have many Fire TVs, more than a half a dozen Kindles, Fire phones, Echo, have my groceries delivered, drop ship items to my kids in college, buy most of our consumer items (e.g., electronics, home, outdoor, items for our horse barns), college textbooks, automotive parts, TV and videos (we ditched cable for Prime TV years ago), payment card reader for business and possess an AWS account. Perhaps, in some small way, I’ve help propel Amazon to the largest “retailer” (a misnomer for a high-tech company) by valuation in the U.S. at over $250 billion–but I am just like millions of others being more virtual and traditionally less “real.” And yes, if Amazon were a “bank,” I’d switch in a minute.
In Part 4 of the series, I will explore criteria for assessing digitally driven readiness and its impacts against success.
(Views expressed in this article do not necessarily reflect the views or policies of the Mortgage Bankers Association. MBA NewsLink welcomes your contributions; articles or inquiries should be submitted to Mike Sorohan, editor, at msorohan@mortgagebankers.org.)
