Why is measurement the Key to Digital Transformation Success?

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This month’s CFO Insight section is slightly different than usual. Although written by Francois Ruchon, who has 20 years of international experience in Finance, the article offers a valuable insight on digital transformation, providing advice to CIOs. Francois is the Senior Vice President of Global Finance, Sales and Business Development at CAST – a leader in software measurement and analysis. Daily, he works with CIOs of large banking, financial services and insurance organizations to help them understand their software assets by providing tangible insight into the risk, cost and efficiency of systems that run their core business. He frequently assists chief executives at banks, financial institutions, and insurance companies to improve their business modernization initiatives. Whether they are going through a digital transformation, merger or acquisition, or shifting toward lean or Agile IT principles, Francois helps them understand if their software assets are helping or hindering these processes.

 

Measurement is the Key to Digital Transformation Success

Digitization is disrupting global business. The same is true for the banking, financial services, and insurance industries. Every BFSI organization needs to adapt their IT systems to the digital age, as consumers increasingly demand mobile, always-on 24/7 service. Failing to adapt to this new era will prove detrimental to the business and will ensure steep economic backlash.

The days of driving IT like a captain drives a super-tanker, using inertia to limit the change required to overcome obstacles, is over. CIOs know they must change course and transform their organizations to succeed in the digital world. In fact, first movers have already overcome many of the challenges to starting the journey.

Past the stage of building up a digital user interface, change is commonly divided between two groups of technologists – those who are already moving in Agile, DevOps environments and those who are used to managing legacy systems. This is the stage in which transformation blueprints can get derailed and result in unhappy customers, or unhappy business partners.

FinTechs and InsurTechs have largely grown without the burden of heavy legacy systems, bypassing these internal complications. This is why they are often held up as examples of transformation success in the industry. Darwin is never too far!

For the more traditional banks or insurance companies who have significant core systems, sometimes written in antediluvian technologies, the metamorphosis will be more painful, and it will come at a higher cost. But in all cases, it is absolutely needed. If not, as a CTO of a large investment bank put it a few years ago:

 

“Financial institutions that have been around for one hundred years or so, will simply disappear.”

 

One might say Darwin’s theory is not what should be referenced here, but there was a time when dinosaurs disappeared from the earth allegedly because of a meteor. The “Digital Meteor” is on its way, and in front of such impending danger, it is a mistake for CIOs to believe they can save the world with messianic solutions.

Hiring technical gurus in charge of rendering the IT organization more agile, more flexible, and more productive is certainly something to consider, but leaving them the keys and hoping they’ll solve every problem is shortsighted.

Simply following the latest industry trend does not make the difference between success or failure. Today, it’s easy to agree on adopting Agile, DevOps, modular architecture, Cloud, and others, but the end goal is really to move core business functionalities to a new digital platform. The challenge for CIOs is to discern whether this exercise is going to be seamless for customers and how long it will take.

Digitization endeavors undoubtedly take several years, but as everyone knows, several can turn into much more than three, four or five. It all comes back to proper planning and considering all dimensions of the transformation – from team size, to timelines, to deliverables, to key performance indicators.

The missing key here is MEASUREMENT. Regularly measuring achievements against plans will ensure you are not aggregating a pile of future re-work, technical debt or introducing new software, system-level risks.

So many early adopter CIOs have realized, a few years along their journey, that building fresh web and mobile interfaces to initially satisfy customers only goes so far to ensure long-term success. Just tacking on integrated APIs and building DevOps capabilities for new application developments still fails to consider IT capabilities at the core. Ignoring core systems means that efficiency and risk issues are likely to remain, drawing criticism from business partners and customers. A lack of, or a slow modernization of core systems will continue to be a thorn in the side of CIOs who are looking for long-term digital transformation wins.

Medical analogies are sometimes the most accurate in fully representing what is at stake here. Let’s say, for example, your cardiovascular system is having difficulty in efficiently pumping blood through the body. You can indeed replace your venal system with a brand new one, but what if your heart is not adequately pumping the blood?

In our case, customers might enjoy a slick user interface – seamless single sign on access and smooth multi-channel experience – but the treatment of their input data will still take ages to process. This could be because the core systems have not evolved at the same pace as the new digital layers, or worse, because connections between the new layers and the core systems triggers instability or data integrity issues.

It is therefore the duty of CIOs to anticipate, manage and MEASURE all aspects of digital transformation – from the flashy front-end to more complex back-end systems.

 

Following this process should help:

  • Modernize core systems
  • Migrate to the Cloud
  • Ensure end-to-end systems, from the newly developed digital layers to the evolving legacy applications, down the databases don’t generate erratic or unexpected behaviors that would translate to production outages or increased risk to the customer.

 

A main reason digital transformation initiatives still fail is because the measurement tools available to CIOs have been fairly rudimentary. Much of the analysis has historically been based on subjective assessments and the measurement of outputs only.

However, what analysis should focus on is not just the number of incidents, but the quality of customer experience delivered. Other industries, such as retail, have been wildly successful here.

Implementing a measurement system that actually denotes team performance based on quality rather than speed will make a world of difference. For example, these measurement systems should look at what functionality has been delivered, how much technical debt has been introduced or remediated and ongoing levels of stability risk against industry benchmarks.

In IDC’s 2017 worldwide predictions for CIOs, the research firm estimated that by 2019, 80% of bimodal IT organizations will accumulate a crippling amount of technical debt, resulting in spiraling complexity, costs, and lost credibility. They write:

“As ‘fast IT’ cranks out applications and products, shortcuts are taken and solutions that are architecturally unsound, brittle, and poorly coded are ultimately handed to ‘slow IT’, which becomes mired in fixing problems, rendering it even slower. As a business problem, technical debt needs a business solution in the form of governance that makes formal trade-offs between ‘the need for speed’ and the need for robustness and reliability.”

For many years, CAST has been at the forefront of software analysis and measurement, pushing CIOs and IT executives to measure their application development organizations to address complex applications, set up objective targets and drive their application development teams to reduce risk and cost. This includes proactively looking at stability, performance efficiency, data integrity and security measures while shifting the IT organization from a run-the-business model to a change-the-business driver.

As digital transformation continues to drive the CIO agenda for years to come, implementing a measurement plan early-on in the process will drastically simplify the process and improve their ability to benchmark progress over time. There are many moving parts to successfully transform, and centrally aggregating performance indicators – regardless of your current stage of transformation – is a strategic process that should not go overlooked.

 

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