- Digital transformations can be dragged down by organizational rather than technical factors.
- The orchestration of key players is one of the most difficult challenges for banks during modernization.
- Research suggests that banks set up a “control tower” to drive alignment.
Core banking modernization has produced some difficult lessons, and the most obvious one has little to do with technology. Selecting a platform is no longer the issue. Instead, banking executives are discovering that it is the orchestration of multiple stakeholders that is the real challenge during a modernization project, where governance can dictate success or failure even before implementation has begun.
This means that clear ownership of the project is vital from day one. Coordination across all parties from the bank to the digital vendor, payment and card partners and other business teams is also needed, as well as disciplined progress monitoring and incident management.
At a recent SBS roundtable, participants agreed that banking modernization programs can derail when governance is retrofitted mid-flight.
“Obviously, there’s project mastery to anticipate and coordination with third-party players, too – lessons to remember,” says Stéphane Berger, Senior Vice President and Head of Sales Enablement Digital Banking Solutions at SBS.
Why do banking modernization programs fail?
A 2024 research report by Bain & Co, which covered 24,000 initiatives, found that only 12% of large organizations undergoing a transformation achieve their original ambition, with a majority dragged down by organizational rather than technical factors.
“Those that do get it right avoid overloading their ‘star players,’ which can lead to burnout among that oversubscribed group, and they often hire a dedicated chief transformation officer to lead the effort,” Bain & Co says.
Analysis by Oliver Wyman highlights that core modernization programs need a governance structure built specifically to keep stakeholders working together to streamline decisions and mitigate risk.
Oliver Wyman suggests that that banks set up a “modernization control tower” to drive alignment across business, operations and technology stakeholders. This would also provide transparency around the scope of the modernization program, as well as drive timely execution and the assessment of regulatory and operational risks, it adds.
Meanwhile, a 2024 report by academic publisher Taylor & Francis notes that the failure of digital adoption is often caused by heavily siloed structures that block communication and collaboration between teams.
Case study: The governance lesson
Governance rather than the technology was the clearest lesson learned by a senior executive during his bank’s core update, an iterative, step-by-step process that added several layers of modernization onto its existing system.
“The most important lesson for me is governance and project management,” the executive noted during the roundtable. “The technology is there; but if you don’t know how to use and deploy it properly, it won’t be much use,” he adds.
The key players were on the same page from the beginning, including the vendor, a separate payments and card-scheme partner and the bank’s business teams. Keeping them aligned, the executive says, “requires very precise management, done properly with a centralized plan that defines the players, the actions and everything that must follow.”
However, setting up the project’s governance before it started was key to its success, the executive adds. “If project governance doesn’t keep up … you won’t reach the desired objective. From our experience at the bank, we found it essential to fully set up project governance and the organization of work across the different players, well before the project starts.”
Putting project governance into practice
Governance in practice can sometimes be easier said than done. However, the roundtable’s participants make it clear that somebody must oversee the key players, a single “conductor” who has the authority to orchestrate the teams and coordinate their work. The Bain & Co data highlights what that ownership is worth: transformations led by a dedicated chief transformation officer captured 24% more of their planned value.
The banking executive reached a similar conclusion. Asked what he would do differently, he says: “Above all, governance – governance that must be well thought out upfront, making sure we’re with the right counterparts and the right plan and roadmap, to ensure our risk is minimal during the project.”
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Q&A: Governance in banking modernization
According to research by Bain & Co, just 12% of large organizations that undertake a digital transformation achieve their original ambition, with a majority dragged down by organizational rather than technical factors. In banking modernization, programs can be derailed if governance is introduced after implementation has already begun.
