Digital transformation – using technology to improve internal processes and enhance how businesses deliver value to their customers – is becoming an essential process for companies to survive in the competitive information age. To understand what separates success from failure, we look at a firm that has undergone a renowned and successful digital transformation programme.
With the pandemic having sped up the digital transformation process worldwide by three to four years[1], it is no surprise that Hong Kong companies are increasing their technology budgets[2] . Market analysis reveals that the top-performing digitized businesses earned up to 80% of all digital revenues in their respective industries[3] – an excellent example of the “winner takes all” dynamic that is a feature of the new economy[4]. The ability to quickly and successfully change to exploit this dynamic has become vital.
Learning from a winner
As a case study, we will highlight a company that has delivered a successful digital transformation project. Spanish multinational banking giant BBVA has gone from being a traditional lender to one that has embraced digitalization at all levels of the organization. According to the company, this is what has been achieved[5]:
BBVA’s efforts have rightly won the group various innovation in technology awards. By studying its success, we can identify four key factors that can also be broadly applied elsewhere.
#1: Commitment from the top leadership
Companies that have a management team that is entirely focused on achieving an efficient transformation tend to be the ones that see the process through to its successful completion.
Much of BBVA’s digital evolution was guided by the vision of its then-CEO and Chairman, Francisco Gonzalez. In 2015, he famously announced that “BBVA will be a software company in the future”. Amid all the potential challenges, he could clearly see the opportunities, noting that “banks must urgently undertake a far-reaching technological and cultural transformation. The industry is swiftly advancing towards a new ecosystem”[6].
Such committed and visionary leadership was a critical success factor for BBVA. Although he has since stepped down, this continues to be a guiding principle – with the business stating that data and technology remain a central strategic priority[7].
#2: A willingness to invest heavily
The financial returns from any digital shift can be uncertain, and many companies are understandably hesitant about investing heavily. Yet, there is proof that the best course of action may be to go “all in”[8]. BBVA is a testament to this, with Capgemini observing that the bank has spent billions of euros on building its technology capabilities over the years[9].
The bank has created what it calls its “3,6,9 process” – three days for team creation, six weeks for prototype development, and nine months for it to reach the customer. Because it has built out a global development platform, it only needs to develop products once. It can then reuse them multiple times across different countries.
#3: Focus on being agile
The Covid-19 pandemic has emphasized how important it is for companies to be agile. Even putting the pandemic aside, client requirements can change in an instant. Firms must be swift enough to adapt.#4: Strengthening regulatory relationships
Companies in tightly regulated industries, such as banking, can help support a digital transformation programme by actively strengthening their regulatory relationships. BBVA itself established a Global Supervisory Relations Unit[13] to coordinate its interactions with the supervisory authorities.
Digital Transformation – an ongoing process
A study by the Hong Kong Productivity Council, titled Research on Digital Transformation in Hong Kong Business Sector, issued a stark warning to companies – go digital or be replaced[14]. Companies must avoid thinking of digital evolution as a “one and done” event. As the case of BBVA shows, it is an ongoing process, meaning a mindset shift from senior management downward is required to make it successful.
[1] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever
[2] https://www.globaldata.com/despite-covid-19-enterprises-in-hong-kong-set-to-increase-ict-budget-on-digital-transformation-says-globaldata/
[3] https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-transformation-improving-the-odds-of-success
[4] https://news.un.org/en/story/2017/10/567612-winner-takes-all-dynamics-digital-economy-could-widen-income-gap-un-report
[5] https://www.bbva.com/en/bbva-doubles-its-digital-banking-customers-and-triples-its-mobile-banking-customers-in-just-four-years/; https://www.bbva.com/en/bbva-will-offer-digital-customer-enrollment-everywhere-it-operates-by-the-end-of-2019/; https://www.bbva.com/en/bbvas-digital-journey-where-we-are-coming-and-where-were-heading/
[6] https://www.bbvaopenmind.com/en/articles/transforming-an-analog-company-into-a-digital-company-the-case-of-bbva/
[7] https://www.bbva.com/en/results-4q19/
[8] https://www.mckinsey.com/business-functions/transformation/our-insights/the-numbers-behind-successful-transformations
[9] https://www.capgemini.com/consulting-no/wp-content/uploads/sites/36/2017/08/bbva_pov_v6_03-03-16.pdf
[10] https://www.bbva.com/en/single-development-agenda-the-solution-to-aligning-strategy-and-execution/
[11] https://www.bbva.com/en/weve-replaced-static-department-budgets-resource-management-that-is-dynamic-and-global/
[12] https://www.bbva.com/en/agile-at-bbva-a-journey-of-continuous-transformation/
[13] https://accionistaseinversores.bbva.com/microsites/bbvain2015/en/performance-in-2015/primary-stakeholders/regulators/
[14] https://opengovasia.com/hkpc-releases-digital-transformation-study/