For CIOs in banking: Four steps to build a digital and IT strategy

27 May 2021 5 min. read

With banks facing technology-led disruption from all corners of their industry, and IT becoming a key enabler of business models, operations and innovation, developing a digital strategy has become more important than ever.

Experts from Cedar Consulting share a four-step approach for how the Chief Information Officer (CIO) can build an effective digital and IT strategy: 

Step 1: Where are we heading

Building a digital strategy cannot be built in silos – it needs to align to the bank’s overall business strategy. Subsequently, the digital strategy needs to incorporate the implication of business strategy on IT functions. These IT implications could be logically separated into three key areas: Applications, Technology and Organisation.

  • Application | covers the application landscape, including digital services.
  • Technology | covers the hardware and network infrastructure.
  • Organisation | covers the people aspect of IT.

4-step approach to building an effective digital & IT strategy

Step 2: Where are we today

Within the bank’s business strategy, it is essential to gain insight in the current state. This requires a detailed study of the existing capabilities across the three areas of Application, Technology and Organisation. 

At this juncture, it becomes critical for the CIO to ask a very pertinent question: “Is ‘Where we are today’ going to take us to where the bank wants to be?”. Answering this question would lead one to one or more gaps that require to be filled. Identifying and, most importantly, acknowledging these gaps forms the base to the next step. 

Step 3: The way forward

With an understanding of the implications of the business strategy on IT and the gaps identified with the current state assessment, the next step for the CIO is to know how to fill the gaps. In other words, these are the directions for the way forward. This step consists of two phases:

Identifying the initiatives
It starts with identifying the key initiatives that add value to the digital strategy, across Application, Technology and Organisation. A key consideration here is to have all the initiatives identified and the prerequisites, supplementary and complementary actions to be recognised as individual initiatives. 

Each initiative must be associated with accountability or an action owner to be executed in a timely fashion. By the end of this activity, the bank will end up with a long list of initiatives to be taken up to align the IT strategy with the business strategy.

Prioritising the initiatives
It is not feasible (and practical) for a bank to undertake all the initiatives identified at one go. The key here is to group them into logical categories for the initiatives to be taken up immediately (short-term initiatives) and initiatives to be taken up later (medium- and long-term initiatives). 

Prioritising the initiatives

The short-term initiatives are typically those that have to be activated and closed in the next six months. The medium- and long-term initiatives are the ones that have to be taken up in the next 1 to 2 years. While the number of categories can go anywhere between three or four, the critical aspect is to appropriately identify what initiative would fall into each category. 

Step 4: When to act (roadmap)

A roadmap is a high-level plan. However, a roadmap is not a replacement for an implementation plan. A roadmap guides the team on how to prepare to implement the initiatives. The high-level timelines lead the CIO office towards factors and dependencies such as approvals from the leadership team, budgets, resources, procuring systems from a supplier, planning for support and maintenance.

Key considerations

Cedar Consulting has years of experience with developing and implementation digital strategies in the banking sector. Based on this experience, the firm’s experts put forward a number of key considerations to keep in mind while building their digital and IT strategy. 

Business strategy awareness: In many banks, the IT team members have not been oriented about the business strategy. This means that an IT staff member is not aligned with the bank’s goals and strategy, and the decisions made by such staff members are not aligned with the business priorities at all. This could be detrimental not just while building an IT strategy but at any given point in time.

Resistance to change: Often, the team on the ground and sometimes even the senior management exhibit resistance to change. A bank needs to build an IT strategy as a growth initiative for the bank rather than just a change management initiative.

Peer comparison: What has worked for one bank may not necessarily give another bank the same positive result. Hence, a peer bank’s success story can only be looked at from a learning perspective and not from a replication perspective. Undergoing the journey of the 4-step approach is a must, and any shortcuts may not necessarily lead toward positive results.

Top-down vs bottom-up: The holistic approach towards building a digital and IT strategy can only be seen when the whole exercise is approached from a top-down perspective rather than bottom-up. The disadvantages of the bottom-up approach, in this case, are many and include oversight, siloed view/perspective and short-term rather than long-term resolutions.

Inside-out vs outside in: Inside-out is within the bank perspective, whereas outside-in is the industry perspective. The outside-in perspective is critical while building an IT strategy. It provides the bank with the opportunity to consider all the key learnings and the global and regional industry practices while building a digital and IT strategy of its own. However, it must be viewed from a learnings perspective only and not from a replication standpoint.