Financial Services Executive Outlook: The Reality of Data Value Realization

Author: Alex Korogodsky

Financial Services

Over the last few months, Wavicle has conducted our 2022 Financial Services Executive Survey. The survey audience included C-level executives and senior decision-makers in the financial services sector (banking, insurance, and capital markets) in North America. We designed the survey to assess the maturity of their existing data and analytics functions that drive digital transformation and to measure the strength of alignment of their capabilities with value creation and realization.

 

We are excited to share our findings and strategic insights in a series of blog posts that gives you a sneak preview of the results. Indeed, we will publish the complete summary of the findings; moreover – we will be prepared to discuss things that are most important to you in a 1:1 setting and cover lots of interesting insights and correlation analyses. But we simply can’t wait to bring you these learnings to empower you to drive digital transformation better, faster, and more impactfully than ever before.

 

So, here we are today with the first piece of striking news.

 

Contrary to common sense and to what they teach in business school about the importance of value generation and aligning technology innovations to value – by measuring return on investment (ROI) — or to payback period, or to dozens of other metrics, many of our participants stated that realizing the value from their digital transformation efforts is not on the C-level radar screen.

 

Value realization as a c-level priorityThat’s right: 10% of respondents said that value realization is NOT a C-level priority, and another 25% reported that it is slightly in focus. Combined, this is almost one-third! This number is 42% and 40% for the banking and insurance sectors respectively, whereas capital markets appears to be more mature with only 29%. What’s interesting is that at “digital natives” (e.g., insuretechs and fintechs), the C-suite focuses on value in 90% of the cases. Why is that? How can companies like PayPal, Intuit, and Square create enormous value, and what can companies like AIG, Prudential, and Bank of America – the incumbent firms – learn from them?

 

Digital natives know the power of exploiting data network effects that create “hockey stick” growth and allow for aggressive value realization. For example, Tesla cars produce an enormous amount of data that, with the power of AI, makes other vehicles on the network more intelligent. More specifically, what separates those who can capture value from those who cannot – winners from losers – is the ability to scale and maximize the learning effect of the network.

 

To do that requires organizations to build a robust digital platform capability, so your next innovation can quickly move from the “forever MVP” state to a production solution. Modernized data platforms and industrialized analytics environments are the principal components of a mature data and analytics capability.

 

CFO's capability of DT value creation and recognitionWhile this next insight is intuitive, it is also one of the key learnings in our survey: to capture value from their digital transformation efforts, companies need to clearly articulate and quantify that value. However, as our participants shared, defining value is an issue for nearly 23% of them and tracking value is an issue for 28%. Simply stated, executives have difficulty creating a quantitative or qualitative measure and tracking value creation/realization.

 

The winners in the digital transformation take it all. Others become obsolete. With clearly defined metrics for value realization and industrial-grade digital platforms that facilitate value creation and realization strategy, you can take your organization on an entirely new digital transformation journey.