Chris Skinner believes ‘digital’ is a cultural and business transformation programme, not a project or function. What does this mean for digital leadership?

I was listening to someone talking about monolith versus microservices structures recently, and they likened it to an old car versus a new one. Old cars were made of metal and welded together into a solid machine, where, if any part broke, you had to replace the whole machine. The machine was unwieldy, slow and hard to change. A new car is moulded and put together as a network of components. Each component is independent of the machine and can therefore be switched out quickly and easily, and replaced. The machine is fast, easy and speedy to change.

Nice analogy, and speaks to two themes that I would advocate for any organisation. The first is how to organise your developer team. I always fall back to the discussion with one startup who uses Amazon’s two-pizza approach as its focus. Each Amazon development team is structured to a size where they can be fed with a maximum of two pizzas for lunch. For Jeff Bezos, small teams make it easier to communicate more effectively, to stay decentralised and fast-moving, and encourage high autonomy and innovation. This is so obviously the case today in an API marketplace structure that it demands such decentralised approaches.

The second theme is how a bank should structure. A bank has historically controlled everything in its value chain, and tightly coupled that chain. Banks don’t trust decentralisation, but want close control, because it allows it to secure everything. Security and control avoids risks and exposures, so a heavy metal machine is far better than a light, plastic one. Yet, if a bank continues to try to control the value chain, then (as I’ve written many times) it will make them slow and resistant to change, which, in today’s open banking world, will signal irrelevance and obsolescence.

For these reasons, a bank needs to decentralise its internal structures and open its eyes to external opportunities to source components of its value chain through APIs.

Digital innovation initiatives

I know that many banks are doing this, especially the usual suspects who market themselves as technology companies offering digital banking. For example, many banks have innovation labs and development portals such as those from Citibank and Deutsche Bank. A growing number have API (Application Programming Interfaces) marketplaces such as those from BBVA and DBS (nearing 200 APIs).

This shows the eagerness of the banks to change, and the fact they are changing. However, I have heard several comments from some of these banks expressing concern about the alignment of their digital innovation initiatives and the lines of business they are trying to change and serve. This stretches to the heart of why I talk about the major risk in banking today being a lack of digital leadership.

Many bankers are asked if they’re working on open banking and APIs, and many may start with a frown, wondering what the hell you’re talking about, while others may be aware, but they don’t see it as their turf. It’s being dealt with by the CIO.

This is why I keep saying that digital is a cultural and business transformation programme, not a project or a function. Digital involves opening up through APIs and SDKs (Software Developer Kits) but, far more importantly, is aligning the changes to the products, services and lines of business needs, and getting those lines of business leaders to be aware, involved and articulating the change to their teams, clients and customers. Without the latter, it’s a bit like throwing technology at a wall: it just breaks.

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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by Connect world,

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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