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Unformatted text preview: How DBS Bank Pursued a Digital Business
Strategy
Business digitalization is changing the competitive landscape in many industries. Digitally savvy customers are demanding more while threats of digital disruptions from
new entrants are rising. This article describes how DBS, a large Asian bank, responded
to digital threats and opportunities by adopting a digital business strategy. It identia successful digital business strategy.1
Siew Kien Sia
Christina Soh
Peter Weill Banks Need to Adopt a Digital Business Strategy 1 Business digitalization is changing the competitive landscape for many industries, and the
banking industry is no exception. With the rapid adoption of the Internet, ecommerce and
smartphones, consumers are increasingly turning to computers, tablets, mobile phones and
smartphones to interact and transact with banks. As a consequence, because bank customers
are visiting branches less frequently, the number of physical bank branches has declined
steadily over the years. This trend will likely continue—for example, McKinsey sees a sharp rise
in digital banking consumers, estimating that the number in Asia will rise from 670 million in
2016 to 1.7 billion by 2020. At the same time, a new breed of digital players is entering the
2
revolution, JP Morgan Chase
to the banking sector.3
4 Korea launched its N mobile platform, which allows customers to use their smartphones to
withdraw cash from ATMs, send money and pay at stores.5 Money management functionalities,
location-based offers and credit facilities are also integrated into the platform.
1 Dorothy Leidner is the accepting senior editor for this article.
JP Morgan Annual Report Building the Retail Bank of the Future June 2016 (15:2) | MIS Quarterly Executive 105 How DBS Bank Pursued a Digital Business Strategy challenging to respond to the digital threats and
opportunities and are struggling to compete in
an increasingly digital marketplace. They are
often weighed down by their legacy IT systems
and cumbersome legacy processes. Burdened
by heavy compliance requirements, these banks
also have little capacity to experiment with digital
innovation. Yet digitalization hits at the core of a
bank—i.e., the digitalization of money and all the
related functions around money.
IT is not just critical in the running of
banking business but is also an important
source of banking innovations and has strategic
implications for future banking models. Hence,
strategy with business strategy. IT needs to be
pervasively embedded in every aspect of a bank
and be an integral part of the business strategy.
The IT strategy of a bank is thus inextricably
fused with the business strategy. Bharadwaj et
al. termed this fusion of IT strategy and business
strategy digital business strategy.6 How can a
bank pursue such a digital business strategy?
achieve the fusion between business and IT so
it can respond to the new digital threats and
opportunities? These are the questions that this
study aims to address. Pursuing a Digital Business
Strategy
Best practice for pursuing a digital business
strategy is still in its infancy. Most organizations
simply respond to new digital threats and
opportunities in an ad hoc manner within some
organizational functions. For example, some
digital initiatives within their marketing functions
but do not actively link these initiatives back to
their core IT infrastructure.7
the digital realm—most often by offering current
banking services through online or mobile
channels (e.g., launching new websites or mobile Bank of Australia engaged with its customers
throughout the entire home-buying process
by integrating a property listing database and
the full range of mortgage services on a simple
mobile app.8 Other banks are also experimenting
with innovative digital offerings, but often within
a particular business function or division.
Moving forward, however, there is a growing
sense that such functionally oriented experiments
fail to maximize the potential of digital business
strategy. A digital business strategy is inherently
cross-functional and thus requires simultaneous
business resources across multiple organizational
processes. A more holistic and integrated
approach is needed if companies are to respond
effectively to the threats and opportunities arising
from digitalization. To do so, companies need to
develop several related capabilities in the areas
of leadership, operations, customer needs and
innovation.
Leadership. CEOs need to be transparent,
adaptive and resilient, and senior executives
must acquire new competencies.9 The senior
10 able to understand the potential and challenges
of digitalization and have a shared vision of
digitalization being central to the growth of the
business. Top management leadership is crucial
for articulating the digital business strategy
and for aligning the necessary investment in
resources.
Operations. The pursuit of a digital business
platform on which digital products and services
can be readily delivered. These digitized business
processes, based on standards and integration
business partnerships.11 MIS Quarterly MIS Quarterly
MIS Quarterly 106 MIS Quarterly Executive | June 2016 (15:2) misqe.org | © 2016 University of Minnesota How DBS Bank Pursued a Digital Business Strategy Customer needs. Companies also need to
develop the ability to respond swiftly to the
demands of a growing number of digitally savvy
customers. This requires the digitalization of
products, services and customer relationships,
and the seamless integration of functional silos
across the enterprise. Deeper analysis of the
new value propositions to customers in the
digitally enabled context is required. These value
accessibility, higher affordability and wider social
connectivity.12
Innovation. Companies face the challenges of
innovating to continuously stay at the cutting
edge of technology and of keeping in touch
with evolving customer needs.13 This requires
developing an innovation ecosystem with
external partners, including customers. Keen and
Williams14 highlight the new realities of value
sources in the broader digital ecosystem; the
strategic challenge is to identify and capture these
dynamic sources of value, which requires new
forms of collaboration, new processes and new
infrastructures.
Existing research, however, reveals little about
how banks can make such a holistic transition.
There are few comprehensive accounts on how
banks have embarked on such radical enterprisewide digital transformations. The examples tend
to be anecdotal, often just focusing narrowly on
a key digital initiative launched by a bank and
lacking an in-depth account of the transformation
journey. The authors have studied one bank— centers on three key Asian markets—Greater has been aggressively investing in IT to create an
infrastructure platform for regional growth.
technology was also driven by the changing
nature of Asian consumers. In Asia, there were
over 700 million digital banking users in 2014,
expected to grow to 1.7 billion by 2020.15
Generally younger and more mobile-centric
Asian consumers were leading the adoption
of smartphones and preferred to engage with
businesses in a very different way. This could
be seen in the fast growth of digital banking in
Asia. Between 2011 and 2014, digital banking
penetration in the developed markets in Asia,
rose from 59% to 92%.16 In emerging Asian
economies, the penetration rate was 33% in
2014, up from 10% in 2011. Moreover, 82%
expected the relationship with their private banks
to be conducted mainly through digital channels
rest of the world.17
To strengthen its presence and reach across
put technology at the core of its banking business.
million18 annually on technology. An additional
three years. successful digital business strategy (see the DBS Bank Background
bank to become the largest bank by assets in
services for institutional banking, consumer “Whether we know it or not, the digital
revolution has put banks under siege.
With Internet 2.0 and mobility, the game
a burning platform of competition from
mobile and Internet companies. If we don’t
embrace digital—and quickly—there is a
real danger that our lunch will be eaten. It is
only a matter of time before the disruption
that the retail and telecom industries have MIS Quarterly MIS Quarterly June 2016 (15:2) | MIS Quarterly Executive 107 How DBS Bank Pursued a Digital Business Strategy Figure 1: Key Thrusts of DBS’ Digital Transformation Strategy •
•
• 1. Cultivate Leadership for Digital
Transformation
The most vocal champion for digital experienced befalls banking. Monumental
change is just around the corner and Bill
Gates will be proven right when he said
that people need banking, but not banks.”19 cataclysmic Rewiring DBS Bank For the
Digital Era
strategy involved strategic initiatives and disruption put digital
at the heart of banking
continually asked his senior executives was how
well the business was exploiting the digitalization
of banking products and services. Technology
strategy. For example, he commented on the use
of digitalization in overcoming the constraints digitally enabled customer experiences and “The point about moving to information
and mobile [digital] is that we need to
rethink what our business strategy is and
how our business model is going to change.
It is not just about developing mobile apps
but about rethinking the organization. How
do you rewire an organization for [digital
transformation]?”20 David Gledhill, Head of regionalization drive:
banking through digital channels, the need
for a large geographic footprint in order
to scale up in large geographies such as
China, India or Indonesia becomes less of
an imperative. A successful digital banking
strategy will enable us to accelerate our
access to emerging markets without the
need for a large and expensive bricks and
mortar network.”
The Group Executive and the new Head Banking Disrupted, David Gledhill, reported directly to the CEO and
strategic directions. Additionally, senior banking 108 MIS Quarterly Executive | June 2016 (15:2) misqe.org | © 2016 University of Minnesota How DBS Bank Pursued a Digital Business Strategy executives were kept up to date with the latest
developments in the digital landscape through
various forums to help them see the potential
disruptions and threats of disintermediation
from new market entrants. For example, Ms.
Division, became more acutely aware of the
rapid commoditization of wealth management
by online retail investment players (e.g.,
bypassed traditional wealth management
advisors and put their money directly into funds,
the lucrative management fees that banks collect
for wealth management services were at the risk
becoming history
Committed to transforming herself from a
technology idiot
digital warrior 21
response to the digital threat was to deploy IBM
Watson, a cognitive cloud-based data analytics
solution in the Wealth Management Division. IBM
Watson helped relationship managers (who may
and customer data so they could deliver greater
This initiative was just one of the many
technology investment decisions jointly planned
by senior business and technology executives
through their annual technology road-mapping
workshops. The close collaboration between
business and technology executives was
evident in the strong business ownership of the
technology roadmap; the business heads, not
their IT managers, would present their strategic
IT plans to senior executives themselves.
Increasingly, senior banking executives were
also encouraged to innovate and think digitally,
development programs were revamped and
structured as hackathons.22
“Yes, it’s a huge cultural change. In the past,
our leadership program has been all about
leadership skills, communication skills. We
scrapped all of that and our leadership
program now is all about hackathons: [we]
take every one of our senior leaders for a
one- or two-week hackathon. We … mix traditional senior bankers with a bunch of
20-year-old coders and see what happens.
It’s fascinating to watch. On day 1 or 2, there
are two camps, the bankers and coders,
neither really sure of what to think of each
other. By the end of the week, there’s such
passion and intensity about what they are
creating that we really think we’ve [ignited]
a very magical spark [that] changes
people’s thinking in the organization.” Neal
The cultivation of leadership for digital
transformation was not just restricted to senior
executives but also systematically cascaded
down the hierarchy to mobilize the change
agenda. Investments in collaborative technology
telepresence videoconferencing systems and
coordination and the gathering of feedback from
different stakeholders. Mr. Gledhill explained
how he pushed his employees to participate in
We encourage people to
speak up, to put their views on the table. We want
people with the change agenda. This is a big shift in
culture
set up in the internal enterprise portal in 2011.
This forum encouraged staff across the region to
provide regular feedback or make improvement
suggestions directly to the CEO. The portal was
The forum proved to be an effective channel for
getting wider inputs from employees, cutting
What’s important
is that [the portal] has allowed people to feel they
were part of the process of [making a] change 23 2. Develop Agile and Scalable Digital
Operations
For greater responsiveness, the previously
separate Technology and Operations Divisions
Mr. Gledhill. As the Head of Group T&O, he was
responsible for over 5,000 employees across
Gallup
Business Journal June 2016 (15:2) | MIS Quarterly Executive 109 How DBS Bank Pursued a Digital Business Strategy Figure 2: Reporting Structure for DBS’ Group Technology and Operations Division the region. The new T&O structure was also
carefully aligned with the respective business
lines and geographical markets, because the T&O
very, very close to business,
to add business value through technology 24
The T&O heads for the various lines of business technology platform across countries, the
reality was that Asian markets were diverse
stages of development. Hence, the technology
platform had to be not just scalable but also reported to Mr. Gledhill, as did the respective
country T&O heads (through the matrix reporting
comprised project managers, business analysts
and system analysts dedicated to understanding
the unique business line or local market
requirements.
to rationalize and standardize the technology and
operations platforms. According to Mr. Gupta,
many of the business processes and technology
platforms needed to manage a regional bank
Frankly, if you go around
the countries, we do things differently in every
place. We don’t even have consistent technology
platforms across different countries. That is a
singular priority for us 25 enterprise systems, to reverse-engineer and
modernize the legacy systems, and to adopt
service-oriented architecture and enterprise
application integration technologies.
“Our belief is to get to the back end, to sort
out the pipes. This requires vast amounts
of work in the back-end infrastructure,
integration layers, messaging and all the
associated innovations you need to make
your architecture nimble. Getting the core
right is where we really put our heavy spend.
It will speed up the front end. We build
world-class systems on top of that.” David architecture. Thus, the T&O teams worked closely 110 MIS Quarterly Executive | June 2016 (15:2) misqe.org | © 2016 University of Minnesota How DBS Bank Pursued a Digital Business Strategy with their business counterparts to rationalize
the range of banking applications needed to
support their various operations. The changes
needed were captured in a technology roadmap
that showed the current state of standardization
and the areas to be standardized going forward or different product-packaging features, such as
tiered pricing, rebates and loyalty points.
Another new enterprise-wide platform was
the wealth management system, which integrated
retail banking and private banking functionalities.
This platform was launched in 2011 and was the cornerstone of a newly created, disciplined
process of engagement with business users to
manage deviations. Every deviation had to be
these deviations were logged, reviewed and
The result of these initiatives was that
successfully deployed across 13 countries in
28 months. The common operating platform
comprised a core banking suite of standardized
applications,
including
trade,
accounting
ledger, capital reporting, interfaces with
Internet banking and other channels. New
functionalities in customer management and
liquidity management were also introduced. In
addition, the modernization of the legacy core
also enabled rapid rollout of new products, such
as investment or insurance plans denominated transition of customers from middle-class to highend segments. This integrated banking platform
facilitated a seamless customer experience. It
enabled retail customers with growing assets to
access not just the retail banking platform (e.g.,
to manage their checking accounts, credit cards,
management functionalities in private banking
to manage their growing assets (e.g., to manage
their trading accounts, multi-currency deposits, The wealth management system was quickly
followed in 2012 by IDEALTM
and mobile banking platform for businesses.
IDEALTM offered corporate customers a Figure 3: DBS’ Technology Roadmap June 2016 (15:2) | MIS Quarterly Executive 111 How DBS Bank Pursued a Digital Business Strategy customizable dashboard to manage cash and
processing, and access to consolidated statements
solution, IDEALTM
language and was seamlessly integrated with
handled
53.8 million transactions and enquiries, and
was accessed by 137,700 companies across 120
countries26
Although these technology platforms were
typically best-of-breed systems provided by
TM in-house competency in technology integration
was critical for devising sound business solutions
and for staying responsive to business demands.
To be able to integrate
My option to choose best-in-class technology is
probably right for a bank the size of DBS. So, my
real value proposition has been to develop good
technology integration expertise. We need that inhouse. We can’t be outsourcing our brain!
In addition, the T&O Division launched an
hired a new head of process transformation,
Paul Cobban, who was tasked with applying
process improvement methods and lean
requirement for all new T&O projects to undergo
process transformation with stretch targets and
measurement of outcomes. Cross-functional
teams, comprising 10 to 20 people from around
the bank (including senior executives and new
These process streamlining sponsored business problem as opposed
to implementing a piece of technology,
measured purely in terms of on time, on
budget. Failure to do this will inevitably
divide the IT and business teams, and it
would be suicidal for the project”.27 Paul
Cobban, Head of Process Transformation, 3. Design New Digitally Enabled
Customer Experiences
In 2010, as the digital platforms were
Experience Council, chaired by the CEO. Mr.
Head of Customer Experience, as well as Head of
Process Transformation, reporting to the Head of
Group T&O. The intention was to foster a mindset
shift that would go beyond developing a culture of
customer service excellence to creating a culture
of digitally enabling new customer experiences.
“Digital banking goes beyond creating
mobile apps or enabling transactions. It is
about leveraging world-class technology
We have been very focused on executing
against our IT strategy to enable us to be
more nimble and innovative in the ways we
engage our customers, including changing
the way people bank.”28 David Gledhill, experiences was guided by a set of principles initiatives
framework incorporated core Asian values of process improvement program was extended
organization wide, and all employees were
encouraged to contribute improvement ideas. By
of customer wait...
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