Dr Dennis Khoo, Digital Transformation Expert: Why You Can’t Transform a Business with Digital Alone

We recently chatted with Dr Dennis Khoo, digital transformation expert, author, and former Head of TMRW Digital Bank about the secrets to transformation success – and here’s what he had to say…

Digital transformation isn’t a new phenomenon, but it is a difficult one to master. And it’s because of that that we keep talking about it, with the parameters of transformation ever evolving, and business leaders scrambling to keep up with the competition. The result is missed deadlines, unclear leadership, and projects that quickly spiral out of control.

But there is a clear way through the fog of transformation. Following several successful projects, including the launch of ASEAN’s first digital bank, Dr Dennis Khoo knows a thing or two about what makes for a successful digital transformation. We were majorly excited to see what he had to say and we’re proud to share his insights with you today.

Meet Dr Dennis Khoo
Author & Digital Transformation Expert

Dr Dennis Khoo is a digital transformation expert, keynote speaker and author of Driving Digital Transformation: Lessons from Building the First ASEAN Digital Bank and The allDigitalFuture Playbook. Dennis was head of TMRW Digital Bank, which won Global Finance’s Most Innovative Digital Bank in Asia Pacific award in 2019.

CEO.digital: What first drew you towards the banking sector and the world of technology?

Dr Dennis Khoo: “I was always very interested in the sciences when I was young, especially physics. However, before university, at college-level studies, I discovered that I wasn’t sufficiently gifted at advanced maths, and physics today is mostly about advanced maths. So, I decided to become an engineer instead. There wasn’t much deep thinking behind this decision. Singapore needed engineers in the 1980s and hence I enrolled in electrical engineering and graduated with a major in computer engineering.

“I had interned at Hewlett-Packard (HP) in Singapore in the 3rd year of my 4 year engineering program, and they hired me as a computer hardware engineer when I graduated. It wasn’t until 13 years after I joined HP that the opportunity to join banking emerged. During that 13 years, I obtained my Master of Business Administration from the National University of Singapore and also spent several years at HP in marketing roles. So when an offer came along to be the country head of marketing for Standard Chartered Singapore in 2001, I took up the offer, as I thought, that bankers were better paid than engineers.

“In the ensuing 13 years at Standard Chartered, I was given a great opportunity to experience every product head role in retail banking, e.g. head of deposits, wealth management, personal and home loans, credit cards, insurance, etc. This helped me to get a good grasp of banking from the bottom up, and provided great insights into the underlying processes that drove the bank. Eventually, in 2010, I became the Consumer Banking Head for Standard Chartered in Singapore. This was a large billion-dollar business with a high degree of complexity.”

There is no such thing as digital transformation, as I often say. You can’t transform a business using digital alone; it’s business transformation, leveraging people, process, technology and so much more.

Dr Dennis Khoo  Author of The allDigitalFuture Playbook

You launched the first digital bank in ASEAN, can you tell us a little more about that and the challenges you faced?

“In 2017, after 3 years as Head of Consumer Banking in United Overseas Bank (UOB), I was asked to take on a new role to build a digital bank from scratch to protect the UOB consumer bank franchise for the future, in the face of digital disruption, and create a platform that could allow UOB to expand in ASEAN outside of their Singapore-base. Expanding in consumer banking outside of a bank’s home base has always been hard. Regulators normally provide greater protection to local banks, creating a playing field that is not level, because consumer banks hold retail deposits, and protecting these deposits in times of crisis is a key objective of any country. Local banks are seen to be more dependable in such times, as they don’t have other countries they can retreat to in times of crisis.

“At the same time, the way consumer banks expanded regionally changed. In the past, it was a branch-by-branch approach to penetrate the market, often with the regulator restricting the number of branches a foreign bank could set up. This changed with the availability of smartphones and widespread, low-cost connectivity. Every customer now had a branch in their pocket, and when paired with high penetration of digital payments, negates the reliance on physical infrastructures such as branches and ATMs, allowing a foreign bank to compete on a more or less equal playing field where digital banks were concerned for the first time. Regulators in countries that have large unbanked populations (most of the unbanked are concentrated in Indonesia, Philippines and Vietnam in ASEAN) also realised that they could lift their GDPs by 2-3% by banking the unbanked and moving towards greater acceptance and usage of digital payments.

“This assignment to build a digital bank within an incumbent bank with a history of more than 80 years became the most challenging assignment in my 32-year career. Even though you could say that I had undergone years of training, have the requisite technology background, and also have first-hand experience in every product role in the consumer bank, plus having 6 years of experience running large and complex businesses such as the consumer banking operations in Standard Chartered and UOB, it still proved to be very challenging, with a steep learning curve and unchartered territories. I thought to myself, for those who were less prepared than me, it must be an impossible task.”

How can business leaders get their teams on board for a digital transformation, even one that will take years to accomplish?

“Firstly, the priorities and rationale for the transformation must be very clear and known to all involved, no matter their seniority. This requires clarity on what you would like to focus on, and what you don’t want to focus on. Many business leaders adopt startup methods without fully understanding their situation.

“A startup has no baggage and legacy, hence can move faster. If they are a software startup, they can start simple, if what they are going to introduce is a breakthrough or revolutionary. An incumbent company has lots of legacies embedded in its people, process, investments, software, etc. Taking the time to study carefully what their customer gaps are so that they can generate the crucial customer insights to develop experiences that are breakthroughs, are crucial. It’s more likely the breakthrough nature of this transformation is in the combination of many smaller problems, which together when resolved, can produce a breakthrough end-to-end experience for the customer. This takes time to understand and figure out, as most incumbent companies are likely to be more organisation-centric than customer-centric. Therefore, there might be a need to go back to the basics of how to be a customer-centric company and ensure that the required mindset changes take place so that this can take place.

“Secondly, there is no such thing as digital transformation, as I often say. You can’t transform a business using digital alone; it’s business transformation, leveraging people, process, technology and so much more. In fact, in writing The allDigitalfuture Playbook, I identified, together with my co-author Jung Kiu Choi, 19 essential elements all business leaders need to master to get their transformations right. [See Image]. So as you can see, transformations in incumbent companies are likely to be very complex, and they require a holistic approach that balances the different dimensions and elements to achieve the best tradeoff.”

Copyright: allDigitalFuture Playbook

What should transformation leads be doing to identify, attract and retain the right talent for their transformation project?

“First is the understanding that the great builders needed to design and build your transformation are not necessarily attracted just by money as their top priority. They often want to know that they will join an organisation that will help them realise their dreams of becoming change-makers. They need a good story, and a good narrative of how your transformation is going to bring about greater good; for example, make the industry less carbon polluting, become the most proactive player in the industry, or have the best customer experience in the industry. Work on this narrative by tweaking your transformation mission (what is the purpose of the transformation?), and vision (if we achieve this purpose to our wildest ambition, what would we accomplish?).

“The purpose and ambition must be widely communicated in the most inspirational way possible so that it can become the narrative that can attract the needed talent. But in addition to the mission and vision, it is also crucial to define the values and behaviours expected of the staff involved in the transformation and those of the organisation charged with delivering it. The values set the behaviours that allow talented and ambitious people to work together and contain their worst behaviours, e.g. ego, jealousy, listening to rebut, not understanding, siloed thinking, etc. The behaviours exemplify the values, e.g. “anyone, no matter how junior should ask why when they don’t understand the rationale, and it is the responsibility of the most senior staff present to ensure that it is answered or the answer found”. This creates a culture of strong challenge and support that is vital and integral to an innovative environment.

“Second, for most successful transformations it is crucial to have the right combination of internal staff and external staff. If you are generating money in the same way as before, e.g. in a digital bank, you make money the same way as in an incumbent bank, only more efficiently and productively, then you will need insiders that know how money is made. At the same time, you need outsiders who will question the existing paradigms and ask questions the insiders take for granted. Your role as a leader is to combine the insiders and outsiders, so that these two, often fractious groups work well together – no easy feat.

“For insiders, you will want to look at the fringes of the organisation, for great talent that has been ignored or sidelined, perhaps because they are always asking the difficult questions that seniors don’t want to answer. For outsiders, you have to look beyond experience, as everyone is looking for people with transformation experience. Understand and design the job well, so that you have a clear role, with clear responsibilities, and clear accountabilities. From this clarity, write a great job description, and think through the qualities you need to ensure the successful candidate can perform the job well. In this approach, you are not focused on experience but talent., e.g. process and customer experience staff need to be very detailed and understand how processes can be optimised and improved all the time. Look for such evidence, and design your interview questions to hone in on these qualities.”

The best challenger banks, e.g. Kakaobank, NuBank, etc., focus on a great experience at lower and lower operating costs. They sweat the small details and focus on the processes needed to create great experiences. What other industries can glean from this is this obsession with the small stuff.

Dr Dennis Khoo  Author of The allDigitalFuture Playbook

What do business leaders get wrong about their role in digital transformation? What can other industries learn from the rise of challenger banks?

“The role of the top business leaders should be focused on orchestrating and ensuring their staff work well together, and acquire the necessary knowledge so that they can ask the right questions. Orchestration requires business leaders to ensure everyone on the team can work very well cross-functionally, and break down the silos that prevent different functional units from working seamlessly together. Business leaders that have spent their entire careers in a few limited functions, often find themselves out of their league when tasked to head a complex transformation in an incumbent company, because, in such situations, breadth is often more important than depth. And if the business leader hasn’t already acquired the necessary depth at his level of seniority, it may be hard to quickly gain the knowledge required to understand how things work end-to-end.

“Another important aspect of transformations is that success is often predicated on the ‘how’. Most times, the ‘why’ (e.g., to leverage technology to disrupt your industry) or the ‘what’ (e.g., get top-level support, hire the best, leverage algorithms to make data-driven decisions, etc.) are well-known. The knowledge gap provided by why and what has narrowed significantly today, and is likely to remain so for the foreseeable future. The key, therefore, is understanding ‘how’ to accomplish your transformation. (How can I find out what problems my customers would like solved badly? How can I find out honestly where my competitors are better than me? How can I recruit the right internal staff to join the transformation? Etc.).

“The other important aspect to get right is to understand how the ways of working of the transformation unit need to be different from the incumbent organisation. Of the many new ways of working that need to be incorporated, I would consider design and design thinking, LEAN 6-sigma and agile software development and agile ways of working to be the most crucial. I would recommend that the senior business leaders go for an introductory course on these three important new ways of working, as they have to be well embedded in the new transformation unit. These three methods form the basic construct required to create a “concept-to-code” software factory which every transformation will require. Business leaders that show the curiosity to learn new knowledge will eventually overcome the knowledge gap needed to ask the right questions. It’s not their role to provide the answers, they just need to ask the right questions to ensure that the answers the working team has developed are the right ones, and those answers and trade-offs across various elements (described earlier) and functions are aligned and joined up well.

“If the leader does not have the requisite breadth and has lost touch with how things get done, then one essential behaviour is to not be afraid to ask the fundamental questions and listen intently to the answer, without attempting to bring your experience into the picture in a way that crowds out all other viewpoints. In this way, the business leader can detect if there is merit in the new approach or ask for more education if he doesn’t have the requisite background. This will allow the business leaders to derive the best approach to tackle the complex issues that they are very likely to encounter along the way.

“The best challenger banks, e.g. Kakaobank, NuBank, etc., focus on a great experience at lower and lower operating costs. They sweat the small details and focus on the processes needed to create great experiences. What other industries can glean from this is this obsession with the small stuff. This aligns well with industries where the raw science of technological development or the evolution of business models that allow you to make money differently, are not moving at sufficient speed to generate the required breakthroughs. If you think about challenger banks, there isn’t any one development that can attract the majority of customers to bank with them. It’s focusing back on the basics, building a better transactional banking experience, being better at service, and using data to create data-driven engagement which makes them great at what they do. This is likely true in many incumbent industries but the examples we are exposed to are often breakthrough examples like Airbnb, Netflix, etc. More examples like Apple, who did leverage new technology like touch-typing and gorilla glass to create the iPhone, but the majority of the time, like in the personal computers, create magic through their obsessive focus on the combined experience that the entire hardware, software, and firmware deliver, so that the experience and usage are truly intuitive and frictionless. Too many incumbent companies are benchmarking to startups and technology companies when they should benchmark to great design and experience companies.”

What role is customer experience playing in digital transformation today?

“Many incumbent companies operate in what I call the experience zone. Here, there are no large singular improvements to be had. An example of a large singular improvement in performance would be to compare walking to riding a bicycle. The bicycle brought about a 5x improvement in the distance over time. For businesses that distribute goods, the payback of being able to distribute 5 times faster is likely to revolutionise that industry. That’s why the early bicycles didn’t need brakes, which were added later. Focusing on the wheels, the pedals and steering were more important to produce that 5x performance improvement (that’s a great way to describe the concept of minimum viable product).

“In most incumbent industries, there is no singular performance improvement that can create a sufficient breakthrough. A great example is a digital bank. Thus, the digital bank innovation is a customer experience transformation. It sounds easy, doesn’t it? So easy, you think everyone can do it. Well, it turns out that creating great end-to-end customer experiences is as difficult as finding a breakthrough technology solution or a breakthrough business model. That’s because most incumbent organisations are organisation-centric and not customer-centric. They also generally have a disdain for the detail required to create brilliant processes that power great customer experiences. That’s why companies like Apple are hard to copy. These companies sweat the little details. It’s not easy at all.”

Whilst decision-makers across the spectrum need to be generally conversant with the new and developing technologies and capabilities in their industries, this is less important than understanding their customers very deeply.

Dr Dennis Khoo  Author of The allDigitalFuture Playbook

With two-thirds of companies currently facing high levels of disruption, what should decision-makers across the spectrum be doing to maintain competitiveness?

“Whilst decision-makers across the spectrum need to be generally conversant with the new and developing technologies and capabilities in their industries, this is less important than understanding their customers very deeply. Companies that decide they would like to be at the leading edge but are actually not in the business of supply technology solutions, often end up with solutions that have no viable problems to solve. It’s hard to know your customer’s problems better than your customer, and in most industries today, competition is rife, and everyone is copying everyone else. So the key to sustaining competitiveness is to stay very close to your customers and understand intently what their next problems are. So it is a paradox, that to be great at transformation, you should start either from the people and leadership dimension (when you are still forming the initial transformation unit) or the customer dimension, and certainly not start with the business dimension (as you will become too internally focused) or the capability dimension (ending up with solutions looking for a problem).

“Naturally, all along the way, the senior leaders are trying to understand all 19 elements mentioned earlier, and how they impact and influence one another. A great example is the 4 elements of the business dimension; differentiation, paths to profit, scaling and core competence gap. They are in fact, four interconnected dials. It is impossible to move one dial without the others moving, e.g. the moment you shift the differentiation dial, the core competence gap dial moves, and so will the path-to-profit dial. So you can’t view these elements as independent but as interdependent. This is why incumbent transformations are complex. Understanding that successful transformations work when business leaders navigate them holistically can significantly increase your probability of success, and thus be able to maintain your competitiveness long-term.”

What’s the next big project you have in the works?

“Having left an executive role and written two books on digital transformation in the past two years – Driving Digital Transformation: Lessons from building the first ASEAN Digital Bank and The allDigitalFuture Playbook (taP): How to succeed in digital innovation and transformation in a complex world, I hope to be able to make my taP approach for digital transformations pervasive. taP fills a void in the business transformation industry by providing a holistic approach where none exists. IDC estimates that in 2018, US$1.3T was spent by companies all over the world on digital transformation initiatives. However, almost US$800B of this spending failed to achieve its stated objectives. So, there is a massive impact if taP can help companies achieve a higher probability of success.”

Where can people go to learn more about embedding success into their digital transformations from you?

“Well, they can start by reading Driving Digital Transformation to get a quick overview, and for those who are planning or already driving their transformations, The allDigitalFuture Playbook (taP) offers a step-by-step corporate guide. Both books are available in major bookstores like Amazon and on my website allDigitalFuture.com.”