Addressing the digital skills gap

January 2024  |  COVER STORY | BANKING & FINANCE

Financier Worldwide Magazine

January 2024 Issue

Digital tools underpin many operational processes, but companies also need knowledgeable, talented people to maximise their benefits. Given the growing digitalisation of the global economy, if companies are to remain competitive and productive, they will need workforces equipped with the requisite skills to power technological transformation. These skills are, however, increasingly found to be lacking.

Many organisations are struggling to gain access to skilled professionals who possess an understanding of emerging technologies to fully leverage them for the company’s benefit. They face a skills gap between their employees’ current capabilities and what is needed to succeed in the digital economy. This leaves those businesses at a competitive disadvantage.

A growing gap

In the UK, the digital skills gap is a recognised problem. According to AND Digital, 81 percent of UK managing directors believe that a lack of digital skills is negatively affecting their company. Furthermore, 22 percent of employees believe that a lack of digital skills is impacting their ability to hit targets. Fifty-eight percent said they had received no digital training from their employer.

One key issue that companies face relates to the lack of understanding, on the part of both organisations and employees, of what actually constitutes digital skills.  According to WorldSkillsUK, the number of young people taking IT subjects at GCSE level has fallen by 40 percent since 2015. The number taking A Levels, further education courses and apprenticeships has also declined. Only 48 percent of employers believe that young people are leaving full-time education with sufficient advanced digital skills. Seventy-six percent of businesses believe that a lack of digital skills would hit their profitability.

Through the £2.6bn National Cyber Strategy, the UK government is working to increase the number and diversity of skilled people in the cyber security profession. This includes encouraging young people to develop their cyber and tech skills, and to take subjects such as computer science to establish a foundation for their careers. A key driver for this programme is the government’s desire to enhance and expand the nation’s cyber security skills across the board.

To upskill employees to meet the demand, companies require a clearer understanding of the skills gap and what is needed to fill it. “Industry associations can help to more clearly define the roles that are emerging as key in digital transformations, such as customer experience (CX) experts, as well as define certifications and associated development programmes to achieve accreditation,” says Paul Butler, a partner at Davies.

These issues are not unique to the UK, of course. According to the Information Technology and Innovation Foundation, the US is increasingly faltering and lagging global competitors when it comes to digital skills, particularly in traditional industries, such as manufacturing, retail and healthcare, among others. In manufacturing, this could pertain to a worker’s ability to interpret the output of artificial intelligence (AI)-based systems, or to use automated reality (AR) or virtual reality (VR) tools to carry out repairs, or to interpret spreadsheets or use databases, for example.

And the gap is becoming more pronounced. Research by the Organisation for Economic Cooperation and Development (OECD) in 2020 found that one third of working-age Americans possess at best limited digital skills. One in six cannot use email, web search or other basic online tools. Furthermore, 23 percent of US households still do not own a desktop or laptop computer.

US workers tend to fare poorly in international assessments of digital skills. Coursera’s 2021 ‘Global Skills Report’ suggests that “despite the rapid rate of digital transformation, US digital skills proficiency falls behind that of many countries in Europe and Asia”.

Financial services falling short

Looking at the financial services sector specifically, the majority of banks around the world are struggling to meet the need to digitalise, which is impacting their ability to compete and stay relevant in a digital-first world, according to The Josh Bersin Company. In the US, for example, there will be 350,000 people short of suitable digital and technology skills by 2025.

Despite their best efforts to hire fresh talent, many banks’ digital skills bases are not rising quickly enough. Consequently, the finance sector is facing a massive shortage of people with suitable digital and technology skills. Four out of 10 bank tech jobs in 2023 were not filled by tech professionals with industry experience. Further, this gap is projected to grow exponentially over the following three years, notes The Josh Bersin Company.

That could see traditional banks being surpassed by challenger banks during the next decade. Many banks are struggling to offer the digital experiences that clients now demand. Their digital skills are not keeping up with trailblazer banks that apply talent intelligence techniques to reskill employees out of roles that are becoming obsolete.

“The key drivers of digital transformation are increased competition, often from newcomers or market disrupters, pace of change, customer sophistication, cross-selling multiple products from a single solution, using data as a competitive advantage, and cloud implementation,” points out Mr Butler.

With even the best banks struggling to adapt to meet the need to digitalise, a new data-driven, AI-fuelled approach is required. For Mr Butler, there are a number of challenges relating to digital transformation which banks need to address.

“First and foremost, banks need to clearly define the outcomes they want to achieve regarding their digital transformations,” he says. “There is a risk that many banks are only undergoing digital transformation because the rest of the market is, or even that they are just looking at it from a cost-saving perspective. This can mean they are not clearly articulating a positive description of the future state relevant for their organisation and their customers.

“From this, they can perform a gap analysis between their current state and their desired future state, identifying what exactly is required to achieve this. This allows banks to recognise not just the expertise and skills required to achieve success, but crucially the organisational capabilities that are necessary, for example behaviour at scale or culture,” he adds.

Indeed, corporate culture is key to embracing and effecting digital change. “We have seen many digital transformations fail – not because of a lack of expertise or desire – but because the organisation ‘gets in its own way’ as the internal culture is not enabling agility, collaboration or experimentation,” notes Mr Butler. “When looking at the gap between the current and desired future state, organisational culture is one of the first areas we would suggest taking an honest and objective look at.”

Following that, banks need to clearly define the behaviours they believe are necessary to create the right culture for them. “Then, they should identify role models of these behaviours to demonstrate what ‘good’ looks like, and be champions for the changes required to successfully achieve a digital transformation,” says Mr Butler.

Leadership and culture are fundamental to this process. And leadership goes beyond those at the upper echelons of the company. “Leadership is a mindset that everyone can adopt, and this can be a major positive force for culture change,” suggests Mr Butler. “If the organisation can clearly define a vision, and a set of outcomes that enables this vision, empower people to lead together to deliver it, and recognise and reward the right behaviours that enable a positive culture, it is halfway there,” he adds.

When it comes to digital skills in the financial services sector, Mr Butler believes the issue is less about the pure technology skills required for digital transformation and more about three ‘Ds’ of design, delivery and data skills. “By design skills, we mean the end-to-end design of digital solutions, taking a customer perspective and being able to model it into outstanding solutions for customers,” he says. “This involves CX experts working with product owners and technology teams. We unfortunately see a significant lack of CX skills in the industry.”

In terms of delivery skills, this largely comprises collaboration and agility. Collaboration in this sense means a single vision of outcomes and operating models, across all teams involved, creating cross-functional teams where possible. Agility means frequent turnaround that allows the company to achieve new features, with the ability to learn from each new version and drive continuous improvement. “Many banks still have slow delivery cycles, inflexible release methods, and challenges on infrastructure provision, which prevents this agility,” adds Mr Butler.

Finally, data skills refers to using data to drive new innovation and learn more about customers. “Financial services firms are capturing huge amounts of data, but there is a disconnect between the data scientists and CX experts, which means that the data is not being mined as effectively as it should be,” says Mr Butler. “This is due to a lack of understanding of customers by the data scientists or analysts. This 3D set of issues affects CX and satisfaction negatively – clients become frustrated; they do not see improvements and new features quickly enough, meaning they do not feel understood, and ultimately, we see them switch to competitor offerings.”

The learning and development approach

As the digital landscape evolves, it is vital that companies understand it and are able to identify potential threats. Only then can they strategically allocate the resources necessary to reduce risks and protect valuable assets. But companies can only develop robust strategies if their workforce is digitally literate.

Hiring alone will not, however, solve the burgeoning skills gap. If the talent is simply not there, recruitment drives will not be enough. As the skills gap closes over time, this will also intensify competition for talent. Amid a talent deficit, companies must explore alternative ways of deploying their digital skills strategies. To this end, a focus on technological learning and development (L&D) may become central.

“L&D should incorporate the right behaviours around doing ‘the right thing’,” says Mr Butler. “This will result in data security and privacy concerns being considered properly and factored into solutions. It is not just about technical skills but the right behavioural capabilities – scaling from the individual to becoming the organisational culture – that make the biggest difference in the long term.

“If purpose and the right mindset is cultivated, then the right behaviours are exhibited. This will create a culture that will significantly improve the success of a digital transformation, which means assets like data and privacy are properly protected. Just creating more policies and compliance rules is not going to achieve this,” he adds.

In terms of metrics and key performance indicators, customer satisfaction is fundamental, according to Mr Butler. “In addition, revenue, plus share of client wallet and market share, are crucial – although these are more ‘lag’ indicators,” he continues. “Other metrics that are lower order, but are leading indicators, include the DevOps research and assessment (DORA) metrics and, when it comes to issues, how often an issue is repeated.”

Technological advancements are now accelerating faster than our ability to adapt. This leaves a huge gap in digital skills – one that is exacerbated by organisations failing to commit adequate resources to the problem. Organisations that wish to grow and remain competitive in this changing environment must develop and retain a workforce equipped to fill these roles and thrive in the new digital age. “If the right culture has been built, it will create a learning organisation, which means that while there will never be zero issues, there should not be the same issues reoccurring frequently,” notes Mr Butler.

Going forward, if companies are to bridge the digital skills gap, L&D may be an essential component. “The key is to invest in developing the internal teams in both technical and behavioural skills to create not only the expertise, but also the culture to unlock that expertise to succeed for customers,” says Mr Butler. “This will not be a small investment, but it can be done in a smart way using three key mechanisms.”

The first of these mechanisms is technical and behavioural knowledge, which can be developed initially through digital learning. Critically, this knowledge must be practically applied to become learned skills. It is best done in person, with a peer group who can support each other. Importantly, upskilling should be executed through a blended approach that combines digital and ‘human-led’ media.

Second, learning consultants should not solely be relied upon for delivery. Instead, internal ‘champions’ should develop others within the organisation. This is most relevant in the technical space where a company’s context and infrastructure are key. For behavioural or cultural development, internal champions should partner with experienced L&D resources to create a powerful combination of trust and development expertise.

Finally, companies should use communities of practice that will grow over time as the skilled workforce expands. Such communities can provide support and self-development to members, ‘crowd-source’ solutions and build internal ‘open source’ repositories to drive reuse and common solutions.

“Together, these three mechanisms ensure the best return of investment and achievement of the organisational-wide capabilities required,” adds Mr Butler.

In the coming decades, employees will work increasingly alongside smart machines and AI-enabled tools to help them operate more efficiently and effectively. Tackling the digital skills gap is crucial to ensuring companies can get the best out of these technologies.

© Financier Worldwide

BY

Richard Summerfield