Corporate Digital Competencies for Digital Banking Innovation: Case Studies in Indonesian Banking Sector

Banking sector in Indonesia has enormous potential to grow. The large unbanked population, quick mobile & internet penetration, and advancement of digital technologies have propelled a fast-moving trend toward digital banking innovation. Banks and other financial service providers in Indonesia are anticipating this trend by preparing a roadmap to convert their business models, products, and services into full or partial digital financial propositions to meet the new customer ’s expectations. This study investigates the required digital competencies at a corporate level that banking organizations need to prepare prior to stepping into digital transformation. Four Indonesian banks with different states of digital transformation have been selected as case studies for this qualitative study. This is an ongoing study, nevertheless, some initial findings and observations will be presented. While several previous research have discussed some parts of this study, the authors believe that no past research presented the whole set of corporate digital competencies, especially in the digital banking context. The outcome of this study is expected to be of value to academics as well as to businesses.


Introduction
With an aggregate asset of more than IDR 9,824 trillion from a total of 107 commercial banks in Indonesia (OJK, 2021) and a large number bankable unbanked population of 113 million, the banking industry is deemed as one of the most prospective business sectors in Indonesia (Mehrotra et al., 2015).However, banks are facing increasingly complex regulations (Gai et al., 2019), growing risk and operation challenges (Dewi, 2021)

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shrinking margins, and more intense market competition (de Souza Castor, 2022).More than ever, banks are under huge pressure to maintain and grow their market share.
Banking services were traditionally delivered through physical facilities (Broby, 2021) such as branches, booths, ATMs, and kiosks, so banking was location-and time-bound (Asmudhan et al., 2022), (Kaur, Ali, and Al-Emran, 2021) as customers had to physically present in those facilities during banking operation hours.Today, customers want to access bank services anytime, anywhere, without the need to visit a branch for every single transaction they do (Jana, Khedkar, and Khedkar, 2021), this tendency has grown even stronger during and post COVID-19 pandemic (Ramaswamy et al., 2021).Customers are expecting banking activities to be transformed from brick to click (Pavithra, 2021).This is the main reason digital banking emerged.
Digital banking is about automating and digitalizing banking processes and services to offer a much better customer experience and maximize growth potential.Kaur, Sharma, and Siddiqui (2020) argue that applying digital technologies such as Artificial Intelligence to banking services has improved customer experience and also helped banks to grow and expand.A survey on digital banking in Indonesia by PwC (2018) reported that digital banking has turned mainstream with around 66% of survey respondents indicating that they have developed a digital banking strategy as part of corporate strategy.A similar study from Vander (2019) also suggests that digital transformation is one of the key elements for firms to build and sustain their corporate strategy in the new digital economy.
Despite digitalization and innovation have become commoditized keywords that are often regarded as the main characters of the new and modern banking model, there is a major issue that needs to be addressed to support digital innovation for competitiveness in Indonesia, namely management of knowledge within the banks' organization as knowledge is a fundamental basis of competition (Zack, 1999), (Grant, 1996).Since knowledge is a basic component of a competency (Hogg & Vaughan, 2005), this implies that banking sector is lacking prescribed competencies that they need to develop and nurture to advance their digital innovation agenda.This study aims to identify a set of corporate digital competencies to support digital banking innovation through multiple case studies in some Indonesian banking organizations.

Needs for Innovation
Innovation is a complex concept that encompasses human, organizational, and process aspects of an organization to improve performance through production efficiency and reducing costs (Schumpeter, 2000).Brynjolfsson & McAfee (2012) emphasize that organizational innovation is crucial to winning the ever-challenging competition in the 'machine' era.Willingness to innovate is the main proxy to the company's propensity for change, driven by the exploitation of new ideas and new technology to create a competitive advantage (Harryson, 2008).The advancement and use of technological solutions for product and service innovation are inevitable to meet customer needs in the digital era.Digital innovation is defined as the creation of market offerings, business processes, or models that result from the use of technology (Nambisan et al., 2017) With these in mind, for banks to survive and advance with the market competition it is imperative that they need to be innovative to expedite the new product/service delivery and to improve customer experience, while on the other side, continuously driving efficiency, improving productivity, and overcome the increasing overhead costs to comply with regulations, whether they are from the local regulators or to respond to global industry requirements.Overlying with the context of digital banking trends, digital innovation has become essential for banks to survive and grow.Nylén & Holmström (2015) suggest the following areas to be considered in building a managerial framework for digital innovation strategy: user experience, value proposition, digital evolution scanning, skills, and improvisation.

Corporate Digital Competency
To support the digital innovation agenda, banking leaders have to understand the required digital competencies at a corporate level, across human, process, and technological aspects.
Particularly on competencies that are relevant to the digital environment that the business lives in.

Human Competency
European Union has included digital competency to be part of the eight key competencies for lifelong learning.Personal digital competence comprises confidence, critical, and responsible use of digital technology to achieve various goals related to study, work, and participation in society (The Council of the European Union, 2018).According to Ferrari's DIGCOMP framework (2013), there are five areas of human digital competence.The first area is Information, which consists of identifying, storing, organizing, and analyzing digital information, including interpretation of its relevance and purpose.The second area suggested in the DIGCOMP framework is Communication, including any means of digital communication, including sharing resources through online media, collaboration through digital devices, and cross-cultural awareness.The next area is Content Creation, covering digital content creation, editing, and integration with previous knowledge and content.Including applying intellectual property and licenses for the produced media outputs and contents.The fourth area is Safety, which is any means of digital protection; data, personal identities, security measures, safe, and sustainable use.The last described area of human competencies is Problem Solving, which is required to solve conceptual and technical problems through digital means, utilizing technology creatively, provide appropriate digital tools for decision making.

Process Competency
From the process competency perspective, an emerging organizational competency in the digital era is to provide, tailor, and equip its members with their learning needs.It was Peter Senge who first coined the terminology learning organization (LO) through his inspirational writing, fifth discipline: The Art and Practice of the Learning Organization (Senge, 1990), in which he defines a LO as a company that continuously transforms itself through learning and development of its members.Now, 31 years later from Senge's writing, the concept is still  2015) that is defined as living and learning organizational that intelligently facilitates the performance and learning its entire members, continuously transforming itself.The first characteristic of the new LO 4.0 is clarity of purpose, that is a shared vision and dialogue on how people are valued and need to adapt to support the organization's objectives.The next characteristic is holistic people experience which is a trusted brand that develops innovative, commercial, and continuous learning opportunities.Thirdly, thriving ecosystem that is a people-led system that enables its people, teams, and enterprise to thrive the learning, linked to common goals.The fourth is agile, digital infrastructure is a virtual environment that enables the exchange of knowledge, ideas, and adaptation of competence.Then continual engagement, that is a dynamic community that continually builds on the business relationship, resulting in energy, resilience, and growth.The last characteristic of LO 4.0 is intelligent decision-making, which is a robust platform using insight and performance analytics to drive organizational performance and customized experience.
Harvard behavioral scientists (Garvin et al., 2008) made some comments on why Senge's LO 3.0 vision is difficult to be realized; first, the ideas were less concrete to be implemented.
Second, the concept was aimed at the senior management level while managers have no views on how learning would contribute to organizational objectives.Third, lack of standard tools for assessment.LO 4.0 tried to overcome these impedances by providing empowerment to the staff and learning ecosystem, stronger partnerships between business leaders and people leaders (L&D managers) and taking advantage of digital infrastructure to optimize the learning process.(2019) performed a competency analysis for Industry 4.0, in which they argue that agile is a required component of the ongoing "industrial revolution" that digitalization and interconnection of systems, products, processes, and value-chains trigger the value creations and business models.

Technology Competency
The following emerging digital technologies to support transformation in the financial industry are repeatedly reported by some scholarly papers as well as top consultant firms' journals: Artificial Intelligence (AI), Mobility/Mobile Technology, Cloud Computing, and Big Data Analytics (Henke et al., 2020), (Marr, 2019), and (Vives, 2020).The stage of adoption of those  (2018) suggest key process competencies to support digital innovation, (Marr, 2019) and (Vives, 2020) prescribe the required technologies to support digital innovation -to mention a few, however lack of studies that have comprehensively linked and summarized all the above competency components, especially in the context digital innovation for banking organizations.This study aims to explore and determine the set of digital competencies across human, process, and technology that are essential for bank organizations as foundations for their digital innovation.The model produced from this study is expected to be a useful reference for banking leaders to start and during their digital transformation programme as well as for academic researchers for future studies.Research questions, problem identification, literature review, identification of possibly priori variables have been initially conducted to help shape the initial design of the model-building (Eisenhardt, 1989).Based on the literature review, a hypothetical corporate digital competency model with tentative variables has been formulated.From here, an exploratory study applying a qualitative approach is conducted to better understand the topic in 'real-life'  The purpose of interviews is to get insights regarding what makes each human, process, and technology competency and how to build and implement them in banking organizations.

Method
Interview questions evolve and become more specific in the subsequent interviews as the authors reach a better understanding of the substantial issues related to the topic.Document reviews, records analysis, and focus group discussion may be conducted as well to enrich the qualitative data or for triangulation purposes.The nature of the exploratory study is unstructured, relies on the quality of informants, and requires the interviewer to understand the context.
Referring to Creswell (2018), qualitative analysis starts with data preparation, in this case transcribing interviews, typing field notes, organizing data into specific types.Then continues with coding, which is a process of segmenting sentences or material into categories, labeling each category with a term.The next process is to generate a description of the setting or categories for further analysis, these categories will form major findings of this qualitative study.For this research, the authors employ NVivo qualitative data analysis software that greatly helps to organize, analyzing, shaping, and modeling the unstructured qualitative data.
The final step in data analysis is making interpretations, asking the lesson learned taken from the data analysis.Upon the completion of these steps, a refined corporate competency model is obtained as an outcome of this study.

Results
Due to the Covid 19 pandemic limitations, most of the interviews were conducted virtually through Zoom video conferencing.The thoughts on the understanding of digital competency at a corporate level and the list of essential digital competencies required to support digital innovation or transformation from people, process, and technological lenses.Given the different states of digitalization being implemented in those four banks, it is also interesting to observe whether or not this factor would affect the perception of the required digital competencies to support the bank's digital innovation.list of respondents is shown Due to the Covid 19 pandemic limitations, most of the interviews were conducted virtually through Zoom video conferencing.The thoughts on the understanding of digital competency at a corporate level and the list of essential digital competencies required to support digital innovation or transformation from people, process, and technological lenses.Given the different states of digitalization being implemented in those four banks, it is also interesting to observe whether or not this factor would affect the perception of the required digital competencies to support the bank's digital innovation.List of respondents is shown in Tab 1.
The focus of the semi-structured in-depth interviews is to probe informants' thoughts on the understanding of digital competency at a corporate level and the list of essential digital competencies required to support digital innovation or transformation from people, process, and technological lenses.Given the different states of digitalization being implemented in those four banks, it is also interesting to observe whether or not this factor would affect the perception of the required digital competencies to support the bank's digital innovation.Agile Product Development.A process that allows a shorter time to produce and launch products to market, get customer feedback, evaluate, then refine.Agile process is key in developing digital products/services given the fast-changing of customers' needs and expectations.Some informants, however, suggested that agile methodology may not be suitable to be applied to "legacy" systems such as core banking and cards systems.Micro-services.The idea of micro-services is to decompose a complex technology component into smaller and autonomous parts.This is essential to support agility and to build more sophisticated and large-scale banking applications.It allows the development team to carry out multiple developments and testing activities simultaneously without great efforts of integration.Oracle (2021) argues that micro-services allow banks to realize the benefits of modern architecture and create a protected scalable environment to deploy new capabilities quickly, bringing continuous innovation to the marketplace.
In addition to the above competencies, several informants also highlighted the importance of the leadership aspect in the banking organization.They believe leaders' involvement in developing these competencies is paramount important.Beyond inspiring and motivating employees to embrace the corporate digital business transformation, leaders need to be clear on the pathway in putting in place the right human, process, and technology competencies to support the digital vision and strategy.

Discussion
This qualitative study focuses on the investigation of the required corporate digital competencies that the banking executives need to develop to support digital banking innovation.From the above findings, authors consistently observe informants mentioning the need for comprehensive focus across the people, process, and technology aspects.The authors also observe that there is no significant difference in term of type of competencies deemed necessary from one banking organizations in the case study to the others.This means that irrespective to their current state of digitalization, the perceived required competencies across human, process, and technology aspects are consistent between the case study bank organizations.
Agile as an iterative and continuous processes from planning, development, implementation, and evaluation as mentioned in Camarinha-Matos et al. '(2019) study is also consistently mentioned by the informants.The last competency mentioned in this category is Business Process Management (BPM) that is essential to support the iteration of digital innovation process.
While on the technological aspect, some emerging technologies are suggested, namely artificial intelligence & automation to improve internal process and efficiency, big data analytics that is vital to improve competitiveness and customer experience which is also aligned with previous study from Nobanee et al. (2021), cyber security to secure the bank and customer's assets and information, open API, cloud computing, and micro-services to break down a large and complex component into smaller autonomous components to accelerate product time to market as also suggested by Oracle (2021).

Conclusion
Embarking into digital transformation through innovation is a strategic decision to be considered and decided by banking executives.Not only will it require major investments, but it will also need strong commitments from the stakeholders.Rethinking customers' needs and experience should be at the heart of it.Digital transformation may mean revisiting business strategy, operating model, IT transformation, transforming banking products and services to be accessible digitally, to changing corporate culture.Digital transformation is often a oneway direction, in the sense that once it is started and customers are used to its results, it is no way of reverting to the old business and operating models.Therefore, it is paramount important for banking executives to ensure their preparedness prior to kicking off their digital transformation agenda.
Another valuable insight that came out from the expert interviews is that corporate learning has become a prominent skill that must be acquired by banking organizations.The need has been shifted from being great at doing particular things to becoming good at learning new things.This will remain the interest of the next phase of this study, particularly on investigating learning interaction model involving the learning actors in the digital era: humans and machines.
, as we are now living in an era where the learning approach has evolved where learning has been made easy by various digital technologies such as AI, Big Data, and mobile apps, capabilities, and skills are developed through virtual and agile processes.Online communities share practices and solutions just like human gurus, membered by participants from around the world.The characteristics of LO have shifted from Senge's originals (LO 3.0): System Thinking, Personal Mastery, Mental Model, Shared Vision, and Team Learning into a new LO in the digital era (LO 4.0) introduced by Daly & Overton ( In the later development,Antonacopoulou et al. (2019) introduced the term Sensuous Organizational Learning, which aligns cognitions, emotions, and intuitive insights by fostering critique.It demonstrates the value of "sensuousness" as a way of understanding volatility, uncertainty, complexity, and ambiguity.This concept was an attempt at completing the LO 4.0 that was previously introduced by Daly and Everton to go beyond the focus on the clarity of purpose to the common goals.LO 4.0 provides more holistic disciplines of internal and external collaboration with digital infrastructure as bridges the digital era characteristics (rise of IoT, AI, and VR) and business model in the digital era (sharing economy, collaborative consumption) through a focus on collaboration and agile organization.Aside from learning organization, some literature has named agile process to leverage rapid technological development as one of the key process competencies toward the digital maturity era (4.0).Agile implementation not only provides flexibility and autonomy in a digital transformation process, but it also provides flexibility to redirect actions when new technologies and new opportunities come (Sjödin & Parida, 2018).Agile is an iterative process comprised of continual planning, learning, development, and early delivery of software or project.It is widely used in typical software and digital development.Camarinha-Matos et al.
emerging technologies can be used to measure the digital competency level at a financial organization.A research question emerges from the literature review, namely: RQ: What are the key elements of Digital Competency in Banking Organizations? Across People, Process, and Technology perspectives.Many past studies have discussed the required competencies to begin with digital innovation as a fragmented study of human or technological or process components of it.Fonesca & Picoto (2020) outline a set of personal competencies for digital transformation, Sjödin & Parida This research is based on multiple case studies participated by several banks in Indonesia that have already started their digital innovation and transformation programs.Case study selection criteria are based on (a) the state of digitalization being implemented by the bank, and (b) from the view of the department appointed to be responsible for digitalization across functions or as a dedicated business unit as suggested by KPMG (2020).KPMG categorizes it from the perspective of digital roles in an organization, from a merely fragmented function scattered in multiple departments to digitalization as an integral part of doing business as shown in Fig 1.Four case study participant banks are identified to represent the four categories, respectively.
the four case study participant banks.A research flow is illustrated in Fig 2, following guidelines for qualitative study prescribed by Creswell (2018).Data collection is conducted through in-depth semi-structured interviews with some expert informants from the case study banks.Twelve expert informants are selected based on their roles in various departments such as Technology, Digital Products & Strategy, Human Resources, and Learning & Development.The job title of the informants varies from VP to C-level executives with more than 15 years of working experience in the banking industry.The selection of case study banks based on digital implementation's state is expected to increase the reliability, validity, and generalizability of the result of this study, while purposive sampling technique is employed upon the selection of the informants based on their roles in the digital innovation transformation in their respective bank organization.

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Fig 2. The qualitative research flow Fig 3. Most frequent words mentioned during interviews Digitalization and interconnection of systems, products, processes, and value-chains trigger the value creations and business models as mentioned byCamarinha-Matos et al. (2019) above are also confirmed by the informants.Business Process Management (BPM).The informants suggested that understanding, documenting, and continuous improvement of the day-to-day business process are key to supporting digital banking innovations.It shall begin with understanding the customer journey to define an optimal process to meet the customer's needs.Tahir & Van Looy (2020) describe a stronger link between the implementation of BPM and digital innovation.BPM is expected to create value out of employees and customers through balancing explorative and exploitative business processes to achieve the organization's imperatives.more competitive advantage to the bank to connect and collaborate with the digital ecosystems.This element of technology capability is highlighted multiple times by the informants as banks are expected to connect to other institutions to gain as many as possible value-added products and services to offer to their existing customers or to attract new customers to onboard.Cloud Computing.Cloud computing offers quicker infrastructure provisioning, flexibility, costefficient, reduced risk of a security breach, and elasticity to growth which are essential to digital banking innovation.Marr (2019) included cloud computing as part of the 7 biggest technology trends to disrupt banking & financial services in 2020.
centered design, design thinking, communication, cognitive analysis & problem solving, and digital security & safety are among the most mentioned human competencies by the expert informants.Except for design thinking that can be thought to have been covered in the other competencies such as problem solving and human centered design, the remaining human-related competencies come out from this study are consistent with the previous study from Ferrari's DIGCOMP framework (2013) as outlined earlier.On process competencies, informants emphasize the need for learning & learning organization in the sense that organization has to encourage and facilitate learnings to support digital innovation culture, this is aligned with Senge's LO concept and that LO practices can only be effective with the support from digital technologies such as e-learning and learning needs analytics tool, this confirms LO 4.0 theory from