InsightaaS: Bain & Company is one of the world’s leading management consulting firms, employed by senior executives at major corporations to help them to "make better decisions, convert those decisions to actions, and deliver the sustainable success they desire." Today's featured post illustrates why Bain's consultants are sought after by business leaders wrestling with ways of building leadership within an industry - here, within the financial services sector. The post starts with a brief overview of the importance of technology to FIs, citing transaction volumes and the impact of technology options (mobile apps) on preferences of older and younger customers. It then moves on to set the frame of discussion: the issue, the authors say, is "larger than IT; it is a strategic business challenge as well as a great opportunity."
What does this mean in an IT context? Bain calls for "a new digital IT operating model," moving from a current approach that is designed to deliver "stability, predictability, risk mitigation and efficiency" to a new approach oriented towards rapid delivery of key capabilities (security, anytime-anywhere access, analytics, mobility/web/social support) via a "reboot" that "challenge[s] traditional assumptions about the ways IT and the business work together."
The main part of the post details the "five dimensions of the digital operating model" required to enable the transition/"reboot". Discussions of "priorities and alignment" ("a closer, more nimble working relationship between the business and technology groups"), "delivery capabilities" (with a focus on Agile and web disciplines), "operations capabilities" (DevOps and risk management), "organization" (appropriate support for digital initiatives) and "technology" (including best practices for creating "a scalable and flexible middle tier", retiring/consolidating legacy systems and migrating workloads from mainframes) provide direct guidance to FI management - and are supported by relevant FI examples - but also deliver pertinent insight to managers in other industries.
The post concludes by defining the "reboot" of the IT organization as "a journey that comprises four phases": C-suite recognition of urgency regarding the need for action, development of a clear vision of the future connecting technology and customer service, definition and activation of transformation initiatives, and deployment of new capabilities. The authors note that organizations embarking on a reboot of their IT operations "should not think of this as an IT project...the whole organization has to work together to develp an integrated technology roadmap for a new era of digital customer engagement."
Will FIs take this guidance and move away from current practice to a new approach? Many already are embracing the changes in whole or in part; a graphic demonstrating "traits of a digital leader" shows that there are examples today of practices that are followed by leading-edge organizations. The key to Bain's post is the provision of a framework that organizes these disparate activities into a strategy that will yield predictable benefit over both the near and longer terms.
Customer expectations for banks, wealth management companies and insurers are on the rise. In 2013, more than half of consumer bank interactions around the world took place through online or mobile channels, according to Bain & Company customer surveys. Include ATMs and the share of electronic, digital interactions exceeds 85% today and could hit 95% by 2020.
Technology is at the heart of this transformation, and with the right capabilities financial firms can compete against nimble, technologically sophisticated start-ups that are reimagining ways to serve customers’ financial needs. Executives see the opportunity to deliver differentiated customer experiences and "wow" moments–like the ability to deposit checks with a mobile phone camera, remote bill pay or even basic transactions delivered through a good mobile app. And this trend accelerates for younger customers: 39% of those over the age of 45 considered the quality of a mobile app when switching banks, but 58% of those younger than 45 took it into account.
However, in most financial institutions, significant gaps exist between the business’s aspirations and what they can realistically accomplish. Executives demand greater speed and agility, but their IT departments are unable to deliver, resulting in frustrations and mutual distrust. The C-suite demands for faster, cheaper, better grow louder as the IT function has become slow, expensive and, in some extreme instances, paralyzed. Many factors contribute to this immobilization, including rapidly increasing volumes of business and regulatory demands, a growing need to support complex business processes and products, inflexible legacy systems architectures, onerous internal processes and talent limitations.
We believe this problem is larger than IT; it is a strategic business challenge as well as a great opportunity. Technology executives now have a platform and an environment in which company leadership is keen to listen and support IT initiatives. Business executives will need to work with IT more closely than ever before, supporting technology recommendations and gaining a clear understanding of the challenges and opportunities that technology affords. Working together, they can move quickly to bring their banks, insurance companies and other financial institutions forward into the rapidly evolving digital age...