6 Ways to Transform Your Bank – without Spending Billions
Spending billions on digital transformation – and bragging about it – seems to be the only game in town for large incumbent banks. But this spending hasn’t paid off, and financial institutions continue to battle a heavy fixed-cost base. You know digital transformation is critical, so how do you convince an incumbent bank’s CFO and CxOs that digital transformation doesn’t have to cost billions or take decades?
1) Digital is a Small Team SportCreating small teams is critical to success. Reorganisation can cause huge upset in large organisations, and creating a culture where titles matter less and are decoupled from reward and remuneration takes the support of HR and the CFO. It can be done more easily in digital areas, but applying it across the organisation fairly, is critical. 11:FS has worked with a number of clients to help facilitate this reorganisation. Building the team requires identifying the individuals who can live that culture from day one, and setting them a challenge to deliver new growth from the business.
2) Push Decision Making into Teams, not CommitteesAgility means keeping the decision making as close to the client or project as possible. The project should contain every skill set within it that is required for it to succeed, but banks tend to organise by capability. All the fraud consultants on one floor, compliance on another floor, and the Labradors on another. While this highly specialised approach is designed to mean a few resources can spread across many projects, it comes at a cost in terms of "context switching." The more focussed colleagues are on one task or project, the more productive they will become. As Tom Blomfield, CEO at Monzo, shared with FinTech Insider:
“Having cross-functional, decoupled teams is something that’s very important. So not having an engineering department and a design department and a compliance department, but having a financial crime and security team, for example, which is made up of a lady who used to work at HSBC, and some fraud analysts, and some engineers. And they sit together, and work together, and attack the same goals together, using their different specialties and toolsets. So they can operate very, very quickly to react to new threats and push out code, or update the product, or you know, change the terms and conditions, even, sometimes. They can do that without having to go to other teams to, you know, get blocked on their six-month roadmap. They have the capability inside that team to ship code. So small, autonomous teams.”
3) Do More "New"Large organisations tend not to do "new". Instead, they focus on cost reduction or compliance initiatives, so it's little wonder that they struggle for growth. It's understandable when anything "new" has such a high failure rate. A "new" project at an incumbent bank often requires a five-year plan and a deep business case before it goes anywhere near a customer, and is developed without knowing customer demand or gathering feedback. This doesn't have to be the case with smaller teams working more quickly - "new" becomes possible. The way you build "new" is different to the way you sustain "old". Being Agile has much more to do with who your suppliers are and how you make decisions than whether you have had Agile training.
4) Get customers first - make big plans laterThe Silicon Valley investment firm Andreesen Horowitz is famous for telling their startups that they should focus their first 18 months on writing code and talking to customers. How many big digital programmes in banks have written code in the first 12 months? There may have been a customer survey at some point, but how many of the project team actually met with those customers? If they did meet those customers, how many times per week did they meet? Was it just once at the beginning? You see the problem... 11:FS is creating new digital banks for a number of large and small clients, rapidly pushing a digital proposition into the hands of customers. The first step here is having a proposition that solves a real customer problem. Rather than just pushing new product after years of R+D and one customer survey, new product development built with the help of your customers is far more likely to solve their needs. That small group of advocates can become an invaluable source of design and functionality feedback, often completely changing what you thought your product was supposed to be.
5) Iterate, and iterate, and iterate!Monthly reporting cycles of projects, rolling up into programmes, mapped against a business case written two years ago, isn't creating the accountability you need for digital transformation. Small deliverables, delivered often, changed often or even removed entirely, based on regular customer feedback are vital to success. This may feel like back and forth and lots of expensive rework, but using small teams with the right mix of capabilities removes the old two- to four-week wait for departments to sign off a certain feature. There is also the added benefit of knowing there is customer demand for a feature before its full rollout.
6) New Vendors for a New Way of WorkingFinTech creates an entire universe of new suppliers. Cybersecurity, Fraud, Biometrics, Machine Learning and Blockchain - these subjects are an arms race. Financial institutions need a way of having their ear to the ground, they need the insights of what is best in breed and they need to get those services from smaller companies through procurement. If organisations move away from billion-pound transformation programmes that fail to deliver benefits and towards small teams, a new vendor diversity will be required. There are laudable programmes such as the Accenture FinTech Innovation Lab, but while many large incumbent vendors have moved into acquiring some of the next generation of vendors, the core problem of being able to use smaller vendors when looking to be truly transformational remains. Paul Robban, COO at DBS, had some interesting thoughts on this;
“I oversee procurement at DBS and we’ve had to really rethink our processes about how we can work with startups. Because if we put our traditional bureaucratic checks and balances on a startup, we’ll kill them, so they can never work with us, so we’ve got to rethink how we engage.”