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The Trading Mesh

Round Table Report - Transformation to a multi-channel organisation

Tue, 21 Feb 2017 05:00:36 GMT           

Discussion hosted by The Realization Group, led by Certeco, Digital Works, Aviva and Northern Trust, on 26th January 2017

The digitisation of financial services is often seen as a process of accelerated automation, or even transformation, which harnesses innovations in digital technologies to improve on and replace manual- or physical-based service provision. Automated platforms known as robo-advisors, for example, are rapidly replacing human financial planning advisors in the wealth management space. But the transformation of financial services firms into multi-channel organisations is about serving very human ends, and can be achieved most successfully by using very human means. 

This was one of the main conclusions of a roundtable event for industry practitioners held in late January, hosted by Certeco and The Realization Group at The London Capital Club, the first in a series focused on digital transformation and business change optimisation in the finance and insurance sector. 

The potential benefits of using digital technologies to transform financial services and insurance firms into multi-channel organisations are so significant and so varied that they are almost overwhelming. However, as noted in the opening comments of Anthony O’Hara, head of practice for business analysis and architecture at Certeco, digital transformation is not the same journey or process for every firm. Individual companies must have a clear view of their long-term business objectives as well as their competitive strengths and weaknesses, before deciding upon their required change management programmes initiatives and the technologies that should be deployed to help them achieve their strategic goals. 

However, this is a difficult environment in which to make such an assessment, as several roundtable participants observed. Indeed the future of the finance sector has rarely been so uncertain, with the myriad impacts of regulation continuing to have far-reaching impacts on margins, revenue streams and capital constraints across business lines. At the same time, political and economic risks and uncertainties abound, while competition from non-traditional sources mount. This all makes strategic planning both very hard and absolutely essential. Roundtable participants highlighted many barriers to the adoption of digital technologies and the development of innovative solutions: reliance on legacy systems; limited budgets; a post-crisis, risk-averse mindset; access to talent; and short-term shareholder priorities. Equally, they were quick to identify opportunities for their own firms to leverage innovation and deliver new and / or improved services to customers, with Hugh Hessing, director of UK customer services at Aviva,  wishing he was 10 years younger in order to play an active role throughout the forthcoming period of technology-driven change! 

Hessing’s point was particularly resonant because of the scale of the successive waves of change that digital transformation is likely to bring to the existing business processes and models of the finance sector, some already being witnessed in other, largely consumer-focused industries. Banks, insurance firms and asset managers are, of course, familiar with the processes and practicalities of migrating to a new generation of technology. But, as one roundtable participant noted, a key difference with many aspects of digital technology innovation is their impact on external-facing processes and relationships, rather than just internal ones. This brings both opportunities and challenges, but it also causes complexity and demands flexibility. The reengineering and reimagining of value propositions and supply chains with digital technologies is inevitably an iterative process – even if some lessons can be learned from the retail, travel and entertainment sectors – as is the development of new services, driven by the new insights that are already being derived from rigorous and systematic analysis of structured and unstructured data. 

Perhaps unsurprisingly then, the importance of skilled, experienced and motivated humans was a recurrent theme of the roundtable discussion, despite its nominal focus on the transformational power of digital technologies. Richard Morecroft, Senior Partner for Strategy and Leadership at Digital Works, voiced reservations about the appointment of chief digital officers at financial services firms because ultimate responsibility for digital transformation should reside with CEO. Other roundtable participants decried the declining influence of human resources (HR) departments in financial services firms since the financial crisis, noting that the importance of talent management to digital transformation initiatives required HR execs to be fully involved in strategic planning. 

Aviva’s Hessing asserted that the experience of product managers as they piloted their product areas into a multi-channel business environment would prove invaluable experience when they subsequently take on more senior leadership roles. Morecroft added that the potential of big data analysis to deliver new insights into customer behaviour – thus paving the way for the development of new solutions and services – would only be fully realised if experienced staff with deep product and market expertise were deployed to inform and tweak artificial intelligence programmes alongside data scientists. 

This point led to a discussion of the cultural challenges of creating a multi-channel organisation. According to Mark Becker, an independent consultant and Certeco advisory board member, the fintech firms that increasingly compete with incumbent financial services providers had already grasped the demographic challenge presented by a millennial generation, which expected digital customer experiences. Moreover, he said, fintechs are well-advanced in their use of data analysis to segment customers and anticipate their expectations. Earlier, Steven Quigley, global head of income and international tax at Northern Trust, explained how his firm’s wealth management arm was already experiencing the effects of the generational shift, as wealth is passed down to a cohort of digital natives who expect real-time information on investment performance and strategy delivered to their iPads. Can risk-averse, publicly-listed financial institutions innovate quickly enough to compete, especially when start-ups can quickly scale their infrastructures through advances in cloud computing and related innovations? 

O’Hara acknowledged that large firms often needed help with enabling creativity to flourish, while Hessing said that agile management techniques adopted at Aviva has successfully encouraged technology and business staff to collaborate successfully on product innovations. Another roundtable participant insisted that creativity and innovation needed to be given space to develop by senior managers. Indeed, as Northern Trust’s Quigley noted, many large firms have already created ‘innovation labs’ to create a suitable environment to explore the application of new technologies to existing processes. But a key sub-strand of the roundtable discussion – on the evolving regulatory framework for data privacy and digital identity – suggested that collaboration across skill sets (and generations!) will continue to be crucial. 

The ability of digital technology innovation to transform customer experiences, leaving behind firms that do not adapt quickly enough, has already been placed beyond question in other industries. Moreover, digital technologies can provide new, valuable insights into customer behaviour. Nevertheless, a clear understanding of any firm’s long-term value proposition to its core markets is a pre-requisite to its transformation into a multi-channel organisation – not an afterthought. As O’Hara noted, there is no silver bullet and no single journey or roadmap. The past may be an imperfect guide to future performance, but a clear understanding of your present situation is the right place to start planning that journey – encompassing customers, suppliers and employees alike – toward digital transformation.