Other parts of this series:
- Prioritizing investment in ‘the new’
- Don’t get stuck in the mud: Overcoming barriers to change
- Be open to change from the ‘outside-in’
- Combine speed & stability for true agility in financial services
- The human factor can make or break growth
- The role of leadership and the importance of culture in change efforts
- Customers at the heart of change
In June, we released the results of our Financial Services Change Survey 2017, and highlighted the key themes and trends about the state of change and how financial services (FS) firms are tackling it. In the coming weeks, I will take a deeper dive into the details of our study and share my in-depth analysis.
We are going to start off by looking at change investment. Why start here? Because it shows FS is putting its money where its mouth is…
According to our survey, FS firms are investing significantly in change, and intend to strengthen this commitment. There are five top themes. Some clearly relate to today’s core business around (i) efficiency and cost control and (ii) risk and regulatory compliance. While others are more oriented towards growth and even developing tomorrow’s business: (iii) customer service and experience, (iv) product and service innovation and (v) digital technology and channels.
All five look set to see increased investment over the next 12 months – in particular cost, digital and customer change. For many FS executives, these investment priorities are converging, as cost saves are made today to create space for transformation funding and then new digital technologies are used to improve the consumer experience and increase internal operating efficiency.
When it comes to risk and regulatory compliance, 81 per cent of insurers and 86 per cent of banks are investing in it now, with more than 50 per cent in each industry expecting to increase their investment. Contrary to our expectations, when asked whether mandatory investments ‘get in the way’ of discretionary and strategic investment, only 15 per cent of the respondents said ‘greatly,’ a majority (69 per cent) said ‘to some extent,’ and 16 per cent said ‘not at all.’ Contrary to our expectations, the perception that mandatory investments ‘crowd out’ discretionary and strategic investment was not proven in the results.
Despite the mandatory change burden, 80 per cent of FS firms currently invest moderately or significantly in new digital technologies and channels, and more than half (60 per cent) expect to increase this in the next 12 months.
Among the digital technologies rated as most important for change delivery are big data and analytics, mobile, the Internet of things and cloud. What’s of note about these digital priorities is that almost none of them existed or were nascent five years ago. As one survey respondent put it: “Mobile is a priority. Four years ago, we didn’t have a single mobile banking customer; we now have around eight million people who use nothing else.”
These investments are often clustered around business problems or opportunities – for instance mobile apps, sensors and social media generate new data sources which can then be analysed to generate new understanding of customers or optimise propositions, but that can only be done with the power of cloud computing. This is also where the evolving regulatory landscape comes into play–especially with the Global Data Protection Regulation (GDPR) coming into force next year, which provides customers and employees with new rights about what companies do with their data. All of these opportunities and disruptions require change investment.
Balancing change investments across the core business and ‘the new’ can be a challenge. It’s up to leaders in FS to ensure their firms have sufficient funding for essential change now and space to develop the new. That starts with a careful prioritisation of investments and resources for ‘running the business’ and ‘changing the business.’ Most importantly, FS leaders need to guarantee that ‘change the business’ activities are no longer limited to marginal enhancements, but an integral part of the core business that create growth and value. Move too fast and you over-commit and get too far ahead of the market and regulators. Move too slowly and you become uncompetitive and see your profitability eroded.
According to our survey, only about a quarter of FS firms have a clear view of their change portfolio, while among ‘change leaders,’ (those seeing the best results from their investments) that number is significantly higher–at 60 per cent. For success in ‘the new’ there is a need for greater balance between larger programmatic investments, seed funding for innovation and tranche funding for continuous change. Applying lighter business case disciplines and governance to seed funding allows innovation and reduces time to value.
We have helped a large number of financial services firms re-prioritise their change investments to create a stronger link to their strategic direction, increase return on investment and reduce costs. This is a short sharp intervention and a ‘zero based’ mindset that should be applied on an ongoing basis. Getting to a clear portfolio is essential for prioritising workload, resources and funding.
You can read more survey results here.