Einstein famously described insanity as repeatedly doing the same thing and expecting different results. Recent research from Gartner found that the Digital Transformation efforts of many Financial Services firms were, in effect, hoping that “doing ‘more of the same’ will equate to improved performance”. While this isn’t insanity, it’s not exactly transformational either.
There has been a great deal of investment throughout the Financial Services industry to provide an omnichannel digital customer experience. But this has yet to reap the expected benefits of Digital Transformation. Gallup has noted: “Although banks are offering more channels, they are not realizing desired outcomes such as reduced costs and higher customer engagement.”
The principle reason for this is that, in many cases, banks have simply used digital technologies to underpin the business processes that were already in place. They have been able to make small efficiency improvements but nothing that is transformative. Recently, finews.com noted that digitization efforts had not really altered the core products and services offered by traditional banks. This is a statement that’s equally true in other areas of Financial Services such as Insurance – if not more so.
Insurance remains 50-year-old business processes, information siloes and legacy systems that no longer meet business needs. Any organization will struggle to build the extensible, collaborative and agile business structures in those circumstances. They inhibit financial services firms fully benefiting from Digital Transformation and from delivering excellent customer experience.
McKinsey suggests that this requires a two-pronged approach – Digital and operational – with the first step being to move beyond the product and service departmental silos that have so long underpinned the Financial Services model. The consultancy recommends that the business should be aligned to the key customer journeys for the firm. This recognizes that a customer journey – such as opening an account or making a claim – encompasses a number of business functions, processes and IT systems.
Customer-facing journeys for a bank according to McKinsey, can typically be divided into seven categories: signing up for a new account; setting up the account and getting it running; adding a new product or account; using the account; receiving and managing statements; making changes to accounts, and resolving problems. Similar journeys can be easily mapped for Insurance firms or Investment brokers.
Digitization – both of customer experience and day-to-day operations – is one of the five ‘levers’ necessary to achieve the Digital Transformation required to a customer-centric model, according to McKinsey. It sits alongside lean process design, intelligent process automation, advanced analytics and business process outsourcing. While it’s undoubtedly true that all are necessary to maximize investment in Digital Transformation, trying to do everything at once is extremely risky. An early focus on digitization is my preferred approach for a number of reasons.
First, it offers a number of operational and cost ‘quick wins’. Just replacing paper-based processes with digital ones increases productivity and efficiency while reducing the cost associated with manual processing and paper storage and management. Making content digital – especially when you can bring structured and unstructured data together – can significantly reduce risk and facilitate effective compliance.
This may sound very much like ‘doing more of the same’ but it isn’t. I believe that digitization is the foundation upon which other McKinsey levels are built. It is difficult to imagine how you can apply advanced analytics and intelligent process automation unless you have full control of the data within your organization.
Gartner suggests that digital maturity for Financial Services companies requires that CIOs focus their firm’s participation in an expanded ecosystem that includes customers, competitors, suppliers, regulators and stakeholders from other industries. This allows for better customer connection and engagement – as well as driving innovation – within the dynamic digital markets that all Financial Services firms are facing. It also requires a sound digital platform upon which to build these new connections and services.
Let me give you an example. OpenText, SAP and Delaware Consulting have recently been working with an insurance company in Asia. The firm had over 800 different types of correspondence – which totaled over 50,000 separate documents that were all printed and mailed each day. The company realized that it could make huge cost and productivity improvements if it could replace its paper-based correspondence. That was only the start.
The company set about using its digitization program to radically alter how it engaged with customers. It built a completely new level of experience for its customers based around a self-service portal that went much further than simply automating the exchange of document types. Customers can receive information, ask questions, upload documents and administer their accounts. Each customer now has a personalized portal that they can access any time, anywhere and through any device.
Digitization has been a foundation for this insurance company to deliver true Digital Transformation. The firm implemented the OpenText™ Extended ECM (xECM) solution to create a centralized repository of all customer information. Its agents now have a single source of truth on every individual. They now have up-to-date, real-time information when dealing with customers. The program has given the firm the ability to take an enterprise-wide view of the systems and services it needs that can help target its operations towards the specific journey of each of the customers.
Digital Transformation has to be built from the ground up. It starts with replacing paper-based processes but it must gone much further. Digitization is the platform to create the business innovation and customer engagement for success. In its 2017 CIO Agenda, Gartner found the banking CIOs lagged behind other industry leaders when it came to investing in Digitization. The company recommended that Financial Services firms should dedicate as much as 40% of their IT budgets to Digitization by 2018. We can be certain that consumer demand will continue to grow and competition will continue to accelerate through digital-only financial service providers. Perhaps Gartner’s estimate will yet prove to be too conservative.