FINANCIAL SERVICES IS THERE ANY VALUE FROM IT? Helga Mepham It seems a week cannot go by without another article or soundbite being published about current levels of IT spending, doubts over whether sufficient value is being derived, and more drastically, the growing need to stagnate or even cut the IT budgets that burgeoned during the boom years in the run up to and throughout 2000. With economic pressures becoming increasingly more evident in 2002, how many of us have also started to hear the business shouting.... why should I reduce costs on my bottom line to pay for an ever increasing IT cost base? On the face of it, the business does have a point. For example, how many us can also relate to a project where once the original business case/cost benefit analysis was completed and signed off, it was then never referred to again - gathering dust on the project sponsors shelf or ending up in the archive folder of the project's directory structure to be resurrected 4 months later, and only then because someone wanted to check whether the Fixed Income department had originally promised 2 or 3 full-time resources for User Acceptance Testing? Traditional methods used for measuring value, such as Activity Based Costing, have over the years gained the reputation of being more expensive to complete than they can actually deliver in expected benefits. In addition, the philosophy that projects stop on go-live day with little subsequent reference to or questioning of whether the business solution actually delivered what it set out to do, is still all too common. Unfortunately, there is no magic wand to solve this. Instead, businesses need to start to think in terms of challenging IT and measuring the incremental value it provides - constantly verifying that what is being delivered internally, fits with the complex economic environment within which the business is operating: Refresh the business case Business cases should not be immediately forgotten once signed off. Instead implement a programme of regular review and assessment, preferably monthly. Not only should this be done within the context of changing economic pressures - does the original cost/benefit case still stand up to scrutiny in the wake of decreasing resource costs for example - but should also verify that the programme in place for delivering the IT is still on track to achieve what it set out to do in the first place. Importantly, this should not be a witch hunt or a finger pointing exercise, but a pragmatic focussed activity that sponsors and project managers insist on. Evolve the project Time and business do not stand still, you only have look at events since September 11th to understand that. In today's world, delivering IT with benefits and value that were relevant to the business 18 months ago is unacceptable. Where circumstances force a change in direction for the business, you need to evaluate the continued relevancy of projects and be prepared to make far reaching decisions about their future direction. This may mean an increase in the spend or resources allocated to a project in order to get the business solution implemented earlier (and therefore take advantage of beneficial market conditions). Alternatively, re-scoping the project or stopping the initiative all together might be more appropriate. Instigate a benefit realisation programme Benefits and therefore value, take time to be realised - often many months after the business 'solution' has actually been implemented. Equally important is the need for the business to fully appreciate the fact that achievement of real incremental value does not mean the magical appearance of £20m extra revenue on go-live day. At the outset, there must be a plan in place which determines not only what the benefits are, together with how and when they expect to be achieved, but also defines the measures that should be taken to assess how successful the realisation of those benefits has actually been. In the boom years, cries of 'IT for competitive advantage' were commonplace, as were the seemingly bottomless pots of money provided by the business to support all the initiatives that were kicked off in an attempt to achieve it. At the same time, there appeared to be little questioning of how many of those initiatives had actually created any of the value or advantage they claimed to be able to achieve. The situation now, however, is very different. There is still competition, even more now, but in addition, less revenue is being generated, IT budgets are being cut and the questions falling at the IT directors door about providing 'value for money' are becoming more pointed. Encouraging the business to look for the incremental value that IT can provide by refreshing the business case, evolving the project and initiating a programme to ensure that all the benefits are fully realised is a step in the right direction. CAN ACCOUNT AGGREGATION COMPLEMENT AND ENHANCE YOUR CRM CAPABILITY? Tim West Tim describes how Account Aggregation can be a fast-track route to add new feeds to existing CRM solutions... It all started so well... You are the IT director of a large retail bank. You have a headache that won't go away. Only five years ago you invested many millions in a state-of-the-art CRM system. The problem was that your business had historically been (and still is) managed in silos, with very little information shared between departments - the current account, the savings products, the personal loans, the mortgage book, the card businesses. You saw your customers through your products, not as single, multi-product entities. So you bought your way out of trouble, spending years developing the CRM monolith - and initial results from the implementation began to pay dividends on the investment. You began to know who your profitable customers were, you could listen to them as individuals, you could respond to their needs, recognise the warning signs, and you began occasionally to know which responses generated results. Hurrah! That was a good bonus year, you bought the sports car that you hardly ever drive these days. ...but lately, things have got worse Since then, the shape of the bank has changed beyond recognition. There's the main bank, its mass affluent online offshoot, the upmarket stockbroker, a trendy new credit card, the bank you recently 'merged' with, the investment manager whose products get increasingly complex, and an offshore private bank. They have some links to your CRM system, varying in quality from 'fully integrated' to 'marginally useful'. There is no single customer view across these disparate organisations, and no hope in sight of ever seeing one. A glimmer of hope, too good to be true? Then, a year ago, a sales team touting account aggregation services arrived in your office for a meeting. They explained how they could create a customer-centric repository, building simple links to your legacy systems for a fraction of the cost of your existing CRM system and in addition, with the customers' permission, could pull in external data from other financial institutions. A powerful proposition enabling you not only to attract and retain customers, but to win share of wallet from other banks. It seemed immature technology, with security risks, possibly flouting regulation, and inviting bad press. Perhaps it could be a tactical solution until your current CRM system managed to integrate the other businesses? Figure 1 No, said the Board, we won't spend that much money on a tactical, throwaway solution. So you went back to throwing more people and money at the CRM solution, hoping for no more mergers and acquisitions that would upset your plans. So is account aggregation just CRM on-the-cheap? The above story is bound to ring true, to a greater or lesser extent, for many readers. We hear this story on an all-too-regular basis. In a recession, the textbook marketing response is to focus on your existing customers since new ones are in short supply. This is the classic CRM value proposition and our IT director in the story above is now doing just that. However, at Bluerock we believe that account aggregation systems can live alongside, complementing and augmenting in-house CRM solutions with new and relevant data and allowing banks - recession or no recession - to aggressively market to their competitors' customers. So how can CRM and aggregation co-exist? By treating the aggregation tool as another feed into the CRM engine, banks are able to short-circuit the process of integrating legacy data into the customer data-base. Aggregation technology can be used to gather elusive data from both internal and external systems. Using the same architecture as above, with the aggregation engine providing feeds from difficult-to-integrate internal systems and prev-iously impossible-to-integrate external data, the IT director gets faster benefits. Recognising this, many of the aggregation software vendors have already written interfaces to the main CRM systems (see Figure 1). So, while the UK waits for the inevitable domino effect (when all financial institutions rush to implement aggregation services), there is a convincing argument to become an early adopter of aggregation technology, starting by integrating internal systems. Marketing departments are famously good at designing sales collateral and notoriously bad at identifying trends and matching products to customers. The archetypical CRM strategy that they preach is "discover - assemble - deliver". Honest, humble and forward-thinking IT directors will recognise that aggregation can hugely enrich the "discover" phase of any CRM strategy and embrace aggregation technology immediately. DARE TO BE DIFFERENT: REAL INNOVATION AND CHANGE MANAGEMENT IN OPERATIONS Alison Paterson Over recent years financial services players have looked for ways of managing change and harnessing external developments to their benefit. Many have succeeded in creating lean organisations and efficient operations but the challenge remains on how to gain competitive advantage and maintain truly pioneering operations. Real Innovation is about creating a way of working that changes customer perception of your product and/or service, is a step-change ahead of the competition in terms of efficiency, and specifically and wholly contributes to overall strategic objectives. It is much more than traditional employee suggestion schemes or operational management targets and can only be achieved through involving decision makers and every-day business users. Essentially it is your approach to innovation that will determine your success. It should be flexible to meet both your current constraints and future organisational needs. It should also provide for: - Identification of opportunities. Use regular events such as weekly team meetings, quarterly business reviews and annual planning exercises, as well as ad-hoc feedback from employees and customers as opportunities to capture and build a list of potential innovations. The focus should be on active listening to open dialogue, exploring ideas rather than formal one-way presentations from management. Foster a culture of continuous improvement through empowerment and incentivisation (financial and non-financial) that values and references success on an on-going basis. - Challenge, qualification and prioritisation. Encourage contribution from only (but all) those involved and impacted by the changes through cross-functional reviews. Typically this includes representatives from areas such as Operations, Marketing, Risk, IT and HR. There is a role for impartial facilitation at this point to ensure all individuals contribute and commercial realities are considered. The group's role is to assess all potential innovations in terms of "holistic" cost and business benefit (tangible and non-tangible), and consequently decide to either discount or proceed with ideas for approval. - Approval to proceed. Sponsor/Executive review of qualified opportunities should be focused and immediately follow the qualification stage. Protracted off-line decision making by committee will loose the impetus gained by the team, whereas a recommendations presentation to a sole decision maker, should enable a decision in principle on the same day. - Implementation in a measured and coherent manner that causes minimal business disruption and is supported by good internal and external communication. Depending on the "reach" of your innovation this may justify setting up a project office. The approach will only work where there is a continuous loop following on from implementation back to identification and if there is buy-in throughout the organisation to maintain this momentum. Above all, there must be an acceptance that innovation is an on-going process; as you develop new solutions that deliver results, others will try to mimic your success, using your solution as their baseline. Continuous innovation means commitment of resources - people and financial - and buy-in throughout the organisation. Few organisations are brave enough to dedicate resources to commence and maintain such a programme of change. Even fewer organisations dare to be different and ask the fundamental question - what is the cost of not being innovative? If you require any further information please contact: Julian Sawyer [email protected] Helga Mepham [email protected] Bluerock Consulting Limited Alderman's House Alderman's walk London EC2M 3XR Tel: 020 7743 6780 bluerock-consulting.com About Bluerock Consulting Bluerock Consulting specialises in providing consulting services to the financial services sector. Our senior consultants have typically worked for financial services institutions and for one of the large consulting firms. Consequently, each Bluerock consultant brings to assignments in-depth business knowledge and a proven track record. Bluerock's approach to assignments is to work with our clients and focus on the success that they want to accomplish and not to prolong our assignment. We have many blue-chip financial services institutions that will testify to this success and economy of our approach.