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Keynote: why are Innovations critical for Banks & Insurances?

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Keynote: why are Innovations critical for Banks & Insurances?

A perspective on the Financial Services industry: the amount of changes will only accelerate.
- Exponential technologies are driving change; convergence of several disciplines from software to devices to biotech
- Our expectations as consumers are set by our online experience from services such as Facebook, Google or Amazon
- Disruption pattern: startups put themselves in-between the customer and the company
(i.e. check24)
- Industry changes leading to further FinTech & InsureTech investments
- Margin pressure: banks & insurrance by the lowest interest rates we have seen in 2.000 years
- User Experience is driving value in a new way – and most startups understand customer-centricity
- Banks & Insurance companies are under pressure because their offering is fundamentally undifferentiated
- Regulators are opening up: i.e. PSD II forces the banks to open up their data; full disclosure of insurance commissions will arrive soon
- Customers don’t want to be ‘told’ anymore: they don’t come to branches anymore - buy how can advice as the key point of sales be digitized?


Banks need to build up digital capabilities based on 5 pillars plus 1 enabling capability:

(1) DATA-DRIVEN DIGITAL INSIGHTS
- Data-driven segmentation & Value Proposition Design
- 360° single customer view
- Customer Experience excellence
- Comprehensive data ecosystem, including 3rd party APIs

(2) CUSTOMER EXPERIENCE EXCELLENCE
- Customer-centric experience design & processes
- Omni-channel experience delivery
- Journey consistent front-to-back, end2end
- Clear brand positioning & brand amplified by a purpose

(3) DIGITAL MARKETING
- Data-driven, real-time segmentation & cohort analysis
- Data-driven customer- life-cycle management
- Targeted digital (performance) marketing

(4) DIGITALLY ENABLED OPERATIONS
- Operations are designed to support customer journeys
- Streamlined and automated fulfillment processes
- Digitized sales and service interactions

(5) SMART TECHNOLOGY SETUP
- Scalable application architecture
- Flexible IT architecture (i.e. SOA) with clear messaging
- Flexible IT infrastructure

(6) DIGITAL ENABLERS
- Digital Talent Management
- Value-driven Organisation & governance
- Test-and-learn culture

We feel honoured McKinsey copied this model in the following article:
Cutting through the noise around financial technology, Feb 2016: http://bit.ly/1Rtz0AF

Published in: Business

Keynote: why are Innovations critical for Banks & Insurances?

  1. 1. THIS IS AWESOME ©2016 1 Frankfurt, 12th of October 2016 Presented by Stefan F. Dieffenbacher Keynote: why are Innovations critical for Banks & Insurances?
  2. 2. THIS IS AWESOME ©2016 2 Company builder helping corporates to build up new digital business. Focus: revolutionary, new offerings. About me: Stefan Dieffenbacher Currently running two companies: Strategy / Exeuction Advisory focused on digital helping corporates to take their next step with their existing digital channels. Focus: evolution of existing. Active investor through THIS IS AWESOME / private – currently active shareholder in four additional companies & startups. Heavy background in FS:
  3. 3. THIS IS AWESOME ©2016 3 Why innovation is critical in banking & insurance
  4. 4. Digital is both a major thread as well as a *glorious opportunity* for Financial Services
  5. 5. The thread
  6. 6. THIS IS AWESOME ©2016 6 The thread: stability of large organisations is decreasing Source: Innosight / Richard N. Foster / Standard & Poor's Average company lifespan on S&P 500 Index (in years) (each data point represents a rolling 7-year average of the company lifespan)
  7. 7. THIS IS AWESOME ©2016 7 Do you remember the world’s largest company in 2007?
  8. 8. THIS IS AWESOME ©2016 8 Nokia
  9. 9. THIS IS AWESOME ©2016 9
  10. 10. THIS IS AWESOME ©2016 10 The new leader: Apple. Funnily enough, Apple is deriving most value from it’s mobile phones – an industry Nokia previously dominated.Picture: Future Apple headquarter
  11. 11. THIS IS AWESOME ©2016 11 Apple has 2x as much cash as the US Government Source: Forbes, 2015 The new leader: Apple.
  12. 12. THIS IS AWESOME ©2016 12 Similar to Apple changing mobile phones, digital disruption has turned around many industries
  13. 13. THIS IS AWESOME ©2016 13 The *glorious opportunity*
  14. 14. THIS IS AWESOME ©2016 14 FinTechs have followed a very simple pattern thus far: they go where the money are. Especially to payments… Source: McKinsey 2016 Customer segments and product of leading financial technology companies in 2015, % of total
  15. 15. THIS IS AWESOME ©2016 15 Venture-Capital Investments in FinTech have recently accelerated. Globally, nearly $23 billion of venture capital and growth equity has been deployed to fintechs over the past five years, and this number is growing quickly: $12.2 billion was deployed in 2014 alone. Source: McKinsey 2016 Global investments in financial technology, $ billion
  16. 16. THIS IS AWESOME ©2016 16 The FinTech landscape by component Result: component-based banking Disintermediation? Rather “component-based banking”. § Ever more complex business models. § New players will enhance banking. § Banks will open their ecosystems to play in an ever increasing complex landscape. Latest version can be purchased here: https://www.venturescanner.com/financial-technology
  17. 17. THIS IS AWESOME ©2016 17 BlockTech in Financial Services Result: component-based banking Disintermediation? Rather “component-based banking”. § Ever more complex business models. § New players will enhance banking. § Banks will open their ecosystems to play in an ever increasing complex landscape.
  18. 18. THIS IS AWESOME ©2016 18 FinTechs in Germany Result: component-based banking Disintermediation? Rather “component-based banking”. § Ever more complex business models. § New players will enhance banking. § Banks will open their ecosystems to play in an ever increasing complex landscape.
  19. 19. THIS IS AWESOME ©2016 19 A view on the InsureTech Market Result: component-based insurance Disintermediation? Rather “component-based insurance”. § Ever more complex business models. § New players will enhance banking. § Insurances will open their ecosystems to play in an ever increasing complex landscape. Source: Swiss Finance + Technology Association, 2016
  20. 20. THIS IS AWESOME ©2016 20 FinTech is a *glorious opportunity*: massive creation of value for customers & plenty of money to be made Source: Let's Talk Payment, December 2015 Startups attacked large players and took market-share of these. But also (and probably mostly!), they have created new markets!
  21. 21. THIS IS AWESOME ©2016 21 Top-level: what is happening? Klaus Schwab has summarized it well…
  22. 22. THIS IS AWESOME ©2016 22 A perspective on the Financial Services industry: the amount of changes will only accelerate. Our expectations as consumers are set by our online experience from services such as Facebook, Google or Amazon Margin pressure: banks & insurrance by the lowest interest rates we have seen in 2.000 years Banks & Insurance companies are under pressure because their offering is fundamentally undifferentiated Disruption pattern: startups put themselves in-between the customer and the company (i.e. check24) User Experience is driving value in a new way – and most startups understand customer-centricity Regulators are opening up: i.e. PSD II forces the banks to open up their data; full disclosure of insurance commissions will arrive soon Industry changes leading to further FinTech & InsureTech investments Customers don’t want to be ‘told’ anymore: they don’t come to branches anymore - buy how can advice as the key point of sales be digitized? Exponential technologies are driving change; convergence of several disciplines from software to devices to biotech
  23. 23. THIS IS AWESOME ©2016 23 What to do?
  24. 24. THIS IS AWESOME ©2016 24 Mind the chasm
  25. 25. THIS IS AWESOME ©2016 25 Mind the chasm – but avoiding the realities of the markets is not a solution! Compared to other branches, banks are here This is where banks should be
  26. 26. THIS IS AWESOME ©2016 26 Mind the chasm – but avoiding the realities of the markets is not a solution! Here is where agile happens Compared to other branches, banks are here This is where banks should be
  27. 27. THIS IS AWESOME ©2016 27 Everything changes depending on whether you are working on a castle or a speedboat type of challenge, including: § Org structure § People & their capabilities § Approach § Technology setup § Customer approach § Etc. The remainder of this presentation will focus on castles. Define your starting position: are you solving a castle or a speedboat type of challenge? Your existing digital channels / banking platform / products / services. Any future innovative or disruptive products or services. Most castle’s (aka. large organisations) are trying to solve speedboat issues with their castle operating procedures. That is their prime point of failure.
  28. 28. THIS IS AWESOME ©2016 28 The critical business needs: Banks need to build up digital capabilities based on 5 pillars Data—driven digital insights Robust analytics & BI based on centralised data infrastructure Data-driven segmentation & Value Proposition Design 360° single customer view Comprehensive data ecosystem, including 3rd party APIs Digital Marketing Data-driven, real-time segmentation & cohort analysis Data-driven customer- life-cycle management Targeted digital (performance) marketing Digitally enabled operations Operational- excellence enablers Operations are designed to support customer journeys Streamlined and automated fulfillment processes Digitized sales and service interactions Customer Experience excellence Clear brand positioning & brand amplified by a purpose Customer-centric experience design & processes Omni-channel experience delivery Journey consistent front-to-back, end2end Smart technology setup Digital enablers Digital Talent Management Value-driven Organisation & governance Test-and-learn culture Flexible IT architecture (i.e. SOA) with clear messaging Scalable application architecture Agile delivery to market Flexible IT infrastructure The basics: security & privacy We feel honoured McKinsey copied this model in the following article: Cutting through the noise around financial technology, Feb 2016: http://bit.ly/1Rtz0AF
  29. 29. THIS IS AWESOME ©2016 29 The basics: security & privacy Flexible IT architecture (i.e. SOA) with clear messaging Scalable application architecture Agile delivery to market Flexible IT infrastructure The critical business needs: Banks need to build up digital capabilities based on 5 pillars Data—driven digital insights Robust analytics & BI based on centralised data infrastructure Data-driven segmentation & Value Proposition Design 360° single customer view Comprehensive data ecosystem, including 3rd party APIs Digital Marketing Data-driven, real-time segmentation & cohort analysis Data-driven customer- life-cycle management Targeted digital (performance) marketing Digitally enabled operations Operational- excellence enablers Operations are designed to support customer journeys Streamlined and automated fulfillment processes Digitized sales and service interactions Customer Experience excellence Clear brand positioning & brand amplified by a purpose Customer-centric experience design & processes Omni-channel experience delivery Journey consistent front-to-back, end2end Smart technology setup Digital enablers Digital Talent Management Value-driven Organisation & governance Test-and-learn culture Since banks are increasingly becoming IT companies, it is no wonder that the entire list of digital capabilities is ultimately IT driven – and thus part of the IT function! We feel honoured McKinsey copied this model in the following article: Cutting through the noise around financial technology, Feb 2016: http://bit.ly/1Rtz0AF
  30. 30. THIS IS AWESOME ©2016 30 The opportunity landscape in InsureTech Source: Guy Weismantel, http://bit.ly/2d9jSiW Source: Startup Bootcamp Insurance London, 2016
  31. 31. We understand the points of focus as banks & insurance companies. But how do we execute?
  32. 32. THIS IS AWESOME ©2016 32 1. IT needs a fitness program Data—driven digital insights Robust analytics & BI based on centralised data infrastructure Data-driven segmentation & Value Proposition Design 360° single customer view Comprehensive data ecosystem, including 3rd party APIs Digital Marketing Data-driven, real-time segmentation & cohort Data-driven customer- life-cycle management Targeted digital (performance) marketing Digitally enabled operations Operational- excellence enablers Operations are designed to support customer journeys Streamlined and automated fulfillment processes Digitized sales and service interactions Customer Experience excellence Clear brand positioning & brand amplified by a purpose Customer-centric experience design & processes Omni-channel experience delivery Journey consistent front-to-back, end2end Smart technology setup Flexible IT architecture (i.e. SOA) with clear messaging Scalable application architecture Agile delivery to market Flexible IT infrastructure Digital enablers Digital Talent Management Value-driven Organisation & governance Test-and-learn culture We feel honoured McKinsey copied this model in the following article: Cutting through the noise around financial technology, Feb 2016: http://bit.ly/1Rtz0AF IT needs a “fitness program” to enable banks to support future strategies. Any strategy is useless without the fundamental ability to execute. Banks typically have two major concerns: § Speed of IT (due to the weaknesses in their IT setup – see left) § Weaknesses in developing value-driven roadmaps
  33. 33. THIS IS AWESOME ©2016 33 2. Existing tools are not ideal to prepare for value-driven prioritization and execution Startups: the Business Model Canvas nor related models do not explain how to translate to execution. Corporates: Difficult to orchestrate and integrate corporate & IT- Strategy. 1. Introduction 2. Basic Challenges a. Growing customer needs b. Regulatory requirements c. Competitive & cost pressure d. Digitizing of the environment e. IT risks and IT security 3. Effects of the challenges on the IT strategy a. Standardization, sourcing, scalability b. Integration architecture and innovation c. Complexity reduction (IT has grown historically) d. Information security & privacy e. Handling it innovations 4. Dealing with the challenges a. Objective dimensions of it b. Portfolio training in it and orientation of portfolio 5. IT norming strategies a. Standard b. Non-Standard 6. Division specific areas of action and transformation a. Transformation of the bank b. Private customers c. Corporate customers d. Financial markets e. Comprehensive bank controlling f. Credit processes 7. IT specific fields of action a. IT governance b. Changes in sourcing model & reducing the vertical integration c. Continuous development of IT functions i. Increasing the maturity of requirements management ii. Increasing the maturity of Project Management iii. Increasing the maturity of Architecture Management iv. Increasing the maturity of control functions v. Increasing the maturity of provider control vi. Increasing the maturity of Innovation Management vii. Increasing the maturity of Application Development & integration viii. Increasing the maturity of Information Security Management & Data Protection d. Establishment on an IT group e. Integration of business critical event-management f. Authorization management g. Talent Management h. Processes and method i. IT risk management 8. Measurability of the IT-strategy a. IT costs b. IT architecture management c. Human resource development d. IT operations e. IT projects
  34. 34. THIS IS AWESOME ©2016 34 2. Value-focused conversations Data—driven digital insights Robust analytics & BI based on centralised data infrastructure Data-driven segmentation & Value Proposition Design 360° single customer view Comprehensive data ecosystem, including 3rd party APIs Digital Marketing Data-driven, real-time segmentation & cohort Data-driven customer- life-cycle management Targeted digital (performance) marketing Digitally enabled operations Operational- excellence enablers Operations are designed to support customer journeys Streamlined and automated fulfillment processes Digitized sales and service interactions Customer Experience excellence Clear brand positioning & brand amplified by a purpose Customer-centric experience design & processes Omni-channel experience delivery Journey consistent front-to-back, end2end We feel honoured McKinsey copied this model in the following article: Cutting through the noise around financial technology, Feb 2016: http://bit.ly/1Rtz0AF We need a smart dialogue across business, IT and Marketing how these fields integrate and how these need to be managed.
  35. 35. THIS IS AWESOME ©2016 35 2. We need one common & simple language between IT & business: Customer Journeys enhanced with their implications are an ideal means to this end Customer Action Front-end Backend Support processes Interaction with Bank personnel 1 2 3 4 5 We need a simple and value focused tool both IT and business understand The customer journey is ideal: § Almost all bank processes are driven by customers § With very few customer journeys, 90% of the value- functions of the bank can be mapped The customer journey needs to be enriched with system and staff interactions
  36. 36. Thank you.
  37. 37. THIS IS AWESOME ©2016 37 Let’s create winning digital businesses – together Achieve digital transformation. Develop independence. Create profit. And design the future.

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