How structural collaboration leads to value propositions in the financial sector


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In the (post-)crisis era, challenging the status quo through innovation will be critical to restore profitability in the financial sector. The commoditisation of products within the industry is making it very difficult to compete on price. Moreover, a whole array of non-banking entities is entering the market to close the gap between the offerings of banks and the needs of customers. Suddenly, banks face competition from telcos, supermarkets, tech firms and innovative start-ups, all experienced in building online relationships and developing and marketing transparent products.

In this paper we explain how financial institutions can install structural collaboration trajectories with key stakeholders (consumers, employees, management) in order to develop true value propositions consumers are willing to pay for.

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How structural collaboration leads to value propositions in the financial sector

  1. 1. Part 1 : Introduction
  2. 2. In the (post-)crisis era, challenging the status quo through innovation will be critical to restore profitability in the financial sector. The commoditisation of products within the industry is making it very difficult to compete on price. Moreover, a whole array of non-banking entities is entering the market to close the gap between the offerings of banks and the needs of customers. Suddenly, banks face competition from telcos,What to expect? supermarkets, tech firms and innovative start-ups, all experienced in building online relationships and developing and marketing transparent products. In this paper we explain how financial institutions can install structural collaboration trajectories with key stakeholders (consumers, employees, management) in order to develop true value propositions consumers are willing to pay for.
  3. 3. Time to innovate is NOW! So from a bank‟s point of view the competitive frame of reference has expanded considerably and at a frightening pace. “Customers judge across their entire set of experiences rather than just comparing your As a result, only financial institutions which organization to others like it. We want our invest in service innovations taking technology to be as intuitive and user-friendly as Apple products, the service we receive to be as advantage of a profound understanding of thoughtful as we might get from Nordstrom, and consumer needs and demands will be able to personalization and ease of payment as good as outperform competition. (IBM Institute for Amazon’s” (Forbes, Rita McGrath, Five Big Trends in Business Innovation in 2012). Business Value 2010)However… …impediments to innovate are probably more persistent in the financial sector than in any other industry. Strict regulations, low margins, legacy, long time to market, focus on short-term financial success, commoditisation of services & products, IT-driven NPD, lack of organisational structures & funds fostering innovation… most often result in banks embracing the opposite of an open-innovation-minded culture. (Accenture Research, 2010)
  4. 4. With the rise of web 2.0 and social media, new tools are available for organisations to facilitate open innovation and structural collaborationHere’s the processes. In the next chapters, we explain why and how to install structuralsolution! collaboration trajectories with internal and external stakeholders (consumers, employees, management), what the keys to success are and the implications for the organization. We end with concrete cases in the telco, aviation and financial sector.
  5. 5. Part 2 : Structural Collaboration
  6. 6. When we talk about open In most cases, this innovation or structural collaboration starts with a pilot collaboration, we refer to the project. If the test is integration of the voice of successful, the collaboration the customer in all decision- can gradually be built up in a making flows of your more structural manner. Less than one out of ten companies company. In most companies, which co-create with their customers are only allowed toPower to give their feedback at the very end of a decision-making flow customers also uses this collaboration for launching new products or services. We could through traditional marketthe people research. This paper gives insights on how to involve say that the focus of co- creation is mainly on the initiation of new ideas. But the customer in every single even if consumers are more or phase of the decision- less continually involved in the making flow on an on-going process of dreaming up new basis. Currently, only 3% of all ideas, this is still not enough to allow us to speak of „structural companies have experience collaboration‟. with developing new products and services with their consumers.
  7. 7. Structural collaboration means that the customer isinvolved in all aspects of your company’s life. This includes:1. Getting new insights: Exploration of the target group. Listen directly to how they perceive the product and service quality in order to optimize the commercial portfolio. This also implies discovering new market trends and unmet needs from your most relevant customers.2. The development of new ideas and fine-tuning of existing ideas: Create new commercial value together with the customer.3. Key role during implementation: Include customers during the implementation phase to make sure that your interpretation of their ideas is correct.4. Continuous evaluation and optimization: Use the customer‟s voice as a continuous flow of information to improve loads of smaller, tactical issues and to re- shape the future of your company, your customer being your primary consultant.
  8. 8. Overview of structural collaboration and business issues And it pays off: a recent article in the „Harvard Business Review‟ claimed that companies are more able to solve all their main business issues if they collaborate closely with their consumers. The good news is that consumers are also willing to help companies out with this: more than half of them want to collaborate with one of their favourite brands on one or more of these issues. The goal of this paper is to look into the necessary ingredients for a company to structurally get the consumer on board.
  9. 9. The objectives of structural collaboration Based on 17 interviews with senior executives of (global) brands from different industries, we came to the conclusion that companies that are working on structural collaboration with their customers have four clear objectives in mind with this approach:1. Create better products, improve the 3. Add consumer feeling to the gut feeling. A lot ofcustomer service and communicate in a managers rely on their gut feeling, which is wonderful. Structural collaboration should add „consumer feeling‟ tomore impactful way. This is by far the most it. By collaborating so often, managers create the ability toimportant objective for large brands in order to put on the consumers‟ hat during a meeting and think ascollaborate with consumers. By succeeding in this the consumer. Which helps them to make moreobjective, the overall performance of the consumer-relevant choices.organization will increase.2. Become more agile. By involving customers in 4. Marketing & PR. Companies that are listening andevery phase of a decision-making chain, things that involve consumers in decision-making are popularmove faster. Companies can make better nowadays. Tell all your customers that you take decisionsdecisions more rapidly and have a better feeling of based on consulting other customers, and they will likewhat will be needed to be equally successful in the you more. Leveraging the internal collaboration platformsfuture. A big plus in today‟s fast-moving world. towards the external communication has an impact on the overall perception. This is not the main goal, but a very welcomed indirect effect.
  10. 10. It‟s clear that structural collaboration with consumers is not about having the right technology to make it happen. It is about a mentality shift for most organisations. A shift from a „we know best‟ attitude towards an open mentality. The most beautiful resultAn evolution, of collaborating companies is the creation of what we just called the „consumer feeling’. Adding the consumer feeling to the gut feeling of companies isnot a revolution the biggest change one can achieve through structural collaboration. To reach this situation, a number of steps need to be taken. Based on our research, we learned that all companies started small and evolved towards bigger and bigger collaboration projects. In the end, collaboration was really embedded in their organization. It was a process of change, not a revolution.
  11. 11. The evolution towards structural collaboration happens in three steps:1. Collaboration always starts with a first-time try out. Companies organize a co-creation project in which they allow the customer to participate in one specific project. Most frequently occurring examples are co- creation of a new product, a new package or new marketing communication.2. If this try-out is experienced as a success, the second step is to apply collaboration on a project-based level in the organization. In this stage, companies have the habit to involve customers in every important new project they work on.3. After a while, it becomes hard for them to take decisions without the voice of the customer during the process and they decide to collaborate structurally.
  12. 12. Three pillars for structuralcollaboration with your customers
  13. 13. 1 Select the right participantsIn our opinion there are two types of - meaningful - Companies that want to involve the customer instructural customer collaboration : an open online more strategic decisions and that have a need for in-platform where everyone can participate and a depth feedback, tend to work with a closed onlineclosed online community where you select the community with a limited number of relevantpeople to join in. In the large open communities you customers. If you want to solve a specifichave little direct control over who joins and who management problem, it is better to discuss possibledoesn‟t. The members come together in a solutions with a smaller, closed group of between 50 and 150 of people with a keen interest for yourvery spontaneous way to discuss particular category. It could also be a group of your mostsubjects of their interest. Your role with ardent fans, fans you have carefully vetted andregards to these people is simply to listen. This will selected yourself. The major advantage of thisallow you to discover a series of unfulfilled market approach is that you have everything in your ownneeds, which may eventually lead to new products hands - and this is advisable if you don‟t want theand services. Of course, you are also free to ask whole world to know what decisions are being taken.them questions, but you should always rememberthat these are open communities - anyone elsemight be listening to their answers!
  14. 14. 1 Select the right participantsHaving said that, it is important to acknowledge that not Research has shown that without this kind ofevery customer will be able - or is suitable - to help you emotional commitment people seldom aresolve management problems. To give your company interested enough to contribute effectively to anaccess to the right advice on a daily basis, you need to you need to online community. In other words,listen to the right (and relevant) people. For your talk to people who are interesting andcommunities you should seek to attract people who interested. If they don‟t have an opinion or ifcan offer added value. The minimum condition is the natural motivation to take part is missing,that they have a clear commitment to the your community will not achieve what you want it to achieve. But natural engagement is notcompany and what it stands for. They may be experts sufficient, in order to make your community a realin the sector, knowledgeable and enthusiastic amateurs success you need to manage it well. Severalin the sector or just big fans of your brand. things are important: be open and transparent about the goals of each project, listen actively (allow participants to put their issues on your agenda too), make it a fun experience (after all people are doing this in their spare time) and give enough feedback on what you did with their answers.
  15. 15. 2 Internal communication is not enough Internal = ExternalManagers show more interest in a project or Sharing your collaboration work with the wholeapproach which gets external credits than in a organisation and the rest of the world has severalproject with a sole internal focus. In other advantages. Next to an increase in motivation of yourwords: make sure your structural management, it will also increase the motivation of yourcollaboration is not completely taking communities‟ participants. Further, research has shown that consumers have a higher trust level towards and aplace behind the scenes of your better perception of co-creating brands. So, there is also aorganization. commercial benefit to leveraging your efforts externally.
  16. 16. 2 Internal communication is not enough Internal = ExternalThere are a few communication tactics you can apply to increase the internal and external impact of yourcollaboration process:Meet-up with participants: Go for tangible Bite-size & Apply content marketingCollaboration occurs on a results: If you work creative techniques: Don‟tdigital platform but it is an together with your reporting: Share communicate once or twiceinteraction between people. consumers on a about your collaboration, but the results of yourTo increase the interaction structural level, make talk about it more frequently. collaboration in aand the emotional bonding, sure you have concrete Use three levels of content: big short, compellingmake sure your employees deliverables. These content campaigns (e.g. when and creative waymeet up with these people in results (e.g. new you have BIG news: launch of with yourthe real world as well. Show products, insights, employees. Make an initiative or showing the endthem around in your company, advertising, result), content projects (e.g. a sure it is easy totell them your challenges and packaging…) should be theme you talk about for a few digest and totreat them like part-time shared with the world in days/weeks) and content share.employees. order to make the updates (small, daily updates collaboration aspirational with relevant information). for the market and for the manager involved.
  17. 17. 3 Measure impact there is need for evidence that the approach works. ThereforeTo keep the collaboration flow going,we advise to use a number of clear success indicators that you can measure during theimplementation of structural collaboration in your organization. There is no standard list of KPIsto use; they differ from company to company, as they are closely linked to the company culture and thecompany‟s (long-term) objectives. There are a few KPIs that apply to all companies to follow up on the impact ofstructural collaboration.
  18. 18. 3 Measure impactSuccess of innovation, impact of Cost reduction: by integrating the voice of thecommunication and improvement of customer customer in the entire decision-making flow, the costservice: by involving customers early in the of ad hoc market research should be reduced. Nextprocess, your company will take better decisions. to that, by creating better products and servicesProduct launches, new advertising campaigns and based on the input of the market, the impact ofso on should have a higher success rate than before word-of-mouth will increase, which may lead tothe collaboration was implemented. lower media budgets.Consumer feeling of the organization: you can Brand perception: listening actively will humanisemeasure to what extent your management has a your brand and make it more popular.better feeling of the attitude and behaviour of yourtarget market. The goal is that managers think asconsumers and improve their performance throughthis newly acquired skill. Define your KPIs, measure them and celebrate success!
  19. 19. Need for changes in internal implementation processesCollaboration should lead to decisions that In other words: it is important to start with a try-out,are taken through a between the market and but it is equally important to start with a long-term view. Make sure you know where youre going. Afteryour company. The proof of structuralcollaboration is in the implementation of the ideas. In the try-out, it is a matter of including collaborationorder to succeed in this crucial step, there is a need into projects where the fit feels right. Peopleto change the internal decision streams. The (internally and externally) get bored rapidly. Makechallenge is to integrate consumer feedback sure you have a flow ready in your collaboration process to keep the conversations going. Plan withand input into every phase of the decision room for flexibility. Once you have completed acycle. Remember that structural collaboration does number of successful collaboration projects, thenot come overnight. It starts with a try-out that fits possibility to move forward to structural collaborationwithin the existing culture. Make sure that as from the will arise.start you know what your next step will be.
  20. 20. Make sure that, along the way, you take into accountthese last tactical tips to make collaboration work:Have clear objectives for each collaboration projectInvolve all stakeholders early in the processManage expectationsHave a community managerCreate internal and external credibility
  21. 21. 1. Have clear objectives for each collaboration project. Make sure not to collaborate just for the sake of it. To get the feedback of consumers in the decision flow, the objectives have to be very clear, and in line with the business goals.2. Involve all stakeholders early in the process. The higher the number of departments involved at the beginning of the process, the better. In order to integrate the collaboration flow in the decision flow, it is crucial to have a buy-in from the relevant teams.3. Manage expectations. Collaboration won‟t lead to the next big idea for your company. Customers are great sparring partners, but don‟t set your expectations too high. Make sure that during the integration of their feedback in the decision flows, everybody is aware of what to expect from the collaboration.4. Have a community manager. Make sure to have assigned somebody to manage the community. This person is responsible for managing the conversation with participants in the collaboration process and for sharing the insights internally. He or she brings the consumer‟s voice to life within the company.5. Create internal and external credibility. By delivering results and integrating the voice of the customer in your decision flows, you will gain credibility among the participants in the collaboration platform. Credibility among employees will also grow as they will see that the collaboration adds value. Marketing your collaboration efforts is not a bad thing, but it should not be the only thing.
  22. 22. Part 3 : Cases how we applied the above frameworkIn this last chapter, we demonstratefor important players in the (financial) services sector. We report on 2successful co-creation pilots in the telecom and aviation sector that -eventually-resulted in a long-term connection between all parties involved. We also show howthe financial sector is gradually opening up and starting to implementing their first trueco-creation trajectories surfing the waves of social media and web 2.0.
  23. 23. The Telenet case:The Launch of Yelo
  24. 24. Telenet is the largest provider of broadband cable services in Belgium. Its business comprises the provision ofanalogue and digital cable television, high speed Internet and fixed & mobile telephony services. By launching anew service in Beta and integrating the voice of the user in the further development, Telenet co-created uniquevalue with customers.With the purpose of securing (1) market leadership and (2) first mover advantage, Telenet‟s missionstatement comprises “generate impact through happy clients spreading positive word-of-mouth”, turning theground swell phenomenon to their advantage. Therefore, they launched a new service in Beta and differentinternal teams (R&D, marketing, communication, management, even de CEO, Duco himself) collaborated with auser group in an online pre-launch community on the further development of this application.
  25. 25. During the official (press) launch of By integrating the voice of theYelo, an application bringing customer in the development of this new service, consumers were notdigital TV to mobile devices only collaborating on improvements,like the iPhone, iPad and they actually co-defined the(portable) computer, users were development roadmap and theinvited to provide feedback on socialmedia. 100 participants were go-to-market strategy for therecruited from the open community following join a 3-week closed pre-launch This roadmap is structured around a This co-creation approachcommunity to allow in-depth model generated by consumer resulted in highly satisfied users,discussion of the uncovered themes, feedback, differentiating betweencollaboration on improvements and basic expectations, satisfying with83% being satisfied toto structure the development improvements and addictive new very satisfied, turning usersroadmap. After the community, features. 30 out of 45 user- into real brandfeedback was shared on social generated and prioritized ambassadors. About 1 out of 7media again, offering all users a improvements have already been iPhone and iPad users in thechance to join the dialogue. added to the roadmap, ranging from Belgian market installed Yelo. bugs and interface changes to content features. More than 50% of Recently, similar co-creation the last update were user-generated initiatives have been set up for a changes. large Belgian Bank and a worldwide issuer of credit cards.
  26. 26. ING Student HouseLeveraging on the next generation
  27. 27. ING, a global financial institution of Barbera Van der Wal, SeniorDutch origin, has the ambition to Research Manager, ING retail: “Ourbecome THE bank for students and marketing challenge was to gain experience with an online communitywants to have full understanding as a tool for structural collaborationof the life of students and their with key target groups. The goal wasbanking needs. to generate relevant customer insightsIn the ING Student House community in the fuzzy front end of the innovationthe different marketing teams gained funnel, to test marketing ideas and toinsights into the daily life of 150 co-create with the target group”.students by discussing, among Eventually, the community providedothers, themes such as income, ING with a rich and detailed viewexpenditure, financial administration, of the life of students nowadays. Susanne Streng, Segment Marketer,banking and insurances, during 3 In a closing workshop with the ING ING retail: “For me the added value ofmonths. The focus was on how ING Marketing-students team, over 100 the collaboration project was not onlycan add relevance to student (smaller and bigger) ideas were the concrete outcome, but also generated to better match ING to the installing a real dialogue with theclients. In that perspective marketing needs and wishes of their studentideas were evaluated and co-created target and ACTING upon true clients. The NPD department now haswith the students. customer centricity. Engaging a clear view on the directions for the development of the new student customers in structural collaboration is the ultimate brand touch-point positioning, and thecommunity turning them into true brand provided them with a rich source of ambassadors”. customer quotes, brand reflections and unsolicited feedback.
  28. 28. It’s not only about technology andyoungsters…
  29. 29. To further improve the experience of In a second phase, another group oftravellers, Air France-KLM, the frequent travellers placed theFrench-Dutch airline holding insights into perspective with theircompany, wanted to connect with stories and came up with ideas ontheir customers on an emotional the “My Transfer Idea” community, a 3-week creative journey. Analysis oflevel. Transfer flights in particular the ideas resulted in 32 conceptare complex situations, evoking a lot boards; the 4 most feasible wereof emotions, mostly negative. To integrated in a quantitative andapproach this situation as an emotional concept screener.opportunity and to demystify theinnovation process, InSites This “My Transfer Idea” project doesConsulting and Air France-KLM not only use the emotionalcollaborated on a complete and experience of travellers as a startingstaged co-creation project, point for innovation in servicecentralised around the emotional design, the emotional layer isservice perception. By connecting present in the completewith Air France and KLM frequentflyers in an insightment community, innovation approach and10 insight platforms were defined, connection with the frequentemphasizing their needs, emotions flyers.and expectations.
  30. 30. Also in the financial sector, a wide range of Both groups were followed for 3 months, with atarget groups and business challenges have meet & greet between the second and thirdbeen tackled by long-term customer months. The results revealed different types ofconnections using online platforms: autonomous investors embodying different needs and insights on the dynamics between- In the aftermath of the financial crisis, a 1- the investors and account managers. In the year intensive collaboration process (via an end, quick wins, short-term actions and online community) was set up between strategic projects towards the target group different internal teams (active involvement were defined. of the CEO) and customers of 2 large banks facing a merger. The goal was to - Also in a more sensitive context, true keep the finger on the pulse and generate customer-centricity is key - nothing makes a customer insights on the integration, so that basher bash more than not being able to tell it the teams could act upon them and control to your face - whether it is about how to damage or loss due to the fusion. handle a compensation trajectory towards investment customers or giving meaning to- With the purpose of better servicing their your brand after re-branding. autonomous investors, a large Belgian retail bank installed a dedicated community among autonomous investor customers and account managers (with a sub-community per profile).
  31. 31. Research teamTom De Ruyck Delphine Vantomme +32 9 269 14 07 +32 9 269 15 20 @tomderuyck
  32. 32. Want to know more aboutresearch in thefinancial sector? Delphine Vantomme Business Director Financial Services +32 9 269 15 20