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Global CIO Banking Summit - Workshop Cultural Changes to Survive Digital Disruption


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Title: Cultural changes required to be still standing in the aftermath of the Digital Disruption caused by Open Banking and PSD2
The UK and European Regulators have a goal of increasing competition in the banking market around PCA, BCA, SME Loans and Payments. They are effecting this through the CMA Remedies and PSD2 which impose near-term dates for Banks to expose their data and services publicly through APIs. New entrants and Third Party Providers, will seek to gain revenues and market share from established players using the APIs that banks have to provide at no cost. This will fundamentally change the competitive environment and banks need to have a strategy to compete in this digital market. This will require a change to their current people, process and technology which are not aligned to this dynamic digital market. Many banks will end up as a commoditised utility and only one or two will be the big winners in this wave of disruption. This talk will cover the open organisational culture Red Hat believes is needed to be on that (very) short list of digital winners.

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Global CIO Banking Summit - Workshop Cultural Changes to Survive Digital Disruption

  1. 1. Cultural changes required to still be standing in the aftermath of the Digital Disruption caused by Open Banking and PSD2 Global CIO Banking Summit 2017 - Workshop 1 Jeremy Brown Director, Red Hat Open Innovation Labs - EMEA 7th Feb 2017
  3. 3. 3 UBER In San Francisco Uber has 3x revenue of the entire prior taxi and limousine industry! AIRBNB Without owning a single room Airbnb has more rooms on offer than some of the largest hotel groups in the world! KICKSTARTER Top Kickstarters raise tens of millions of dollars from tens of thousands of individual backers, amounts of capital that once required top-tier investment firms! The WTF Economy
  4. 4. 4 Open Banking The Open Banking Standard is driven by the Open Bank Working Group (OBWG), set up in September 2015 as part of an initiative of UK HM Treasury to explore how data could be used to help people transact, save, borrow, lend and invest their money This standard will guide how open banking data should be created, shared and used by its owners and those who access it PSD2 PSD2 is a data and technology driven Directive that aims to drive increased competition, innovation and transparency across the European payments market, while also enhancing the security of internet payments and account access. (November 2015) Euro Banking Association (EBA) Consultation Paper on RTS on SCA & common and secure communication under PSD2 It’s Not Limited to Silicon Valley Disruption in Banking - Open Banking will offer tremendous potential for Banks and Financial Institutions to innovate at pace, create new revenue streams and disrupt the disruptors
  5. 5. 5 “We need banking but we don’t need banks anymore. Do you think someday we can open bank account or ask for loan without physically have to come to the bank?” Bill Gates Antony Jenkins, former CEO of Barclays “We will see massive pressure on incumbent banks, which will struggle to implement new technologies at the same pace as their new rivals. That will make it increasingly challenging for them to deliver the returns and profitability that their shareholders demand.” Taavet Hinrikus co-founder of Transferwise “The entire banking industry can be disrupted for the better and bricks and mortar banks are heading for tough times" "Every vertical in banking is a huge opportunity,"
  6. 6. What if Google, Apple, Facebook or Amazon became a bank? 6
  7. 7. Because something is happening here But you don’t know what it is Do you, Mister Jones? Bob Dylan, Ballad Of A Thin Man
  8. 8. Responding to Disruption
  9. 9. 9 Error #1: Not Establishing a Great Enough Sense of Urgency Error #2: Not Creating a Powerful Enough Guiding Coalition Error #3: Lacking a Vision Error #4: Under Communicating the Vision by a Factor of Ten Error #5: Not Removing Obstacles to the New Vision Error #6: Not Systematically Planning For and Creating Short-term Wins Error #7: Declaring Victory Too Soon Error #8: Not Anchoring Changes in the Corporation’s Culture HBR: Leading Change - Why Transformation Efforts Fail By John P. Kotter
  10. 10. OPEN SOURCE IS NOT JUST CODE; IT’S CULTURE Collaboration Transparency (both access and the ability to act) Shared problems are solved faster Working together creates necessary standardization + OPEN SOURCE CULTURE
  11. 11. The Open Organisation 11 "an organization that engages participative communities both inside and out—responds to opportunities more quickly, has access to resources and talent outside the organization, and inspires, motivates, and empowers people at all levels to act with accountability." - Jim Whitehurst, CEO of Red Hat
  12. 12. 12 ● Greater agility, as members are more capable of working toward goals in unison and with shared vision; ● Faster innovation, as ideas from both inside and outside the organization receive more equitable consideration and rapid experimentation, and; ● Increased engagement, as members clearly see connections between their particular activities and an organization's overarching values, mission, and spirit. But openness is fluid. Openness is multifaceted. Openness is contested. Openness Can Lead to
  13. 13. 13 ● Transparency ● Inclusivity ● Adaptability ● Collaboration ● Community Truly open organizations embody them all—and they connect them in powerful and productive ways The Basic Conditions for Openness
  14. 14. 14 ● Autonomy — Our desire to be self directed. It increases engagement over compliance. ● Mastery — The urge to get better skills. ● Purpose — The desire to do something that has meaning and is important. Businesses that only focus on profits without valuing purpose will end up with poor customer service and unhappy employees. What Do We Want? From the book “Drive: The Surprising Truth About What Motivates Us” by Daniel Pink
  15. 15. 15 ● Decentralised & Autonomous - top down goal setting but bottom up decision making ● Two Pizza Teams - The basic building block of your organisation ● Automation & Self Service ○ Automation is a basic requirement, need to reduce lead times ○ Self Service de-couples teams, allows autonomy ● APIs & Platform Theory ○ De-couple teams, build a virtuous cycle in your ecosystem ○ Think Platforms and become a student of Platform Theory Keys & Principles
  16. 16. 16 Wrong Question! How do I move faster? Decentralise to increase autonomy and to move faster Hierarchical or Flat?
  17. 17. 17 You can’t dodge Conway’s Law so work in “two-pizza teams”[1] “organizations which design systems ... are constrained to produce designs which are copies of the communication structures of these organizations” — M. Conway If you can't feed a team with two pizzas, it's too large. — Jeff Bezos [1] It’s worth reading The Science Behind Why Jeff Bezos’s Two-Pizza Team Rule Works
  18. 18. 18 Automation & Self Service - Reduces lead time, not just cycle times lead time cycle time What we have learnt from our participation in open source communities is that it’s not enough to be agile, you must be adaptable. Lead times are one good metric to help you measure your adaptability through automation and self service
  19. 19. 19 “Optionality” - Give yourself options - Release the value of additional optional investment opportunities available only after having made an initial investment ● Private IaaS / Public Cloud - Optionality for your basic infrastructure ● PaaS - Optionality for your code ● APIs - Optionality for your business Create Digital Platforms
  20. 20. 20 ● People don’t resist change - we are an evolving adaptive species ● People are not stupid (overall) ● They will resist loss of power ● Their resistance is smart response to dumb method! ● The more resistance you experience the more likely it is that your methods suck! ● Instead of fighting resistance to change, watch out for common mistakes in implementing change ● There are symptoms of struggle with adaption and the new that should not be confused with resistance to the change itself ● Keep going, change has no beginning or end just constant adaptation If you are experiencing resistance... It’s not me it's you (or your method)!
  21. 21. To empower our customers to deliver the most innovative software success stories of the 21st century. To accelerate the delivery of our customer’s innovative ideas, and create infectious enthusiasm for building applications the Red Hat Way, by leveraging community-powered innovation to deliver an outstanding labs experience. INNOVATION ACCELERATED MISSION VISION Jump-start your initiatives and gain the tools to sustain them
  22. 22. THANK YOU