8th June 2017
Natalie Ceeney CBE, Chair of Innovate Finance, and former Head of Customer Standards at HSBC UK and CEO of Financial Ombudsman Service, was the keynote speaker at our recent event Asset Management: Differentiating through Digital.
Natalie, who has implemented large scale digital transformation initiatives in many financial services institutions offered our delegates these four top tips for embracing radical digital change.
1. Bring the outside world in
When you are the change-agent within a company, it can be really difficult to persuade your peers or your boss that things can’t stay the same, or that radical rather than incremental change is needed. It can be easier for outsiders to do the hard work for you. People from outside can often say things that you can’t; and they can bring other-sector knowledge in too.
The more time leaders spend looking inward, the less we see the outside world. And the less we see the outside world, the less we see the need for change. So a technique I’ve often used is to expose leaders to outside thinking. Futurists can talk about how the world is going to be different in 10 years; the future of AI, or millennials and changing consumer needs. Fintech start-ups can talk about how they see the world in a different way. Think tanks can share their visions of the future. There are a variety of ways to do this, whether through a one day event, or a series of talks, meetings or breakfasts.
2. Think like a start-up
There are some big companies, particularly tech companies like Google and Amazon, that have retained their start-up, innovative edge. But there are lots of big incumbents who, for good reason, have internal cultures that are quite risk adverse. After all, for large financial services institutions you need a strong focus on the day-to-day incremental numbers, and don’t want people going off piste. But, if you’ve got a culture that is risk adverse and then put innovation in the centre of it, you will kill it.
So, I always suggest that companies ask themselves ‘If I put an innovative team or person in the middle of this business would they thrive?’. If the honest answer is no, then rather than trying to take on the whole company culture, you might be better innovating on the side of your business. One of the best known examples of this is when Midland Bank created First Direct in the 1980s. Midland Bank, knew it was bureaucratic, so it built First Direct on the side, and allowed it to thrive within a completely different environment. It became Britain’s highest rated bank.
However, if you do set up innovation on the side of your core business, or buy a start-up to create that innovation, you need to think very carefully how you support it and enable it to thrive. Your innovation is likely to need to be able to take risks in an environment more akin to a venture capitalist funded entity rather than under standard controls. I’ve seen too many companies buy innovative start-ups, or hire innovative people, and then slowly throttle them, wasting a huge amount of time and money.
3. Understand your customers, and create services which meet their needs
In my days leading the Financial Ombudsman Service I saw some great businesses which were customer focused, but sadly, far more that saw ‘treating customers fairly’ as a regulatory imperative rather than a business one. With little real competition in many parts of financial services, this may have been a sustainable strategy in the past, but it won’t be in the future.
It’s expensive to not understand your customers. If you have a customer journey that is horrible and clunky, it’s likely to have a high failure demand cost. That failure demand may manifest itself in high costs of contact centres (most contact centres spend more than half their time rescuing customers from poor processes), in high complaint levels, or a high attrition rates. However, if you delight your customers they tend to recommend you.
But as importantly, one thing we’ve got wrong in financial services for many years is assuming that the financial services “product” addresses the customer need, rather than understanding what the customer really wants to do. Many of us have gone through a three-hour mortgage interview process, carefully designed by a bank to be a good customer experience. But when you step back, customers do not want a three-hour mortgage interview, they just want to be approved for a mortgage so they can go and buy a home. Similarly, the customer need is not for a loan – it’s to buy a car, or to go on a holiday. And few customers are really shopping for a pension – what we want is to fund our retirement.
With the core focus of many new Fintechs being around creating a great and compelling customer experience, the need to really understand customers is rising up the agenda.
4. Take lots of small bets
One of the big challenges of a new venture is proving the return on investment. Many businesses kill initiatives early, where they can’t instantly prove the ROI. But some of today’s most successful businesses today started with a great idea, which met a customer need, and worked out how to monetise it along the way. Others knew they could create something valuable, but didn’t initially quite know how to make it happen. It’s rare to know at the start of technology driven innovation exactly what the path is to success.
It’s expensive and risky to bet the farm on one big idea. What many of the most successful innovators do is to take on lots of small bets, with small initial levels of investment. They’ll try something out, pilot it at a small scale, and take investment decisions as they go. They take lots of small bets and treat innovation in the same way a VC firm would.