For many businesses, digital transformation is now a key business priority that requires immediate resolution. With 85% of enterprise decision-makers stating they have a two-year period to make significant inroads into digital transformation or they will fall behind their competitors and suffer financially[i] and $1.18 trillion predicted to be spent globally on digital transformation technology and services in 2019[ii].
The reality is that transformation is unique to each individual business, and often fraught with challenges. It’s expensive, time consuming, and changes may need to operate alongside existing legacy systems and BAU governance as they’re being introduced. (Which could be why Capgemini found that 50% of banks and 56% of insurers were found to have barely started the digital transition and are thus being classed as beginners[iii].) With less than one in six organisations delivering successful digital transformation programmes[iv] and just 12% of global financial institutions considered a ‘digital transformer’ by Gartner[v], it’s clear that many companies struggle to get it right.
Ross Timms, Head of Strategy at Rufus Leonard, shares how financial services organisations can overcome the two main barriers to successful digital transformation: definition and impact.
Choosing the right transformation
To be successful, you need to know why you want to transform, and therefore what kind of transformation your business needs. Following 30 years of helping business leaders transform their organisations – from BT’s first website in 1994 to BBC’s future of voice strategy in 2019 – we typically see three distinct types of transformation, each with their own characteristics:
- Change how you do business: responding to changing consumer demands, running the same fundamental business but delivering it in new ways, with new processes and through new technology.
Example: Fidelity – one of the largest asset managers in the world, which is over 70 years old – have invested $2.5 billion a year on technology through Fidelity Labs and Fidelity Centre for Applied Technology to deliver new and innovative products to the market. With a focus on blockchain, artificial intelligence and virtual reality, they have launched an interactive money check-up, a first-of-its-kind brokerage app with a customised feed based on user assets, and FidSafe which is a free secure online tool to store all of a family’s most important documents. Fidelity have also been transitioning into a new style of business; interestingly, one that competes with tech firms like Nvidea rather than their traditional Wall Street rivals like Charles Schwab.
For Fidelity, their success is clear to see. In 2018, despite a slowdown of stock markets (the worst performance in a decade), Fidelity was able to hit record financial performance; with a 19% operating income rise, 12% boost in revenue to a record $20.4 billion and hit annual income over $6 billion for the first time.
- Change your business: changing your business offering and responding to evolving needs and behaviours by solving problems in new ways.
Example: To create products and services for SMEs, NatWest decided not to use their existing business and infrastructure. Instead they launched Mettle, a new digital-only business current account. Mettle is just one example of an innovative solution coming out of the bank’s portfolio of initiatives, ventures and products to better support SMEs across the UK – responding to customer needs with new features developed quickly.
Plus, NatWest Tyl, the bank’s re-entry into the merchant acquiring market was announced in May; NatWest APtimise, the UK’s only end to end accounts payable solution; and automated lending platform ESME, which announced in March it has already lent over £50m to UK businesses. These all offer business customers more choices in banking.
- Change your market: understanding how changing behaviours will create new markets and being there to meet that demand first.
Example: With a clear transformation strategy set out; moving from a products-based company to a platform, PayPal has delivered innovation, digital experiences and partnerships which have set it totally alone in the digital payments market. The company’s ability to evolve through innovation while providing customers with more freedom in how they want to pay has been key to this.
Most recently, PayPal have created partnerships with banks to enable customers to sign-up to PayPal using their bank card, link reward points from multiple banks to their PayPal wallet, and used its open technology platform to expand partnerships with the likes of Google and Apple to allow payment using PayPal account and fingerprint authentication.
In 2018’s full year results, PayPal posted growth across the board due to its transformation efforts. This included revenue growth of 18% to $15.45 billion, a 17% increase in active accounts to 267 million and 9.9 billion payment transactions which was a rise of 27%.
The drive to digital transformation needs to balance two things: the practical need and the requirement for a north star. The former is driven by pressure on profit and the need to move at the speed of the consumer. The latter is driven by your company’s mission, purpose or vision. Aligning your brand to your technology gives your platform a purpose, a role beyond the practical and a clear point of focus which drives transformation efforts.
Find your single point of focus
Defining the purpose of your transformation programme is integral to measuring its impact and success. Once you’ve defined your ‘why?’ you can distil this into a single point of focus that explicitly meets top-line commercial objectives.
Looking back at our three brand examples, all of them can demonstrate this single point of focus. Fidelity aligned everything back to their ‘Community Bank’ vison. NatWest decided they need to offer simple banking in an SME environment. And PayPal have always had a pinpoint focus on democratising financial services to enable everyone to participate fully in the global economy. That single point of focus gave each of these businesses a clear steer on how to define both growth and performance objectives.
In turn, this single point of focus acts as a guiding star for how to leverage your brand, how to shape your customer experiences, understand what’s required of the organisation and your technology platforms. Ask yourselves, ‘how might we defend or improve our brand market position/ensure ongoing user relevance/create internal alignment/maximise platform performance?’.
Measuring the impact
Understanding this creates a clear platform to identify and align KPIs across the organisation. Do you need to increase brand value/equity or increase share price? Do you need to create channel shift through self-serve or improve customer satisfaction? Do you need to reduce employee churn or improve workforce utilisation? Or, finally, do you need to increase platform utilisation or ensure security of data and information?
This approach makes sure that a micro view on performance aligns back to the macro measurement of impact and progress. It gives the business the levers it needs to keep everyone on course over a multi-year programme of significant change. And, crucially, it provides a clear goal to galvanise everyone in the business.
In recent years, we’ve helped brands like the Aviva, AA and Lloyd’s Register tackle large-scale digital transformation. As a result of facing off the challenge of delivering successful transformation, we’ve created the Business Impact Matrix. Built on the principles explored here, the tool establishes a clear point of focus for all business units, aligning growth and performance activities. It ensures that all customer-facing and colleague-facing activities align to a shared goal and clearly aligned objectives. The tool drives a process of prioritisation, helping to align separate agendas and providing a clear framework to decide what to do first, second and so on.
However, you choose to define success, bringing both vision and impact into a single tool is the biggest single step any organisation can take to make sure they are part of the 15% of companies that are successful with their transformation ambitions.[vi]
[ii] IDC – Worldwide Semiannual Digital Transformation Spending Guide
[iv]The Digital Helix
[vi]The Digital Helix
Sunak to use budget to expand apprenticeships in England
LONDON (Reuters) – British finance minister Rishi Sunak will announce more funding for apprenticeships in England when he unveils his budget next week, the government said on Friday.
Employers taking part in the Apprenticeship Initiative Scheme will from April 1 receive 3,000 pounds ($4,179) for each apprentice hired, regardless of age – an increase on current grants of between 1,500 and 2,000 pounds depending on age.
The scheme will extended by six months until the end of September, the finance ministry said.
Sunak will also announce an extra 126 million pounds for traineeships for up to 43,000 placements.
Sunak’s March 3 budget will likely include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown, but he will also probably signal tax rises ahead to plug the huge hole in the public finances.
Sunak is also expected to announce a “flexi-job” apprenticeship scheme, whereby apprentices can join an agency and work for multiple employers in one sector, the finance ministry said.
“We know there’s more to do and it’s vital this continues throughout the next stage of our recovery, which is why I’m boosting support for these programmes, helping jobseekers and employers alike,” Sunak said in a statement.
(Reporting by Andy Bruce, editing by David Milliken)
UK seeks G7 consensus on digital competition after Facebook blackout
LONDON (Reuters) – Britain is seeking to build a consensus among G7 nations on how to stop large technology companies exploiting their dominance, warning that there can be no repeat of Facebook’s one-week media blackout in Australia.
Facebook’s row with the Australian government over payment for local news, although now resolved, has increased international focus on the power wielded by tech corporations.
“We will hold these companies to account and bridge the gap between what they say they do and what happens in practice,” Britain’s digital minister Oliver Dowden said on Friday.
“We will prevent these firms from exploiting their dominance to the detriment of people and the businesses that rely on them.”
Dowden said recent events had strengthened his view that digital markets did not currently function properly.
He spoke after a meeting with Facebook’s Vice-President for Global Affairs, Nick Clegg, a former British deputy prime minister.
“I put these concerns to Facebook and set out our interest in levelling the playing field to enable proper commercial relationships to be formed. We must avoid such nuclear options being taken again,” Dowden said in a statement.
Facebook said in a statement that the call had been constructive, and that it had already struck commercial deals with most major publishers in Britain.
“Nick strongly agreed with the Secretary of Stateâ€™s (Dowden’s) assertion that the governmentâ€™s general preference is for companies to enter freely into proper commercial relationships with each other,” a Facebook spokesman said.
Britain will host a meeting of G7 leaders in June.
It is seeking to build consensus there for coordinated action toward “promoting competitive, innovative digital markets while protecting the free speech and journalism that underpin our democracy and precious liberties,” Dowden said.
The G7 comprises the United States, Japan, Britain, Germany, France, Italy and Canada, but Australia has also been invited.
Britain is working on a new competition regime aimed at giving consumers more control over their data, and introducing legislation that could regulate social media platforms to prevent the spread of illegal or extremist content and bullying.
(Reporting by William James; Editing by Gareth Jones and John Stonestreet)
Britain to offer fast-track visas to bolster fintechs after Brexit
By Huw Jones
LONDON (Reuters) – Britain said on Friday it would offer a fast-track visa scheme for jobs at high-growth companies after a government-backed review warned that financial technology firms will struggle with Brexit and tougher competition for global talent.
Finance minister Rishi Sunak said that now Britain has left the European Union, it wants to make sure its immigration system helps businesses attract the best hires.
“This new fast-track scale-up stream will make it easier for fintech firms to recruit innovators and job creators, who will help them grow,” Sunak said in a statement.
Over 40% of fintech staff in Britain come from overseas, and the new visa scheme, open to migrants with job offers at high-growth firms that are scaling up, will start in March 2022.
Brexit cut fintechs’ access to the EU single market and made it far harder to employ staff from the bloc, leaving Britain less attractive for the industry.
The review published on Friday and headed by Ron Kalifa, former CEO of payments fintech Worldpay, set out a “strategy and delivery model” that also includes a new 1 billion pound ($1.39 billion) start-up fund.
“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.
Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.
The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance, all mean the sector’s future in Britain is not assured.
It also recommends more flexible listing rules for fintechs to catch up with New York.
“We recognise the need to make the UK attractive a more attractive location for IPOs,” said Britain’s financial services minister John Glen, adding that a separate review on listings rules would be published shortly.
“Those findings, along with Ron’s report today, should provide an excellent evidence base for further reform.”
Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.
“It’s a question of knowing who to call when there’s a problem,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.
A UK fintech wanting to serve EU clients would have to open a hub in the bloc, an expensive undertaking for a start-up.
“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” Swinburne said.
The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).
“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.
($1 = 0.7064 pounds)
(Reporting by Huw Jones; editing by Jane Merriman and John Stonestreet)
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