Digital Roadmaps for an Increasingly Digital Economy

By Falk Rieker, GVP, Global Head of IBU Banking at SAP

In a period of slow growth, intense competition, commoditized products, and eroding customer loyalty, financial services firms face numerous business challenges.

The industry has been at the sharp end of disruption, which initially crept up slowly, and then suddenly rewrote the rules of engagement. And now it’s here: new regulations for open banking standards (e.g. PSD2) are setting the pace of disruption. As the competitive landscape continues to be upended by both new regulations and new entrants such as payment initiation services providers (PISPs), aggregators, and account information service providers (AISPs), there is increased pressure to master the next wave of industry-wide disruption: open, autonomous banking.

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But inverting business models and tailoring to every individual customer’s unique requirements can seem a long way from the quagmire of today’s infrastructure, silos and legacy systems.  Part of the problem is that digitalization demands that you not only know what your long term strategic objectives are, but also understand how you’re going to get there without compromising your short-term goals. It’s a tricky balance. Many digital initiatives start out with good intentions but are put at arm’s length from the core business, and ultimately have very little impact.

IDC found that more than half of European organizations that embark on a digital transformation journey get stuck. This typically happens because they create a ‘special projects’ team for digital initiatives that’s separate from the rest of the business, ending in some form of deadlock.

Finding a way for financial services firms to create a sound digital roadmap, and then successfully navigate it, is the question almost all firms are looking to answer. One strategy is the “three horizons framework”, originally published by McKinsey in the book, The Alchemy of Growth. The framework helps financial services firms turn their strategic priorities into modular, scalable and extendable digital programs that start with the reality of where you are today. IDC’s Digital Use Case Map for Financial Services, sponsored by SAP, maps out how to reverse engineer a roadmap to get your organization to longer-term scenarios that are tailored to your corporate vision by incorporating the types of use cases  needed to get there.

The strategic priorities of an organization can now be translated into one or more “future” digital-business use cases that underpin its digital competitiveness. Take banking, for example. Within the industry, we see customers seeking intelligent banking solutions, that encompass connected, open, and autonomous banking services. Delivering a 360-degree business model with a frictionless banking experience that perfectly aligns financial products and services with customer interaction preferences, lifestyles and requirements is fundamental to the long-term vision of the business. It empowers banks to adopt the role of omni-advisory and facilitation services to guide customers through important phases in their lives – not only in terms of financial services but also around major events such as retirement, health, education, real estate, and travel. Using the Horizon Approach, this is the long-term desired objective – otherwise known as Horizon 3.

But developing an omni-advisory and facilitation services business model requires building intelligent banking operations and customer profiles in the mid-term (Horizon 2). However, this is only possible if banks develop connections with the ecosystem to master open customer data in the short-term (Horizon 1).

This is just one example of how use cases like these are an essential part of designing a digital roadmap. IDC identified more than 450 and found that successfully executing digital at scale requires use cases with capabilities that can be easily transferred across the enterprise, ranging from unified commerce platforms to next generation payments. Think of these use cases as a foundation to enable more advanced uses cases to build on by layering them into mid-term and long-term horizons.

These use cases can be used to focus on business value, prioritize technology investments, facilitate innovation strategies, and identify when and where different executives need to get involved.

One of the main reasons this approach is so successful is because it allows companies to create a roadmap that’s modular (as use cases can be swapped in and out), as well as scalable (by factoring in the next horizon of your strategic development plan). And because the roadmap is extendable as new technologies in the long-term horizon mature and go mainstream, they can easily be folded into the mix as required.

The sheer volume of interdependencies inherent to legacy infrastructures can make it difficult to see the forest for the trees. Finding a proven path from the here and now to the reality of a new business model can be a daunting task. Use cases and a Horizon-based approach deliver a step-by-step guide to making it tangible and achievable and will ultimately accelerate your company’s digital transformation.

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