The banking industry stands at the brink of digital disruption, and a growing number of incumbents are launching digital projects to combat increased competition and cater to heightened customer expectations. The ones who will succeed with their digital projects are the ones who invest time and resources in digital concept development.
The key to successful digital projects lies in proper concept development. It ensures your digitisation efforts are aligned with customer needs, bears the potential of unlocking new revenue streams and lays the foundation for successful project implementation. But where do you begin? Where do you focus your efforts? And how do you ensure stakeholder engagement?
Embarking on a digitalisation project for the first time may seem like a daunting task. To help you launch successful digital projects, we have identified five critical steps that power any successful digital concept development, whether the goal is to improve existing business processes or to develop new products and services:
- Understand the current state of affairs
- Facilitate creative, innovative and disruptive thinking
- Develop a digital concept strategy
- Ensure stakeholder engagement and market verification
- Create a high-level implementation strategy
1. Understand the Current State of Affairs
Every successful digital concept development begins with a thorough understanding of your current situation and identification of existing business process pain points. What does your business processes look like? What frictions and pain points exist in your customer journey? How do your internal processes and workflows affect effectivity and productivity?
Use the following methods to map out existing business process limitations, pain points and frictions:
- Customer journey mapping: A rigorous study of your customer journey reveals where your business come short and how you can streamline operations for improved customer experience. Pay particular attention to any frictions in the customer journey and make an effort to understand your customers’ pain points. Customer interviews and surveys are often helpful.
- Internal process and workflow mapping:Identify the various information sources used throughout your business process and outline the process stages within your value chain to highlight and reveal any internal frictions and pain points. Consider supplementing this method with internal workforce interviews and surveys.
- Data processing review: Explore how you process and manage data today to identify any data flow pain points and frictions. More often than not, banks have significant amounts of underleveraged data at their disposal which can be made available to reduce data flow frictions.
A thorough understanding of the current state of affairs was the starting point for a large-scale digitisation project in one of the largest Norwegian banks. Determined to streamline their credit processes, they dug deep into their current operations and mapped their end-to-end processes to the smallest detail. When a complete overview of their current processes revealed that most of the applications came from low-risk customers, the bank saw an opportunity to automate the application process. Instead of handling each application manually, they created a decision-making model which automatically determined whether or not the applicant met the requirement for credit loans.
This case is an example of how internal process improvement promises significant efficiency gains and cost reductions, benefitting both customer and bank alike. In fact, European banks can realise up to 40 to 90 percent cost reductions in a range of internal processes through careful deployment of work-flow tools and self-servicing capabilities for customers and staff.
2. Facilitate Creative, Innovative and Disruptive Thinking
Mapping out current workflows and business processes often reveal insights on how your digital project can improve business. However, it is often not enough. To develop and conceive a genuinely innovative digital concept, banks should allow creative, innovative and disruptive thinking during the early stages of the concept development phase. Creativity is, after all, a significant growth engine and a critical success factor in business innovation. In fact, research shows that creative leaders outperform their peers on key financial metrics.
Putting creativity and innovation at the centre, another forward-thinking Norwegian niche bank that finances projects in the business sector saw the opportunity to automate the credit access process for small and medium-sized enterprises (SMEs). By reducing the number of required steps in the process, reducing the number of documents involved and automating decision-making capabilities, they have launched a product that allows SMEs to apply for a loan with a single click on their website. According to McKinsey, automating credit processes and digitising key steps in the credit value chain can yield cost savings up to 50 percent.
There are several different approaches to generating creative concepts:
- Host workshops: Facilitation of creative, innovative and disruptive thinking among internal team members and customers are crucial for digital concept development. Invite customers (or potential customers if you’re considering entering into new markets) to take part in a creative workshop with key internal employees to brainstorm out-of-the-box ideas on how to optimise existing products and services or how to create new ones. The output of the workshop should be a set of prioritised hypotheses which can be developed further during later stages of the concept development phase. At a minimum, you should at least invite one customer or potential customer to the workshop to ensure different perspectives. In many cases, partnering up with an experienced consultancy can prove beneficial during this process.
- Utilise underleveraged data: Building on the insights generated in the data processing review, explore how you can utilise underleveraged data in new and novel ways. In fact, controlling, analysing and visualising your data may expose new revenue opportunities. Research by the Boston Consulting Group shows that leaders utilising big data – vast amounts of data from a wide variety of sources – generate 12 percent higher revenues than companies that don’t experience with big data.
- Explore the opportunities of current technology: Digital projects in the financial industry require a combination of business understanding and technology understanding. According to accountancy Ernst & Young, six technologies are currently the most prominent in financial innovation: cloud computing, big data and analytics, artificial intelligence (AI) and machine learning, robotic process automation (RPA), distributed ledger technology and sensor technology. Recognising the potential of these technologies may help facilitate innovative ideas.
- Foster innovation through regulation: Banks operate in a highly regulated industry, but certain regulations may prove to open up new revenue streams for banks. For instance, PSD2 open up significant opportunities for incumbent banks, and one wealth-management company reduced the cost of KYC by more than 70 percent and enhanced customer experience because they tackled KYC requirements, along with credit-process digitisation, as an integrated re-engineering and automation program.
3. Develop a Digital Concept Strategy
Knowing where you stand today combined with a creative, disruptive process allows you to develop a digitisation strategy that bridges the gap between your current situation and your future solution. In practice, this is done by pairing the pain points of your current situation and the hypotheses derived from the creative process with business case development to establish a set of possible digital concepts to pursue further.
When developing your digital concept strategy, prioritise the hypotheses based on what you believe will generate the highest return on investment and market reputation and explore their feasibility by filtering them through a set of input parameters:
- Consider cost and time-to-market: Test the hypotheses developed in your workshop to determine which concepts are feasible today, which ones will generate the most value, which ones will prove to be the most useful to your customers and which ones can be delivered to market in the shortest amount of time.
- Understand the limitations of current technology: Although technology may help generate innovative ideas, it’s imperative that you understand the limitations of current technology. It might not be possible to fully realise every disruptive idea today. This, however, does not mean they should be discarded. Acknowledge the fact that some concept elements must be developed at a later stage and dare to pursue a project that is not fully automated from the get-go.
- Consider regulatory demands: While regulations may be a catalyst for developing innovative ideas, more often they impose strict limitations. It’s important that consider any and all of these limitations during the concept development phase. Assess whether or not your digital concept fully complies with any federal and state laws and regulations. Does it comply with anti-money laundering and customer risk (KYC) laws? Have you considered the EU-legislation GDPR?
4. Ensure Stakeholder Engagement and Market Verification
When you’ve outlined your digital concept strategy, allow stakeholders to make informed decisions on the concept’s viability before they make any significant investments. Additionally, verify the concept with your customers. This will both ensure stakeholder engagement, certify concept fit with overarching business goals and prove concept feasibility.
- Business case: Stakeholders are mainly interested in maximum usefulness for the lowest possible cost. Develop a business case to justify the investment in time and resources to develop and implement your digital concept.
- Proof-of-concept: Develop a simplified demo version or prototype to test your concept before building it. Highlight critical business processes and elements through a graphical user interface (GUI), which visualises how the concept will function. This could include any third-party integrations, data-flow abilities, decision-making engines for risk assessment, or any other critical elements.
- Go-to-market strategy: Plan how you intend to take the finished product to the market. This strategy should display an understanding of how the concept will fit into existing markets and how it may tap into emerging markets, an overview of the concept’s time-to-market and a listing of essential partnerships. This is critical to ensure stakeholder engagement and product competitiveness.
5. Create a High-Level Implementation Strategy
Finally, develop a plan explaining how you will execute the implementation phase of the project. Break down the concept into a portfolio, meaning several short and concrete project deliveries that can be developed and implemented over a short period of time. Additionally, establish a timeline for regular project decision meetings with stakeholders. This gives stakeholders increased control over the projects and the ability to continuously prioritise deliverables with the best business case across the portfolio. This high-level implementation strategy should provide a portfolio overview of key deliverables, budgets, timelines and risk and mitigation strategies.
At the same time you should detail out the first key deliverable so it is ready for a decision to start at once, while the other key deliverables can be detailed in iterations as the implementation phase is progressing.
The importance of proper concept development is to have a realistic view of cost and timeline. Thorough planning, research and feasibility studies makes it all the easier to develop the concept during the implementation phase of the project. It’s important to put the necessary effort into the concept development phase. It is impossible to detail out the whole concept before your start and you continually harvest competence and experience which can and should be utilized throughout the implementation phase – making an agile approach imperative.