the magazine - synpulse · to provide consultancy at the best possible rate you need to ......

synpulse Rubrik | 1

The MagazineManagement know-how for practical use

New Perspectives on Customer Experience

«Homo Deus» and the Impact of Digitalization on Society

Accelerate your Bank’s Transformation with Business Process Management

2 | 2017 int’l

synpulse | 3

«Artificial intelligence lacks consciousness – that is reserved to humankind.» Yuval Noah Harari

4 | Rubrik synpulse

Edito

rial

Can you imagine living in a future age where teachers, lawyers or taxi drivers no longer exist because technology has taken over their duties? In which you could become older than 100 years and where you get medical advice from a virtual doctor? In our From Outside In interview historian and bestseller author Yuval Noah Harari explains why he thinks that in the near future humans will achieve a new level of evolution called «Homo Deus», due to an advanced level of technology where almost everything seems to be possible.

Digitalization already surrounds us and makes everyday life a lot easier. Our smartphones guide us to the right path; virtual assistants like «Siri» or «Alexa» serve us with every information we ask for and wearables keep us up with our health status. However, what will society look like in the long run, if technological progress continues at this pace? Yuval discusses which impact digitalization has on society and unveils prospects and dangers that we will have to face in the course of digitalization, e.g. how well-known professions will vanish owing to technological advantages.

Also in financial services, artificial intelligence is expanding. Especially banks, asset managers, and life insurers in the South-East Asia and Greater China regions are sup-ported with their launch of Robo Advisory services for retail and affluent clients. To offer suitable advisory consulting, Synpulse conducted market research on mutual fund Robo Advisory in South-East Asia. The findings of this study serve as a feature map for entering the Robo Advisory market in this region. In cooperation with our clients, we can find an automatized advisory solution that optimally integrates into our clients’ individual business model. To provide consultancy at the best possible rate you need to be part of an efficient ecosystem. Therefore Synpulse has teamed up with the FinTech «Additiv» to offer Robo Advisory consulting to financial institutions in Asia and emerg-ing markets.

Synpulse is growing in Switzerland as well. I am delighted to inform you that we opened a new office in Geneva in April. We have already been serving customers in the French-speaking region of Switzerland for some time and are now able to provide advisory sup-port and closely work together with them. The focus will be on Banking Services and in particular Regulatory & Compliance, Digitalization and Operational Excellence.

I wish you informative and inspiring reading.

Your Christoph Nützenadel

synpulse

Editorial ................................................................................................................................................................................ 4

Operational Excellence Accelerate your Bank’s Transformation with Business Process Management ...................................................... 6

Digital Transformation Setting out into the Digital Future of Insurance ............................................................................................................ 10

Operational Excellence Senior Executives Forum: Examining Key Themes for Wealth Management in 2020 ............................................. 14

Digital Banking Three Key Steps towards Unlocking Client Insights for Private Banking ................................................................. 18

From Outside In Interview mit Yuval Noah Harari: «Homo Deus» and the Impact of Digitalization on Society ......................................................................................... 22

Sales & Customer Management New Perspectives on Customer Experience ................................................................................................................. 26

Sales & Customer Management Reduce your Life Insurance Sales Cycle from Weeks to Minutes ............................................................................... 30

Operational Excellence Strategies for Private Banks to Succeed in the Asian Financial Market ................................................................... 34

Digital Transformation Industrializing IT with the Help of Development and IT Operations ........................................................................ 38

Masthead .............................................................................................................................................................................. 42

Table of contents | 5

synpulse6 | Operational Excellence

Accelerate your Bank’s Transformation with Business Process Management

Business Process Management (BPM) is a method that innovative banks use to boost efficiency, profits and customer satisfaction. It also improves employee productivity and helps banks to adapt quickly to changing regulations. This article outlines challenges facing today’s banks and shows how to phase in BPM at your institution.

Authors: Lukas Hohl | Pallav Kapur

Like a phoenix, banking has risen from the ashes of the finan-cial crisis eight years ago. But, in today’s super-charged envi-ronment, traditional banking practices are insufficient to meet customer expectations and ever-increasing demands for more profitability. Changing regulations and new technologies also challenge the banking industry. Now, with Business Process Management you can capitalize on the latest insights and inventive practices to boost your bottom line. A quick review shows these external and internal forces confronting the industry.

External factors: Compliance: Banks are forced to spend heavily on modify-

ing existing processes and systems to comply with chang-ing regulations.

Evolving expectations: Today’s consumers are less loyal because they can «bank shop» the marketplace and com-pare options. To compete and match consumer expecta-tions, banks must embrace change with new products, features, and services.

Disruptive competition: The emergence of FinTech com-panies is transforming traditional banking. Lean and agile business models enable FinTechs to quickly and economi-cally adapt to change – forcing big players to rethink their way of doing business.

Internal factors: Entrenched legacy systems: Due to inorganic growth,

banks are plagued with inconsistent processes that resist standardization and homogeneity. Excessive time, money, and manual effort are expended to manage risk and change.

Low efficiency: Limited process automation compounds inefficiency, making it more difficult to implement new regulations and gain and retain customers. Banks get socked with the classic one-two punch: higher customer churn and lower profitability.

Lack of collaboration: Old-fashioned banking organiza-tion favors many functional verticals tailored to individual roles and needs. This hobbles inter-department collabora-

synpulse Operational Excellence | 7

tion that would naturally lead to integration, information sharing, lower maintenance cost, quicker turnaround and, ultimately, greater customer satisfaction.

Critical success factors for BPMTo stay competitive and prosper, traditional banks must adopt a more proactive and innovative approach. BPM is the key to aligning informational and operational technology invest-ments with business strategy.

BPM requires organizations to shift to process-centric think-ing, and to reduce their reliance on traditional territorial and functional structures. Process-centric thinking enables true cross-functional collaboration at all levels. It provides a holis-tic vision of the overall processes and helps in initiating an or-ganic process improvement by highlighting the inefficiencies and dysfunctions of the traditional approach, which is more functional-centric. Non-value-adding activities become more

quickly identifiable, leading to simplified and streamlined workflows. It also allows the centralization of certain process-es which in turn lowers the cost. The following diagram visu-ally depicts the benefits of a process-centric approach ( 1).

Act proactively with Business Process Management A disciplined BPM approach is vital to capitalize on the ever-changing business environment. The right BPM strategy can integrate siloed functions through optimized process orches-tration and delight the customers with ease of use and faster response times.

The optimum use of BPM comprises three main elements: Agility: Capabilities such as Straight Through Processing

and Business Rules-Based Routing are hallmarks of effec-tive BPM. These attributes enable banks to standardize, consolidate and centralize overlapping and duplicate functions.

1: Traditional versus Process-Centric BPM

Source: Synpulse

Traditional Process-centric

Legal

Legal

KYC KYCCRM CRM

Reporting ReportingClient/Account Data

KYC = Know Your CustomerCRM = Customer Relationship Management

Client/Account Data

Finance

Finance

Executives

Executives

Operations

Operations

Peop

le

Peop

le

Syst

ems

Syst

ems

Process


Transparency: BPM, with its ability to automate end-to-end processes, enables organizations to monitor perfor-mance in real time, identify bottlenecks and improve pro-cess efficiency. Automation enhances the easycapture of audit trails, revealing all interaction types. With this increased transparency, banks can easily measure the impact of business strategy and dynamically adapt.

Effectiveness: BPM helps banks to optimize processes and establish the right process controls for effective mainte-nance.

Easy-does-it phase inMany banks are still known for their conservative stance, with reluctance or resistance to change. Rather than throw caution to the wind and embrace immediate wholesale change, banks can raise their comfort level by adopting a well-defined, phased implementation of BPM. The phased approach is inte-grated, transparent, and efficient. It delivers measurable busi-ness value ( 2).

Phases help the banks to:Define: Banks need to identify all existing complex and dispar-ate processes that must change. All the potential stakehold-ers, business rules, systems, and tasks are spotlighted during this phase. Documenting all the identified information com-pletes this phase.

Valuate: This phase involves the assessment of processes doc-umented in the earlier «Define Phase». It involves analyzing factors like complexity and turnaround time for each of the processes identified. Banks also need to define the success criteria for the «TO-BE» state. Identifying and then evaluating the most effective BPM tools in the market then follows.

Implement: Banks should prioritize processes that are easier to implement and have maximum positive impact. These quick wins will demonstrate the benefits of BPM before taking up more complex operations. In this way, the most common issues will be pinpointed and resolved before the scope of implementation is expanded.

2: Phased Implementation of BPM

Source: Synpulse

Revi

ew and im

prove

Implement

Define

Valuate

BPMLife Cycle

Review interim results and redefine the processes to move closer to the «TO-BE» state

Identify all existing complex and disparate processes that need to be changed

Prioritize processes that are easier to implement and have maximum positive impact to realize benefits

Analyze factors like complexity and turnaround time and define the success criteria for the «TO-BE» processes

synpulse

Authors

Operational Excellence | 9

Lukas HohlAssociate Partner (Synpulse USA)[email protected]

Pallav KapurManager (Synpulse USA)[email protected]

Review and Improve: Mid-way review of interim results is important. Identifying any sticking points will help redefine the processes to improve performance and move closer to the «TO-BE» state.

Benefit-driven BPM yields positive resultsBanks that harness the power of BPM will adapt more easily to industry change, leaving behind competitors that don’t. Faster client onboarding will increase client satisfaction. The visibili-ty and transparency of critical processes and shorter process-ing times will boost employee productivity. Growth will be invigorated through process standardization and optimiza-tion. In conclusion, BPM is a hands-down winner for banks.

synpulse10 | Digital Transformation

Setting out into the Digital Future of Insurance

«iptiQ» enables its partners to apply a digital business model to the life protection market. This allows faster time-to-market and a high customer orientation. In this case study we take a look at the advantages of the young, pan-European insurer.

Authors: Patrick Becher | Silvan Stüssi

synpulse Digital Transformation | 11

While digitalization is a buzzword in the financial services in-dustry, iptiQ has implemented an innovative digital business model that builds on partnerships and technology, and has the power to place an insurance operation on the market with-in months. Owned by the Swiss reinsurance company «Swiss Re», the player is a «white label» insurance provider, working with leading consumer brands across Europe to offer term life, whole of life, and critical illness insurance policies, i.e. elemen-tary protection products to be sold directly to the consumer.

A new player offering a digital business modeliptiQ’s offering consists of bespoke white-labeled life insur-ance solutions tailored to the needs of distribution partners and their customers. Hence, iptiQ combines its own expertise with that of its partners to offer suitable products to their cus-tomers. What makes iptiQ unique is the flexibility and agility it provides in several areas:

partnering (based on a white-labeling capability)

products

time-to-market

Cooperating with insurers & specialist distributorsWhen it comes to partnering, iptiQ will work together with insurers and specialist distributors that distinguish them-selves through strong brands and a high level of customer en-gagement:

Insurers might be searching for possibilities to expand into other markets with new protection solutions. iptiQ can provide such partners with life insurance licenses across Europe. This allows the partner to enter a market with significantly reduced risk and capital. It also offers an entire insurance manufacturing solution to underwriters who have not been offering life insurance so far, but would like to complement their product portfolio.

Specialist distributors typically seek to leverage their existing brand and customer relationships, and are offered the ability to sell life insurance products under their brand. This entails a completely branded customer experience with a branded customer journey for buying and manag-ing an insurance policy, tailored tone of voice for client interactions, and customer correspondence designed according to the brand’s image.

Optimized productsiptiQ aims to take a customer view to ensure products are clearly understandable and easy to buy for end consumers. Distribution partners are offered products which are designed to be flexible and can be configured according to their own and their customers’ needs. All products include extensive rider options that can be tailored as well and increase their flexibility.

Go-to-market within monthsIn order to optimize the time-to-market, most operational components are «turn-key» ready. This implies that iptiQ’s partners can focus on product design, pricing, branding, and distribution and get ready to launch within months.

An innovative digital twin engineThe key to the success of this offering is how distribution part-ners integrate iptiQ’s operating model:

Front-end portal: The modern digital portal provides a fully white-labeled distribution channel – it is branded and tailored according to the needs of distribution partners and end customers. This platform goes beyond a simple buying pro-cess: Its objective is to enable deep customer management and sales optimization through personalization, smart analyt-ics, and multivariate testing. Purchasing a policy is supported by automated underwriting based on Swiss Re’s world leading underwriting tool «Magnum». This creates a whole new spec-trum of products from guaranteed acceptance to fully under-written, using dynamic underwriting questions. Beyond distri-bution, the front-end also enables customers to conveniently manage their policies themselves. As a whole, the front-end provides an intuitive customer journey, and achieves a high conversion rate.

Back-end servicing: Contrary to other insurers that have to deal with legacy systems, iptiQ has designed its back-end to offer standardized and highly scalable administration. Run by

«iptiQ has succeeded where so many have failed: establishing a truly

digital white label solution, with a unique pan-European scale. Synpulse has been instrumental in our journey.»

Carl Christensen, CEO iptiQ EMEA


a third party administrator (TPA), the back-end performs all the largely automated processing required to manage the business. Beyond written correspondence, customer interac-tion takes place through a service call center that serves customers consistently with the distribution partners’ way of handling its customer relationships. Service Level Agreements with the TPA measure the quality of services that are provided to customers, and ensure the high level of customer experi-ence to which iptiQ is committed.

Overall, this twin engine – the combination of front- and back- ends – creates an end-to-end manufacturing solution that can be plugged into the existing business of a distribution partner, reducing the time-to-market for life products while requiring minimum investment.

Taking «digitalization» a step furtherThe operational setup which has been achieved allows provid-ing customers with protection that tackles issues life insurance has historically been associated with: complicated products, lack of transparency, and high prices. Beyond this, technology will provide opportunities to improve customer experience even further, as the following avenues show:

Predictive analytics may allow determining at what point of time it makes most sense for customers to buy insur-ance for themselves and their families.

Personal virtual assistance and robo advice during the buying process may clear up any questions that arise, and make it even easier.

Pricing has to be tailored to match the client’s lifestyle.

Peer-to-peer insurance models could further reduce over-head costs, increase transparency, and advise customers on the right protection for their needs.

Our contributionSynpulse has supported iptiQ over the past three years through all stages of its build-up. We have been involved in establish-ing the business case, the initial setup of the insurance carri-ers, the definition of the operating model based on the digital front-end and the capabilities of the TPA, product develop-ment and pricing, business analysis and requirements engi-neering, and ultimately the testing and go-live of the systems that support operations.

1: iptiQ’s Value Chain Coverage for Distribution Partners

Source: Synpulse

Sales, marketing & distribution

This is managed by the distribution partner, though iptiQ can offer web portal development and call center ser-vices.

Product design and pricing

iptiQ designs the product and pric-ing structure with the distribution partner.

Policy admin & servicing

A fully-fledged ser-vice center that reflects the distri-bution partner’s company philos-ophy, delivered through the third party administrator.

Branding

The distributions partner’s brand and tone of voice is present in every customer touch-point.

Underwriting & claims

iptiQ offers com-plete UW and claims services, including both automated and manual UW ser-vices, matching the distribution part-ner’s distribution choice and strategy.

Collection, tech. accounting and finance

Premium collec-tion and reconcili-ation, client corre-spondence under the distribution partner’s name. Full general ledger and technical account-ing capabilities.

PartnerTailored Standard «turn-key» offering

synpulse

Authors

Digital Transformation | 13

Ingredients for digital innovationWith iptiQ, Synpulse has supported the setup of a digital B2B2C white-labeling platform that focuses on life protection products, and allows distribution partners to offer their prod-ucts through its digital platform. Beyond that, Synpulse has helped several leading insurers and brokers to establish their «digital business model». By experience, we know that the substance behind the buzzword is characterized by what dis-tinguishes a digital from a more traditional business model:

Customer relationship: Customers ask for digital interac-tion channels. They have a growing expectation of a com-fortable and seamless integration; therefore, the level of convenience becomes a selling point – especially in mature and competitive industries.

API-based collaborative ecosystems: Organizations work together to create a service or product (e.g. a broker may interact with multiple insurers to present an overview of policies and associated premiums to their customers). Cost effectiveness requires a high level of automated inte-gration across organizational boundaries, which is achieved through APIs (application programming inter-

faces). In the example referring to the broker, a set of APIs would be able to list a customer’s policies but may also allow extending, canceling, or changing the coverage of a policy. Hence, each organization offers its capabilities to integrate.

Value chain: Not only distribution, but the entire value chain needs to be based on an operating model that supports speed, automation, and standardization to enable this kind of cooperation.

These ingredients make digital business models a breeding ground for a multitude of FinTech companies. They thrive based on customer-driven product and service design and integrate their value chain with other organizations as part of their core offering. We believe that the innovation we have seen to date is only the beginning.

Patrick BecherAssociate Partner (Synpulse Switzerland)[email protected]

Silvan StüssiPartner (Synpulse Switzerland)[email protected]


UK private banking and wealth management executives have difficulty agreeing on how the industry will shift in the face of evolving technologies. This makes medium- and long-term proposition strategy difficult. To address this, payment services, robotics and other key trends were discussed at the «Senior Executive Forum» hosted by Synpulse.

Authors: Josh Cogan | James Tyers

Senior Executive Forum: Examining Key Themes for Wealth Managers in 2020


Under the theme «Accelerating the digital transition to opera-tional excellence», Synpulse welcomed leading decision-mak-ers in the UK private banking and wealth management indus-try to its bi-annual «Senior Executives Forum» on March 21st, 2017 at the historic Barber-Surgeonsʼ Hall in the heart of London. Already in its second year, the forum takes place every March and September. As an independent platform between wealth managers and innovative solution providers, the forum seeks to be a conduit through which both sides come together with keynote speakers and panel discussions allowing experts to voice their opinions on the most pressing issues facing the wealth management industry. We asked wealth managers (represented by Close Brothers, Coutts & Co, and Beaufort Securities) and FinTechs (represented by Arivos, ERI, Techrules, IRESS, Objectway, and Finantix) alike to explore current trends that are responsible for dramatic changes in the contempo-rary wealth management industry. The forum focused on the key areas of operational excellence and digital banking. Every six months, a new focused topic within these areas is selected and introduced based on the input of the executive attendees. They were also asked to give their view on how the industry will evolve in the midterm, in 2020 and beyond.

During the presentations and panel discussions it became clear that there is a growing acceptance among both digital and traditional banking advocates that, in order to stay competitive, their focus areas must shift significantly in the medium-term. The consensus of the forum’s attendees was that the headline topics of 2016 surrounding regulatory change, bank-wide transformation initiatives and the race for front office talent will cede precedence to more innovative solutions. In particular this includes operational excellence through robotics, enhanced customer experience with the help of a digital-mature interaction model and increasingly «focused» change initiatives in order to bring about these transformations.

Key trendsThroughout the forum it was clear that the rapid evolution of wealth propositions, operational processes, and delivery frameworks is increasingly apparent. With so many «innova-tive» offerings entering the market on an ongoing basis, it is difficult for individual firms to predict confidently what strategy they and their competitors will adopt. This became evident as wealth managers spoke about the dangers of over-committing resources to a large-scale transformation which may quickly become redundant as new solutions and offer-

ings reach the market first. While agreement on all aspects of this evolution naturally varied, some clear topics stood out and were echoed by all participants as key to the successful transition to a digital operating model. These topics were:

«digitally-mature» interaction models

robotics

rigorously prioritized focused initiatives

«Digitally-mature» interaction modelsIn the panel discussion focused on emerging payments, it was discussed and agreed by our panelists that the best payment services operate on the basis of being available «whenever, wherever, whoever and however» you want to pay. Successful FinTech companies across all sections of financial services are putting more power into the hands of consumers with higher availability and at lower costs. This discussion quickly unearthed the expectation that, in order to stay competitive, traditional wealth managers will have to adopt this mentality with regard to their client servicing. While traditional servicing methods focus on low-touch, bank-driven client engagements, new digital-based wealth propositions entering the market look to service the client in both a bank- and a client-initiated, on-demand fashion. This move towards a more high-touch engagement model was seen as inevitable in the long-term. Wealth managers spoke to the next generation of clients show-ing an expectation of superior customer experience through 24 hours/7 days «fingertip» servicing combined with the more traditional and prestigious client manager servicing.

Our panelists made clear that the first step towards a multi-channel customer engagement strategy is to establish a con-nected Customer Relationship Management platform (CRM platform), allowing all customer interaction channels to plug into each other and run in parallel. Once this is established, banks provide themselves with a data hub upon which a digi-

«Contributing to building a client repository which, in turn, allows wealth

managers and clients alike to unlock more impactful insights and strengthen

the customer experience.»


tally mature interaction model can be established. This allows each client interaction to contribute to building a client repos-itory, which, in turn, allows wealth managers and clients alike to unlock more impactful insights and strengthen the customer experience. Client interactions can be more targeted with greater success rates when a company holds and utilizes their data efficiently. An area in which attendees saw great poten-tial was in the use of behavioral analytics to understand customer behavior better. Forming a more accurate picture of the clients and their behaviors allows private banks not only to target products in line with their behaviors but also to use this information to partner with lifestyle brands and services to differentiate themselves through a broader banking propo-sition that goes beyond financial advice.

RoboticsThroughout the forum and the various topics presented, the subject matter of robotics cropped up time and time again. It was evident that the majority of executives expect robotics to take root in all areas of wealth management in the coming years. The benefits to operational efficiency achievable from the introduction of robots was echoed by all panelists and attendees, however there was a collective view that when com-pared to more advanced industries, such as the automotive industry, private banking and wealth management remains behind the curve. There is a knowledge gap in the industry of how robotics can be practically introduced to banks depen-dent on legacy systems and manual-intensive processes. The panel on robotics talked about how we, as an industry, are at the begin ning of the automation journey. Also, it is difficult to determine in what ways artificial intelligence will benefit wealth managers in the short-term. The standardization, digitalization, and automation of manual processes through «Robotic Process Automation» (RPA) should be under serious consideration by all executives today.

As private banks and wealth managers begin the journey towards a more automated operating model, our panelists expect to see a long-term shift from focusing on improvements in operational efficiency to the use of artificial intelligence in supporting the client experience and advisory process. While artificial Intelligence (AI) solutions on the market are not yet in a position to deliver value in the «Ultra-High-Net-Worth» (UHNW) advisory space, this will change as technologies improve, clients and wealth managers become more digitally savvy, regulators adopt a more pro-digital mandate, and oper-ating models evolve.

Rigorously prioritized focused initiativesThe timeline for the digital private bank of the future to arrive varied among forum participants. However, all participants agreed that the transition continues to be extremely challeng-ing to navigate as we begin to see how the various levels of digitally enabled propositions resonate with clients. The ex-ecutive panelists in attendance made it clear that the deploy-ment of their digital offering does not have to come in the form of a short-term propositional overhaul. It is unknown what exact proposition will fit their target markets and thus large-scale transformation projects require too much capital and resource commitment. To mitigate this risk, cost, and comp-lexity, our panelists considered Synpulse’s approach to transforming digital offerings through «rigorously prioritized focused initiatives». As the industry moves forward quickly, with new solutions being brought to market in rapid succession, adopting a more incremental digital transforma-tion approach allows strategies to be more responsive to industry shifts.

Digital transformation is a considerable effort and investment, whether it is misunderstood to mean «deployment of new technologies» only or genuinely harnessing technology for the obvious benefits of digitalization. Therefore, it is crucial to pri-oritize objectives to ensure the most efficient use of resources. Once prioritized, applying rigorous, structured planning tech-niques is essential to minimize complexity and ensure the ini-tiative is aligned with the overall long-term proposition strat-egy and finally, choose to implement focused initiatives. Targeted initiatives allow banks to address one narrow pain point at a time, taking fewer resources to deliver measurable results on a very specific subject in a short period of time.

2020 By the year 2020, the Senior Executives Forum will be in its fifth consecutive year. We hope that clients and industry experts will continue using the forum as an impartial platform to beneficially connect with solution providers, to discuss approaches to pressing industry trends, and to reflect on past success outcomes of the previous forums. At Synpulse,

«Rigorously prioritized focused initiatives lower risks and resourcing requirements,

build confidence and win support for the next steps.»


Authors

we view close collaboration between wealth managers and their service providers as a key to navigate these industry shifts in a focused, innovative, and flexible way.

Today it is already clear that, as an industry, we are at the beginning of a transition journey from merely automating operational processes to utilizing digitalization across the entire value chain as industry standard operating models increase in their digital maturity. In 2020, we expect our execu-tives to come to the forum attesting to the improvements in operational efficiency that RPA has brought about. Beyond this, we envisage that private banks and wealth managers will be searching for ways to utilize a more integrated digital ecosystem in their client servicing- and operating models in

order to gain greater client insights, and to ultimately provide a superior experience. Having promoted next-generation operating models and engaging in digital transformations, Synpulse is now bringing in its expertise in identifying, priori-tizing, and addressing functional and operational gaps with valuable help from an ecosystem of leading vendors. Our inti-mate knowledge of private banking and wealth management and healthy relationships with industry clients make us an adept conduit of value between vendors and operating users, facilitating partnerships for mutual benefit. By identifying the key themes from wealth managers and private banks in the UK and developing innovative methodologies to help adapt and deliver on these themes, Synpulse acts as an advisor and part-ner to clients looking to explore evolving operating models.

Josh CoganManager (Synpulse United Kingdom)[email protected]

James TyersSenior Consultant (Synpulse United Kingdom)[email protected]

synpulse18 | Digital Banking

Three Key Steps towards Unlocking Client Insights for Private Banking

There is no doubt – banks have more data than ever at their disposal since almost all of them have invested heavily into digital platforms and services in the last few years. But actually predicting customer behavior from that and setting up an overall strategy based on this is easier said than done. Three steps might help banks to become «digital mature».

Authors: Patrick Otto | Ajay Kumar

Private Banks heavily invested into digital platforms in recent years. From client-facing online banking services to back-end operational procedures their digital transformation is visible. Nevertheless they still can tap the highly valuable potential of information that their applications have accumulated over several years from clients. Digital platform heads in private banks are starting to consider how to reap the benefits of data analytics and how to benefit from these insights little by little, since great opportunities lie therein – e.g. the optimization of the client experience and the reduction of operational over-heads.

The accumulated data is not necessarily restricted to static client information, gathered in one-on-one-meetings with the client or one-time investor profiles by the bank advisor. With enhanced computing power there are many more sources to gain insight into the client’s behavior and preferences, for instance by trades, contact reports, click streams through online channels, and engagement channels. The volume of such revealing data has doubled every three years, with an increasing number of digital channels and service, while data

storage has become cheaper. Therefore with enhanced data analytics, valuable client insights can be generated from the raw data to improve the customer experience and drive revenue generation. Naturally, there are some hurdles that need to be overcome.

Step 1: Journey towards becoming «digital mature»The lack of a well-defined digital strategy that fits with the core strategy of the bank presents a key challenge for private banks. In the industry, most initiatives have been implemented in silos across different parts of the organization – separate to the overall strategy. This has led to misalignments at the service and the system level. For example, few banks have a client-facing digital application that talks to the digital workbenches used by the Relationship Managers that feed insights on the clients’ activities. These misalignments result in overheads in consolidating client behavioral and static data in a centralized data warehouse. However, it could take years before a centrally available data warehouse with good data quality can be established.

synpulse Digital Banking | 19

To address this roadblock, private banks are encouraged to evolve their digital strategy towards an ecosystem of digital applications that not only suits the central harnessing of data, but positively impacts the client experience. To achieve this, private banks are advised to evaluate where they currently stand among the three stages of the «digital roadmap»:

«Traditional advisory activity», which is predominantly conducted by Relationship Managers and their team of product experts or operational staff. Clients pre dominantly rely on the Relationship Managers for all their needs ranging from sophisticated financial advice to simple needs concerning account operations, payment remit-tances, financial statements, updating of personal infor-mation, etc.

«Digital intermediate» is the stage where the Relationship Managers and their team provide higher value added ser-vices. The primary focus is on portfolio advisory and market views. At this stage the Relationship Managers are viewed as still relying on traditional channels for engaging with their clients – in person or via the telephone.

«Digital mature» is the stage where predominantly most parts of the advisory process are digital. Clients can engage Relationship Managers actively via digital chan-nels in order to seek market views, place trades, or to check their positions and statements, to open new accounts, or to seek investment recommendations ( 1).

At Synpulse we assess our client’s current position and pro-pose the transformation plan. Our digital strategy comprises an integrated digital advisory and operating model for private banks. We adopt a client-centric approach that looks into key aspects, client profiles and behaviors, the bank’s business model, and the current IT landscape. The outputs of this assessment include a:

Client journey; consisting of a case of how different cate-gories of clients engage with the bank, thus identifying the key digital and manual touch points.

Digital target operating model; encompassing processes and the suite of applications that will support the Client journey.

1: Stages of Digital Transformation in Private Banking

Source: Synpulse

Traditional advisory Digital maturePhase I Digital intermediary Phase II Phase III

Manual account operations Reliance on traditional

channels for communication

Digitalized account operations Minimal self-service capabilities

for clients

Client engages on digital channels

Analytics on integrated digital ecosystem

Digital transformation

synpulse20 | Digital Banking

This evolves into a digital ecosystem that integrates people and processes within the organization. With a centralized IT backbone supporting the client’s journey, static and behav-ioral data will be more abundant, fast-growing, and enriched with contextual information.

Step 2: Building insight repositoriesIn most private banks in Asia, analytics are carried out using simple tools on an ad-hoc basis due to the lack of dedicated insight generation capabilities. Predominantly, these ad-hoc analytics cover descriptive aspects of the business and seldom seek predictive data across business units, throughout the bank. A common result of the above is the lack of efficiency due to the protection of information flow. This creates ineffi-ciency and inconsistency in generating any insights the bank might seek. Thus the lack of a central repository of insights is the second roadblock in the journey towards leveraging client insights. Fortunately, this roadblock can be easily overcome with a program for building and maintaining standard reposi-tory with the following steps:

Identify common use cases within an open forum, and bespoke reports from all business functions and establish a repository. Enrich the use cases with additional predic-tive and prescriptive business intelligence.

Prioritize the standard set of insights and application cases using two key factors; business relevance and ease of implementation. Factors influencing business rele-vance would ideally include revenue-generating potential, business criticality and frequency of requests. Complexity should be governed by the infrastructure complexity and data quality required for the insight.

Establish the data warehouse that consolidates all the data requirements that support these use cases. This could be a natural outcome of the centralized IT land-scape that supports the digital strategy. Alternatively, it could be a onetime data-consolidation exercise followed by reviews on a need-to-know basis.

In order to fulfill this ambition, a central competence center should be set up within the organization. Ideally, this would build the business logic, maintain the repositories on an on-going basis, and constantly keep improving the use cases with changing business needs. Predictive analytics can pro-vide solutions for common business questions, such as: how

much revenue is this client going to generate? What is likely to be a client’s most preferred engagement channel in the future? What is the pool of clients that are likely to churn? Will a client be interested in a newly-launched product or service? The models to answer such questions along with contextual descriptive analytics will be executed automatically on a regular basis.

Step 3: Insight visualization and placementTo realize the full potential of client analytics, banks are encouraged to find the best way to place the insights gener-ated about its clients in an easy-to-access, understandable, and timely manner. Most importantly, key revenue-generat-ing functions should have insights and predictions related to their clients on a daily basis in order to dedicate their time and resources on clients that will maximize their profits. The non-availability of such insights at the right place and time is the third challenge facing private banks. The solution to this lies in the visualization of data and the distribution of insights in the form of integrated dashboards that fit into the work-benches used by Relationship Managers. These dashboards can be customized by allowing the Relationship Managers to subscribe to the insights and descriptive statistics specific to their clients. A list of prescriptive actions for Relationship Managers for every client that they serve can be pushed into these dashboards to alert them to actively manage the account. For example, an insight (such as account inactivity for extended periods) that predicts that the client is about to close the account can prompt a timely prescription for the Relationship Manager to take relevant actions in order to prevent an adverse outcome. Investment recommendations generated from robotic advisors, portfolio analytics, and product-specialist recommendations can also be integrated into these dashboards. This ultimately ensures that the Relationship Manager has a constant stream of trade recom-mendations tailored to his or her clients.

ConclusionGiven the rapid increase in clients’ demand for digital servic-es, a strong need to explore strategic ways of maximizing the potential of client data analytics is generated. Thus, private banks are currently starting to think about establishing data analytics capabilities. Data analytics will not only help the bank to understand its clients better. The insights, if generat-ed, visualized, and distributed the right way, will also assist in making key strategic decisions that can give the bank a com-petitive edge. The key to this lies in establishing digital capa-

synpulse Digital Banking | 21

Authors

Patrick OttoAssociate Partner (Synpulse Singapore)[email protected]

Ajay KumarConsultant (Synpulse Singapore)[email protected]

bilities for harnessing client data followed by a systematic approach to turn this data into insights. While embarking on this journey from a traditional advisory role to a «Digital Ma-ture» state, banks will face challenges in deciding on the opti-mal suite of applications that befits the banks and its clients.

To maximize the impact of these insights, banks need to have the capabilities to distribute them to different functions in the bank in a timely manner. The three steps discussed in this article will facilitate overcoming these challenges and unlock-ing client insight generation for private banks ( 2).

2: Building Blocks to Unlock and Visualize Insights

Source: Synpulse

Digi

tal t

rans

form

atio

n

Clie

nt b

ehav

iour

al a

nd st

atic

dat

a

Digital transformation roadmap Repository of insights Insight visualization

Traditional advisory

Digital intermediary

Digital mature

synpulse22 | From Outside In

«Homo Deus» and the Impact of Digitalization on Society

Digitalization surrounds us all the time. We depend on it and we are enhancing it. With modern technology, humankind will adopt godlike skills, which even might allow us to postpone death. In his worldwide bestseller «Homo Deus», the historian Yuval Noah Harari philosophizes about how our lives will change in the course of digitalization.

Author: Yuval Noah Harari

Wherein do you see the link from deity – which you describe in your book – to a new stage of human evolution in the age of digitalization and the Internet of Things?Homo Deus means «man-god». It refers to humans who possess divine abilities. We are not there yet, but we are on the way to become gods. I mean this literally. We will acquire abilities that traditionally were thought to be divine abilities – in particular, the ability to engineer and create life. Just as in the Bible God created animals, plants, and humans according to his wishes, in the 21st century we will probably learn how to design and manufacture animals, plants, and even humans according to our wishes. This will not just be the greatest revo-lution in history, but the greatest revolution in biology since the appearance of life on earth. For four billion years, the laws of natural selection governed life. No matter what strange and bizarre shapes life undertook, it remained confined to the organic realm. Now science might replace natural selection with intelligent design and might even start creating non- organic life forms with the help of genetic engineering. We will use direct brain-computer interfaces in order to create cyborgs (beings that combine organic parts with inorganic parts) and we may even succeed in creating completely inorganic beings. The main products of the 21st century economy will not be textiles, vehicles, and weapons but bodies, brains, and minds

instead. After four billion years of organic life shaped by natu-ral selection, science is ushering in the era of inorganic life shaped by intelligent design.

Do you think that there are limits to technological develop-ment?I don’t know. Given enough time, almost anything might be achieved.

In your opinion, from which technological invention has humankind already benefited in this age of digitalization?From many inventions. Thanks to new technologies, today more people are dying from eating too much than from eating too little and more people are dying of old age than from infec-tious diseases for the first time in history. There are still billions of poor people in the world suffering from malnutrition, but mass famines are becoming rare. In the past, every few years there was a drought or flooding or some other natural catas-trophe, food production sharply declined, and millions of people starved to death. Today, humankind produces so much food and can transport it so quickly and cheaply, that natural disasters by themselves will not result in mass starvation any-more. There are no longer any natural famines in the world – there are only human-made ones. The difference between

synpulse From Outside In | 23

earlier days and today is, that humankind would be capable of preventing such famines, e.g. through politics and sustainable behavior.

Looking ahead, humankind will have huge power and respon-sibility due to digitalization. How do you think people will use that power in the future, when visualizing the best case?Technology could certainly help us to deal with the major problems of the 21st century. Take climate change, for example. The only way to stop climate change is to stop economic growth. However, no government can do that and remain in power. Therefore the only realistic hope of stopping climate change is to develop new eco-friendly technologies that can sustain economic growth without destroying the ecosystem.

Diseases are another obvious example. By constantly monitor-ing your body with biometric sensors and by sharing and com-paring your data with those of millions of others, corporations and governments could offer you much better healthcare than ever before. They could e.g. detect cancer when it is only beginning to spread in your body and when it is very easy to cure. They could similarly warn you against impending heart attacks, tell you exactly what to eat and when, and advise you about what kind of climate and work suits you best. However, to enjoy such wonderful healthcare, you will have to give up your privacy, and allow the government or the corporation to constantly monitor you and to know you better than you know yourself. It is a hard and frightening choice.

What social consequences does progressive digitalization have in your opinion? Will there be bigger class distinctions in the future? How will those differences become noticeable as seen in concrete examples?There is a danger that digitalization will result in much bigger class differences. Economic and political power might be concentrated in the hands of a tiny elite. Most people might become economically useless and politically powerless. As biotechnology improves moreover, it will be possible to extend human lifespans and to upgrade human abilities, but the new wonder treatments might be expensive, and might not be freely available for everybody. Therefore human society in the 21st century may be the most unequal in history since the upper classes will not only be richer than the rest of human-kind, but will also live much longer and be far more talented. For the first time in history, economic inequality will be trans-lated into biological inequality. Hence humankind will split

into biological castes – an upper caste of upgraded super- humans, and a massive lower class of useless people. We may eventually enter a post-work world.

Will it soon be possible to postpone death using modern tech-nology? What will the life expectancy of humankind then be?For most of history, death was seen as a metaphysical phe-nomenon. We die because God decreed it. People believed that death could only be defeated by some grand metaphysi-cal gesture such as Christ’s Second Coming. Lately science has redefined death as a technical problem and believes that every technical problem has some technical solution. We do not need to wait for God in order to overcome death, a couple of geeks in a lab could do this. A number of very serious scien-tists believe that we should at least be able to dramatically increase human lifespans in the 21st century, even if we don’t overcome death altogether. They point out that, in the 20th century we have doubled the average life expectancy from about 35/40 to 75. Thus, we should at least be able to do so again. Personally, I am more skeptical. It is true that over the last 100 years the average life expectancy has doubled, but it is dangerous to extrapolate and conclude that it will be easy to double it again. In pre-modern societies, the average life expectancy wasn’t high, because people died young from mal-nutrition, infectious diseases, and violence. Yet those who escaped famine, plague, and war could live well into their sev-enties and eighties, even in ancient times. The average natural lifespan of «Homo sapiens» seems to be somewhere between 70 and 90. So far, modern medicine has not extended this by one single year. For that, medicine will need to reengineer the most fundamental structures and processes of the human body. I doubt we can do that by 2050 or 2100. However, within another century or two, it might well be possible to grant unlimited lifespans, at least to the rich, who could afford the necessary treatments. Therefore, my position is that human-kind has the potential to overcome old age and death, but it will probably take a few centuries rather than a few decades.

In which social areas have humans already become unneces-sary? In which areas will humans always be essential?Many professions are already in the process of disappearing – from farm workers to travel agents. I do not think there is any area in which humans will always have an edge. Automation threatens to replace not just taxi drivers and textile workers, but also teachers, lawyers, and doctors. For example, the first and foremost task of most physicians is to diagnose diseases correctly and then suggest the best available treatment. If I

synpulse24 | From Outside In

arrive at the clinic complaining of fever and diarrhea, I might be suffering from food poisoning. My physician has only a few minutes to make a correct diagnosis and to cross-reference this information with my medical history and with the vast world of human maladies. The same symptoms might result from a stomach virus, cholera, cancer, or some unknown new disease. Alas, not even the most diligent doctor can remember all my previous ailments and checkups. Similarly, no doctor can be familiar with every illness or drug, or read every new article published in every medical journal. To top it all, doctors are sometimes tired or hungry or perhaps even sick, which affects their judgments. Now consider IBM’s famous Watson – an artificial intelligence system that is now groomed to do more serious work, particu-larly in diagnosing diseases. An Artificial Intelligence (AI) such as Watson has enormous potential advantages over human doctors. In its databanks, it can hold information about every known illness and medicine in history. It can update these databanks daily, not only with the findings of new researches, but also with medical statistics gathered from every linked-in clinic and hospital in the world. Watson will also be intimately familiar with not only my entire genome and my day-to-day medical history, but also with the genomes and medical histo-ries of my parents, siblings, cousins, neighbors, and friends. It will know instantly whether I visited a tropical country recently, whether I have recurring stomach infections, whether there have been cases of cancer in my family, or whether people all over town are complaining about diarrhea this morning. Besides, Watson will never be tired, hungry, or sick, and will have all the time in the world for me. I could sit comfortably on my sofa at home and answer hundreds of questions, telling it exactly how I feel. Indeed, an AI system will not need to wait until I feel pain and start complaining. It could monitor my blood pressure, heart rate, sugar level, and brain activity 24 hours a day via biometric sensors. Therefore, it could diagnose diseases when they are just beginning, and when it is still cheap and very easy to deal with them. A plethora of tough technical problems still prevent AI systems like Watson and its ilk from displacing most doctors tomorrow morning. Yet these technical problems – however difficult – only need to be solved once. The training of a human physician is a complicated and expensive process that lasts years, and in the end, all you get is one doctor. If you want two doctors, you have to repeat the entire process from scratch. In contrast, if and when you solve the technical problems which are still hampering AI from dis-placing most doctors, you will get an infinite number of doc-tors, available 24/7 in every corner of the world.

Will Artificial Intelligence ever be able to replace human emo-tions and empathy?As explained in the example above, AI will be able to acquire emotional intelligence and to understand human emotions even better than we can. Sticking to the Watson example, some people argue that an algorithm could never replace human empathy. If your CT indicates that you have cancer, would you prefer to receive the news from a cold machine, or from a human doctor attentive to your emotional state? How about receiving the news from an attentive machine that tailors its words to your feelings and personality? Emotions are biochemical phe-nomena and an AI system could detect your emotions with the same accuracy as it detects your tumors. A human doctor recog-nizes your emotional state by analyzing external signals such as your facial expression and your tone of voice. An AI system could not only analyze such external signals more accurately than a human but simultaneously analyze numerous internal indica-tors by monitoring your blood pressure, brain activities, and countless other biometric data. Hence, an intelligent IT system could know exactly how you feel and could then tell you precisely what you need to hear in just the right tone of voice. For all their vaunted emotional intelligence, human beings are often overwhelmed by their own emotions and react in counter-productive ways. For example, when encountering an angry person, they start shouting, and when listening to a fearful per-son, they let their own anxieties run wild. Watson would never succumb to such temp tations. Having no emotions of its own, it would always offer the most appropriate response to your emotional state. However, it seems far less likely that AI will develop emotions of its own. We should not confuse intelligence with consciousness. Intelligence is the ability to solve problems. Consciousness is the ability to feel things, such as pain, joy, love, and anger. In mammals, the two go together. Consequent-ly, high intelligence has always gone hand in hand with con-sciousness until now. However, intelligence is now decoupling from consciousness. We are developing non-conscious algo-rithms that can play chess, drive vehicles, fight wars, and diag-nose diseases better than we can. Science fiction movies gener-ally assume that in order to match and surpass human intelligence, computers will have to develop consciousness. But real science tells a different story. There might be several alter-native ways leading to super-intelligence, only some of which pass through the straits of consciousness. For millions of years, organic evolution has been slowly sailing along the conscious route. The evolution of inorganic computers may completely bypass these narrow straits, charting a different and much quicker course to super-intelligence.

synpulse From Outside In | 25

Prof. Yuval Noah Harari, 41, is an Israeli historian, lecturer, and writer. He received his Ph.D. from the University of Oxford in 2002. Since 2005, he has been teaching at the Hebrew University of Jerusalem with a current research focus on macro-historical questions. He achieved publicity especially as an author

and drew much attention when he published his book «Sapeins – A brief history of humankind» in 2013. It has been translated into many different languages and was recommended by prominent readers such as Barack Obama and Mark Zuckerberg. His second book «Homo Deus», in which he philosophizes about the future of humankind in the age of progressive digitalization, was published recently. For more information see: www.ynharari.com

In the course of your life, which technological achievements affected you significantly?I value antibiotics and vaccinations highly because without the help of modern medicine I would probably have died long ago. I also value the invention of the internet since I met my husband online.

Could you imagine living with a yet undetected native tribe in the Brazilian primeval forest in harmony with nature and with-out any form of technology?At 41, there is no way I can acquire the necessary skills to survive in a primeval forest. However, if I could live as a hunter-gatherer there, I would most value the physical and mental skills such a lifestyle develops. In particular the ability to pay attention, to smell, to see, and to hear. When ancient foragers and peasants found a mushroom, for example, they ate it with the utmost attention, aware of every little nuance of flavor, which could distinguish an edible mushroom from its poisonous cousin. Today we do not need such keen aware-ness. We can walk into a supermarket while texting messages and buy any of a thousand different dishes. Whatever we choose – Italian pizza or Chinese noodles – we are likely to eat in haste in front of the screen, checking emails, or watching some television show, while hardly paying attention to the actual taste. I would also like to note that all human societies – including hunter-gatherer tribes in the primeval forest – rely on some sort of technology (bows and arrows, flint knives, clothes, etc.). Similarly, it is a fantasy to imagine that hunter-

gatherers have always lived «in harmony with nature». Even before the Agricultural Revolution, human hunter-gatherers had driven to extinction about half of the large land mammals of the planet. Mammoths, for example, were eliminated by hunter-gatherers rather than by modern industry.

Do you sometimes take a deliberate timeout from our techno-logical society?I dedicate two hours every day to meditation, and every year I take a long meditation retreat for 30, 45 or 60 days. I practice Vipassana meditation, which I have learned from a teacher called S. N. Goenka. Vipassana is a method for observing the mind in a systematic and objective manner. The mind is constantly in contact with body sensations. In every moment we always experience some sensation within the body, and the mind reacts to it. Even when we think that we are reacting to an email or a tweet or a YouTube video, we are in fact responding to some bodily sensation that is present here and now. In Vipassana one trains oneself to observe the body sensations and the mind’s reactions to them in an orderly and objective way, thereby uncovering our deepest mental patterns, and helping us to see reality as it is rather than our own imaginations. Thus meditation is a timeout from techno-logical society, but it is not an escape from reality. It is getting in touch with it. At least for two hours a day I actually observe reality as it is, while for the other 22 hours I get overwhelmed by emails and tweets and funny cat videos.

synpulse26 | Sales & Customer Management

New Perspectives on Customer Experience

The latest findings of psychologists on customer experience are worth looking at. Their impact on business interactions, motivation and behavior can help financial service provid-ers to gain a competitive advantage, but this needs to be watched and acted upon continu-ously due to ongoing development. Synpulse expanded its services in this promising field.

Authors: Vladimir Dimitroff | Seharish Tariq

Customer experience (CX) has established itself as a widely practiced business discipline over the last decade. Today there is hardly a company without some formal structures, or at least initiatives, to address it. However, the initial interest and enthusiasm for action were driven by more direct commercial objectives, like retention or increased spend. Emerging meth-odologies and tools were trying to manage company process-es, rather than the experience itself, and understanding CX was mostly from an insight into its rational and measurable aspects. This has brought efficiencies and performance improvements in many places, but has also puzzled many businesses with disappointing customer feedback and behav-iors, despite measured progress. A major shift in the under-standing of CX and attempts to improve it for mutual benefit has come from progress in psychology and behavioral science. Modern CX methodologies recognize that experience is highly perceptual and subjective in nature and that behaviors are largely driven by emotions. Now the best CX insight comes from understanding emotions. Some of the successful efforts involve experience design with an emotional component.

It is also increasingly recognized that customer experience is inseparable from that of employees and their emotional state and motivation regardless of their place in the end-to-end

process. This trend requires that companies revisit their human capital strategies and practices, and introduce motiva-tional measures for an engaged and customer-focused work-force.

All experiences do not «just happen» but are the result of organized effort, of planned business processes, and managed touchpoint events. This obliges practitioners to embrace the discipline of experience design, which increasingly borrows approaches from the Design Thinking toolkit to create prerequisites and induce positive behavior-driving emotions.

While much of this has been happening in the mass consumer space, there is solid evidence of benefits in B2B situations and in niche-segment B2C operations. Private Wealth Manage-ment is one of those narrower sectors. Its historic attention to customer experiences and relationships is nowadays taking new dimensions aligned with the described trends.

Importance of emotions for customer experienceBusiness thinking is intrinsically connected to measurement (of anything and everything) for the purpose of improvement. This was the case when CX started becoming a legitimate busi-ness discipline: understanding it was equated to measuring it

synpulse Sales & Customer Management | 27

in some way and managing it meant having standardized key performance indicators (KPI). Discovering that customer satis-faction (an older and still widely used metric) is a poor predic-tor of behaviors, thought leaders and operating practitioners looked at alternatives like the currently ubiquitous net promoter score (NPS). While it has its merits and can be useful in many ways, NPS provides a rather one-sided and unreliably biased perspective on the experience itself, and its impact on customer behaviors. Then there was the customer effort score (CES), reflecting a very tangible aspect of CX: most people prefer things to be easy, rather than difficult and this can be measured objectively (in most cases physically). Although it is an important tool, it only reflects the rational aspect of the experience. Psychologists, however, almost unanimously insist that our rational decision-making is the tip of an iceberg of subconscious and emotional drivers of our behaviors.

In translating that rather mechanical understanding of CX into business actions, most practitioners embraced tools like «jour-ney mapping». It is indispensable in analyzing and designing customer experiences, but the limitations of a rational-only view have led many journey mapping methods and tools to become de-facto «process mapping» ones. Those tools are indeed useful, but they are too company-centric and detached from the real experiences of customers.

All this is rapidly changing with the arrival of CX in the last three to four years of a growing community of behavioral psychologists, equipped with increasingly sophisticated analysis techniques. They are gaining new insights into the connections between stimuli (events and business actions that invoke emotions), responses (activated emotions), and the resulting motivation for customer behaviors that can be beneficial or detrimental for the business. One early suc-cessful example was the «Emotional Signature™» methodolo-gy and tool introduced by «Beyond Philosophy», the customer experience consultancy. Some of the adopters in real business have had eye-opening revelations where their planned efforts

have undesired effects or how underestimated factors drive more value.

Emotional signature (ES) is a snapshot, a relatively static view of the emotional impacts on customer behaviors. Leading academics and practitioners are now seeking to establish models that reflect the «dynamic», constantly changing nature of experiences, emotions, and behavior drivers. One such approach is the «Customer Experience Vector™» (CXV) developed at «Teletech», a business process outsourcing company, which looks at the emotional state of every single customer, at any point in time (and step along a journey), as a trending vector with a direction and velocity, impacted by external modifiers and indicative of likelihood to behave in certain ways.

This emerging arsenal of means for a deeper understanding of CX is bringing new insights all the time, accelerated by the parallel trend of new technologies in the field: from recording customer interactions for analysis, to applying artificial intelli-gence (AI) to extract meaning from unstructured data (like the narrative in documents and communication exchanges). Synpulse possesses significant expertise in customer strate-gies and operations, including customer intelligence and CX. The firm partners with both thought leaders like the above-mentioned, and innovative technology providers that facili-tate the deployment of their models.

Employees also have experiences and emotionsBack in the days when «customer loyalty» was the prevailing mantra and business goal, businesses made another «surpris-ing» discovery: you cannot have happy customers with unhap-py employees. Academics and thought leaders brought up a number of reasons for this circumstance. Methods were proposed and adopted to manage employee happiness. For years, this boiled down to standard employee satisfaction surveys and «motivational» measures like pay raises, bonuses, and perks. Those have some impact, but are far from deliver-ing the desired engagement and motivation.

Scientists and practitioners are gaining new insights into the

connections between stimuli, responses, and the resulting motivation for

customer behaviors that can be beneficial or detrimental for the

business.

An evident current trend is to seek insights into the emotional dimension of employee behavior and harness the uncovered dependencies for engage-

ment and motivation, leading to customer-centric work practices.


To understand what really drives desired employee behaviors, psychologists and business practitioners have started looking at the «employee experience» in the same way as CX is being assessed and managed. We now recognize that employees are human beings whose experiences are highly perceptual and whose decisions are largely driven by emotions.

An evident current trend is to seek insights into the emotional dimension of employee behavior and harness the uncovered dependencies for engagement and motivation, leading to cus-tomer-centric work practices. Understanding the intricate and complex relationships between employee and customer expe-riences can provide powerful mechanisms for maximizing ulti-mate customer happiness and driving desired behaviors. It is also both the business case and enabler for building a strong customer-centric «culture» inside and throughout the organi-zation, an objective increasingly recognized as inseparable from the creation of shareholder value.

Designing emotionally engaging experiencesThe wider adoption of customer experience practices and deeper understanding of underlying mechanisms is fueling yet another major trend: «CX design». In a business context, experiences cannot be allowed to «just happen», they are methodically planned and engineered to produce beneficial results. While process design as a solidly scientific business discipline has been around for decades, it has always been very company-centric and driven by the need for efficiency, error reduction and cost optimization. Customers and their emotional experiences are rather peripheral in process design, if even in the picture at all. The more recent discipline of «service design» has brought the customer more prominently into the focus of attention, albeit still with error avoidance and efficiency in mind. At best, service design recognizes CX and seeks to improve it, but mostly its rational, measurable aspects (like the described «effort score»). A significant contributor to CX trend shifts is the growing and influential «Design Thinking» (DT) movement. Design thinkers have their

roots in the way designers approach new creations, but have taken this mindset well beyond visual and product design – into the design of business processes, organizational struc-tures, and as a systematic method for managing innovation. The Design Thinking process starts with an essential step of «empathy», recognizing that whatever is being designed will ultimately affect human individuals. It is often called «human-centric design» and has permeated established areas like «user experience» (UX) and «user interface» (UI) design in tech-nology development.

DT is currently CX (and, to an extent, service design) – resulting in the «hybrid» activity and competence of emotion-aware CX design. The use of the philosophy and techniques of Design Thinking in combination with the latest methodologies for emotional insight and influence opens fascinating opportuni-ties for companies committed to a customer-centric strategy. It is still a nascent, emerging area, but we see great potential and expect important developments. Synpulse is also invest-ing into expanding the firm’s expertise in this direction.

Benefits for private bankers and wealth managersCustomer experiences and relationships are the proverbial «bread and butter» of private wealth managers. For centuries, the focus on wealthy clients has required extreme attention to their needs and an adequate response to their wishes. The wealth at stake has always justified exceptional experiences and investment in the skills and supporting infrastructure to provide them. Yet, not everything is smooth and carefree in this area: changing times are introducing client behavior trends that demand attention and strategic adjustment.

Cross-generational loyalty and commitment are now replaced by growing promiscuity, with a growing number of clients using multiple providers to look after their wealth. This is accelerated by digital trends, which bring ease of interaction (and of switching providers), as well as unparalleled access to information – giving the client reasons to question advice and investment decisions unlike historic reliance on the provider’s competence and best intentions, (often) resulting in blind

The use of the philosophy and techniques of Design Thinking in combi-

nation with the latest methodologies for emotional insight and influence opens fascinating opportunities for

companies committed to a customer-centric strategy.

Make your CX strategy emotions-aware, align it with your digital strategy, and

engage employees in a Design Thinking effort to create value-driving experiences

and client relationships.


Authors

Vladimir DimitroffPrincipal (Synpulse United Kingdom)[email protected]

Seharish TariqConsultant (Synpulse United Kingdom)[email protected]

trust. While private banks and wealth management firms are actively digitizing their processes and services, they are in-creasingly becoming aware that the new interaction modes and client expectations need to be addressed through new ap-proaches in CX design and management.

In our view, private wealth organizations now need to re-examine their priorities in order to:

develop a CX strategy and start managing CX in a struc-tured and planned manner

align CX strategy closely with digital strategies and activi-ties

adopt an emotions-aware perspective on CX and seek relevant insights and change methods

embrace Design Thinking in CX and make it central in product, process and service design

look closely into the employee experience and launch initiatives towards emotions-aware motivation, engage-ment, and client-centric culture

Experiences, a highly perceptual part of business interactions, are undeniably influencing attitudes, motivations, and behav-iors of customers, employees, and other value chain stakeholders (like suppliers or shareholders). Today there are methodologies and respective tools based on understanding emotions, for a more holistic and effective creation and management of those experiences. The rapid advancement of technology and the ubiquitous digitalization of financial services pose new challenges, but also open up opportunities. Companies with a strong customer orientation and an up-to-date understanding of behavioral mechanisms will have a distinct competitive advantage in the unending contest for the clients’ trust and value co-creation.


Reduce your Life Insurance Sales Cycle from Weeks to Minutes

Is your traditional life insurance business ready for a change? A technology based on the concept of Straight Through Processing transforms the way individual termlife insurance policies are underwritten – for those insurers and agents ready to embrace change, new business and significant profits are sure to follow.

Authors: Marcel Lötscher | Christian Seidel


From the moment a customer decides to buy individual term life insurance, it can take up to ten weeks to have the policy approved and in hand. In today’s fast-paced world where delivery of product is expected within days, this process is less than optimal for the customer and the insurer. While a simplified issue product is faster, it isn’t ideal as the customer will pay twice the price for a fraction of the coverage. However, the «Straight Through Processing» method is available, thus paring the process from weeks to minutes. With sophisticated software and real-time third party data using predictive data models, it is possible to offer life insurance that is instantly approved for most applicants. This means immediate cover-age of large insured amounts at competitive premiums for most applicants. STP in the USA is available since 2017.

Streamlined approach for new businessStraight Through Processing is the fully-automated initiation and completion of a life insurance transaction. Better known as STP, the goal is to streamline business processes and underwriting to reduce time and effort along the value chain and lower transaction costs. It is data-centric and dependent upon the integration of systems, data standards, and data requirements. As the availability of data multiplies and as predictive underwriting matures, more life insurers will adopt a quicker approach to processing new business applications. Third party data, ID validation tools, and the availability of ac-curate and cheap predictive mortality models will streamline and transform the industry ( 1).

Key benefitsHappy customers grow word-of-mouth business: The current life insurance application process is slow, intrusive, disjointed, and inconsistent. In the end, this cumbersome operation may still require the completion of paper forms. Additionally, most life insurance purchases rely on agents with different incen-tives to sell products and riders which customers may not need. STP eliminates these unwanted challenges to the stan-dard term life insurance application process. The carrier reclaims control. The outcome of this is that the customer is satisfied and spreads the word, resulting in more and hassle-free business. Even better news – developing a better online journey and a consistent omni-channel offering is now very achievable.

Making the sale more quickly: A life insurance sales cycle typi-cally takes many weeks and many touch points. Using an STP method allows you to close most of the sale when the customer

is most engaged – very early on during the application process.

Skip manual underwriting to drop operating costs: An even-tual goal of STP is to significantly reduce or eliminate the need for the manual underwriting process, even in the most com-plex cases. As more confidence is gained, life insurance com-panies will move away from time-consuming, labor-intensive tasks, like fluids, medical exams, and other expensive manual underwriting costs. These factors will come into play only with extremely high face amounts and other unique exceptions.

Slash «not-in-good-order» applications: Another key advan-tage of STP is the marked decrease of not-in-good-order (NIGO) applications. NIGO applications are considerably re-duced when all the required information is collected and vali-dated in real-time during the electronic application process.

Key challengesPotential fraud: The single largest concern with any life insur-ance policy is fraud. That is true of the traditional process and STP. If a virtual transaction is completed and a binding con-tract created based on fraudulent input, this would be online fraud, which directly links to the Know Your Customer regula-tory requirements (known officially as the Customer Identifi-cation Program from the 2001 USA Patriot Act). «LexisNexis», «Experian», «Mitek», «Verifirst», «Jumio», «Alloy», and some other big data players provide real-time integration with tools essential for customer identification. These tools can verify an identity profile with the individual completing the application and conduct Anti-Money Laundering and OFAC reviews. An in-surance firm’s risk tolerance will play a critical part in deter-mining to what extent these tools are used. Additional fraud prevention tools can dampen any leftover risk.

Accessing third party data: All life insurers use data from third parties to build each case’s rate class. One of the changes of the last few years is the speed at which this data can be col-lected and analyzed. MIB, ExamOne and Milliman for prescrip-tion canvassing and most state motor vehicle reports, can be accessed in real-time via API integration. Historical look-back models can also be purchased with the right applicant autho-rizations. Most essentially, the availability of real-time predic-tive mortality models by third parties has become a tipping point to achieve STP. Predictive mortality models are not new, but their accuracy, availability, and low cost is. The most wide-spread model is that of LexisNexis – which is used by Haven

synpulse

Embrace electronic ID valida-tion and verification tech

Improve conversion rate and close sales much quicker

Accessing real-time and predictive data

Reduce underwriting costsDecide which data/model is right for you

Reduce Not-In-Good-Order applications

32 | Sales & Customer Management

Life and Ladder Life in addition to other companies offering STP. LexisNexis «Risk Classifier» product is a proprietary scor-ing algorithm. It predicts relative mortality risk, aggregates public legal and property records, motor vehicle reports, and credit information. Governed by the Fair Credit Reporting Act, the scoring algorithm outputs a life risk score between 200 and 997, where the higher score suggests a higher relative mortality. The scores are then normalized, producing action-able data. Use your underwriting engine to handle the real-time third party data and predictive data. Flexibility of the engine is paramount. Ensure rules can be added and modified by business users to only identify exceptions and very difficult cases for human intervention. This will enable the reduction of manual underwriting.

Key enablersRecommendations for the way forward: As data becomes more accessible and cheaper, more life insurers will move to a streamlined underwriting process and offer Straight Through Processing. This will be an iterative process as insurers find the right balance between cases that are processed straight through, versus the need for additional underwriting (whether that is fluids or a tele-interview). With data readily available to

insurers (predictive models, telematics, etc.), insurers must be prepared to acquire it and then refine their model. Insurance companies that employ STP will be able to decrease under-writing expenses, and thus reduce premium costs. Addition-ally, they will be able to meet the needs of changing consumer behaviors, and create a flexible distribution strategy that allows for quick integration with agents and distribution part-ners, as required. Insurance firms need to get on board with STP or there is a real threat to eventually being priced out of the market.

Overcoming the legacy challenge: Many life insurers that have been in business for decades are tied to their legacy systems. These systems do not allow real-time applications processing nor do they integrate new data easily. This is especially critical in processing new business, where real-time processing and incorporating data from external providers is a key differentia-tor. An innovative approach is to develop a «service-oriented software» that allows for additionally needed flexibility on the distribution side, while keeping traditional policy and claims administration for the less time-sensitive process. Another option is partnering with another firm, or creating a new division for work that starts from scratch (greenfield).

1: Benefits, Challenges, and Enablers of Straight Through Processing

Source: Synpulse

Make eSignature a priority

Enhance the customer experience

Protection from potential fraud

Key benefits

Straight Through Processing

Key challenges Key enablers

Combine existing underwriting models with other third party data and predictive underwriting


Authors

Understanding that the costs associated with modernizing legacy systems can be very expensive and take too long to implement, new establishments can facilitate an STP approach to compete in the new insurance age. The ideal path to STP is a careful move to service-oriented architecture that fosters flexibility and distribution options.

eSignature: eSignature will reduce the need for many paper documents and allow the transactions to happen in real-time. As this form of conducting business is now mature, many play-ers with varying offerings can probably meet the security and legal requirements. Start by looking at the larger players to ease your internal stakeholders. These include «DocuSign», «Kofax», «Adobe», and «HelloSign».

Marcel LötscherManaging Director & Associate Partner (Synpulse USA)[email protected]

Christian SeidelAssociate Partner (Synpulse USA)[email protected]

A use case

Removing life insurance purchase barriersA newly established business unit within a global insurer was trying to change the way people perceived and bought life in-surance products. The global insurer was attempting to combat common perceptions of life insurance as expensive, combined with a tedious approval process and general mistrust of insur-ance agents. Their new business unit was on the right track – a revolutionary change in customer attitudes was needed.

So, what was their goal? «Develop deep partnerships through a winning proposition of coverage, affordability, and experience to reach more customers». STP was able to greatly aid this life insurance initiative.

Synpulse’s major contributions tackled the challenge!With initial support from Synpulse’s global life insurance team, knowledge was transferred from the Switzerland and UK offices to the US team. Synpulse then helped set up and shape the program with a quick two-week ramp-up period. Very swiftly, Synpulse defined a target-operating model (TOM) and enter-prise architecture to align functions, capabilities, and systems. This effort helped surmount and avoid conceptual challenges towards the end of the project. Synpulse brought in the miss-ing project management, business analysis, product analysis, and data architecture capacity to bridge the buildup of the tar-get organization. The role of the firm also included translating underwriting requirements into the user journey and defining the test concept and approach to implement sufficient quality assurance.


Strategies for Private Banks to Succeed in the Asian Financial Market

Asia’s challenging financial industry is undergoing unprecedented change. Returns on equity are shrinking due to margin compression, increased regulation, and declining cost efficiencies. Senior management is required to redefine their operating models. Optimizing, outsourcing or extending business functions are possible strategies to survive.

Authors: Yves Roesti | Salomon Wettstein

In Singapore and Hong Kong, more than 50% of the operating private banks are small foreign onshore private banks (AUM < USD 15 billion)1. Fundamentally, the banks have three main options to avert costs, target economies of scale, and achieve growth:

1. specialize (Core Business Focus) and restructure/ standardize the Operating Model (includes innovative models of cost sharing through community building)

2. pursue Business Process Outsourcing (BPO) via industrial-ized third parties

3. extend their footprint by acquiring additional assets and a front office (as opposed to an exit strategy)

Which opportunities and challenges would a typical foreign onshore bank face if it opted to pursue BPO? An illustrative

example, Asia Private Bank (APB), shows the fundamental problems and solution options. Asia Private Bank is a hypothetical foreign onshore bank created by Synpulse to highlight the typical challenges seen in past client projects:

1 CaproAsia database, Asian Private Banker Report, and Synpulse analysis 2 Synpulse internal database 3 BCG, European IT Benchmarking in Banking, and Synpulse analysis

Case illustration: Asian Private Bank

Private bank with USD 10 billion AUM is operating out of Singapore and Hong Kong (licensed)

Revenue/AUM around 80 bps (USD 80 million)2

Cost Income Ratio around 80% (USD 64 million Operational Costs). 33.33% of Operational Cost is non-front Operational Cost

75% of non-front Operational Cost is Run-The-Bank related while 25% is Change-The-Bank related3

Back Office, IT, and Middle Office Size: 80, relationship managers team size: 50


Is the operating model competitive enough? Over the past three years, APB has seen profits stagnate although business is growing. This can be attributed to decreasing profit margins due to an increase in operational overhead as a result of regulations, high cost to innovate and a long period to realize benefit, and the inability to achieve economies of scale.Like other private banks in the market, regulatory pressures have eroded the APB’s profit margin. Synpulse estimates that going forward, banks are expected to spend an incremental amount on regulatory changes such as «Common Reporting Standard» (CRS) and «Automatic Exchange of Information» (AEoI), transparency rules around «Over the Counter» (OTC) trade reporting, and investment suitability, to name a few. At the same time «Know Your Client» (KYC) documentation standards and regulatory scrutiny are increasing, imposing additional controls and KYC remediation programs. Further-more, APB needs to shoulder risk management challenges, such as fraud and cybercrime. APB’s clients are demanding and expect the bank to be innovative in its service offerings. In order to remain on par, a minimum number of online services

needs to be developed. This requires the bank to invest into end-to-end digitilization, requiring big upfront investments of several million USD4.

How industrialization helps Asia Private BankAPB’s margins have been declining over the past three years. The current operating model is unsustainable in the long term. This is because cost per transaction and «cost income ratio» (CIR) are expected to go up due to the increase in unit labor costs, process inefficiencies, and pressure on margins. In this environment, economies of scale are crucial; they will allow banks to relieve the pressure on margins with a reduced cost per transaction. 1 indicates how APB’s costs will rise, if no concrete action is taken.To reduce cost, achieve economies of scale, and improve growth, APB has to industrialize. This allows banks to free up resources from non-differentiating (back office) activities and focus on where the attention is needed; to build up a sustain-able business pipeline and manage and groom front office staff.Industrialization can be explored internally by leveraging syn-

4 Data from similar undertakings, Synpulse expertise, and past client projects

1: Danger of Inaction

Source: Synpulse based on B-Source, Avaloq

Standardization

Sourcing

Economies of scale

Industrialization

Do nothing

Cost

s per

tran

sact

ion

1

4

5

2

3

Bank tomorrow

Bank today

Integrated standard software

Industrialized Bank (BPO)

Volume of transactions


ergies through the convergence of processes and the IT plat-form. This can be done horizontally, across business divisions, and/or vertically, across booking centers. If internal synergies do not exist or are inadequate, a BPO via highly industrialized third parties (BPO platform providers) can be pursued. On a high level, BPO will enable access to state-of-the-art innova-tions and to the BPO community, which facilitates the possi-bility of cost sharing. In addition, the provider will pass some benefits from the economies of scale that they receive from the BPO community back to the bank.

Can industrialization reduce CIR? In general, a well-tailored BPO solution will enable APB to:

reduce overall cost and achieve a scalable business model

avoid change the bank (CTB) and regulatory cost

reduce and avoid run the bank (RTB) cost

gain access to innovation and cost sharing

increase revenue potential

BPO relieves APB from most of the regulatory cost pressures, as the BPO provider will handle the operational regulatory changes. Access to the BPO community also means that APB will be able to share the implementation costs of new changes and new market trends with the community. Synpulse’s expe-rience shows that banks similar to APB have cut CTB cost down by USD 3-5 million every year. As a bank that is still try-ing to catch up with market innovations, BPO can grant access to the latest technology without the need for making a huge upfront investment. This also means that APB does not need to engage in innovation at high risk and cost that may not pay off in the future.In an industrialized private bank, the service provider will con-tribute all non-differentiating functions, such as operations and IT. Some middle and front office processes can also be outsourced and/or automated. By outsourcing process and associated functions as well as decommissioning systems and infrastructure, APB will be able to reduce its operations and IT headcount by more than 70%, which will result in RTB cost

savings of USD 9-11 million every year. From all these benefits, BPO can bring a total cost saving of more than 25% of the total operational cost for APB.Through BPO, administrative tasks previously performed by Relationship Managers (RM), such as reporting (7.4% of total RM time) and paperwork (17.9% of total RM time), will be auto-mated and/or outsourced. Our analysis5 shows that time spent on client-facing activities is expected to increase (37% to 60% of total RM time) as RMs can reallocate their time for activities such as client interactions and acquisitions. This results in a more active advisory experience, increasing both the revenue/RM and AUM/RM ratio by 10% to 20% and 5% to 15%6, respec-tively. This means a potential revenue increase of USD 13.6 million every year. In addition, scalable technology and addi-tional products out of the box will also be available, increasing speed to market and revenue potential.Overall, industrialization via a well-tailored BPO solution can help APB to reduce and avoid cost, increase potential revenue, and enable access to innovation and community cost sharing. Properly implemented, these benefits can translate into ~30% reduction in CIR.

The new benchmark for small playersAs the business case in 2 illustrates, BPO can help bring about a promising return on investment. After a successful transformation project, APB is expected to have total net ben-efits of USD 186 million (revenue increase by USD 130 million and additional cost savings of USD 56 million) over a ten-year period, which would completely turn its profitability equation around.In Asia, there are many private banks like APB, which are strug-gling to survive. Due to pressure from regulators and the need for innovation and client differentiation, they need to find a way out of the cost trap. It is difficult to sustain the business in the long term with an antiquated operating model. Pressure to change operations and technological capabilities means that merely continuing with reliable performance is no longer enough. A number of banks are looking for opportunities to consolidate in the hope of increasing revenue and improving cost synergies. Those who want to «follow the footsteps» of APB can industrialize internally or leverage BPO, which is a valuable option to drive down cost, refocus the business on clients and front office, and grow the bank at the same time.

5 Based on findings from Sungard Financial System’s 2013 Report in client facing staff efficiency in Private Banking 6 KPIs from Synpulse expertise and past client projects


2: BPO Cost & Benefits Analysis – 10 years projection

Source: Synpulse

Authors

Yves RoestiManaging Director & Partner (Synpulse Singapore)[email protected]

Salomon WettsteinManaging Director & Associate Partner (Synpulse Hong Kong)[email protected]

Assumptions

Industrialization potential in the market is around 33.33% of the operational costs, which is non-front related (MO, BO, and IT)

50–75% savings in the non-front related operational costs were achieved in BPO projects. Efficiency gains were achieved through standardization, automation (STP), and FTE optimiza-tion (operations services through BPO provider leveraging economies of scale)

A BPO platform provider typically offers three main services: - Application Service Provider (ASP) – application support

and maintenance - Infrastructure & Technology Outsourcing (ITO) – IT infrastruc-

ture maintenance and outsourcing - Operations and Processes Outsourcing (Ops.) – Banking

Operations Processes

Annual Service Charge is 5–12 bps depending on the services consumed. Asia Private Bank consumes services that add up to 8 bps. This will be smaller for a larger bank or if fewer services are in scope

For a small bank like Asia Private Bank revenue potential made up a big part of BPO benefits, since it will allow significantly more products and services as well as a faster time-to-market

Projected AUM will conservatively grow USD 400 million every year

A typical transformation project takes 6–9 months to complete

64

47

76

13086

22373

64 67

45

1238

16

56

167

Increase

d Throughput

(RM Revenue In

crease

)

AS-ISNon-Front

Cost

TO-BENon-Front

Cost

50%–75%Gross

Savings

5–12 bps of AUM

$I0–15 million

Revenue Incre

ase fr

om

new Assets

Total R

evenue

Incre

ase Pote

ntial

Bank FTE CostApplic

ation and

Infrastr

ucture

CostPipelin

e Item

s

and Oth

er Costs

Total n

on-front

Operational C

ostFTE Cost

Reduction

and Avoidance

Applicatio

n Vendor and

Infrastr

ucture

Cost Avoidance

Pipeline and oth

er Changes

Cost Avoidance

Non-Front O

perational

Cost w

ith BPO

Total N

on-Front O

peratio

nal

Cost w

ith BPO

Annual Serv

ice Charg

eRelease

Upgra

de

Upfront In

vestments

Service

Differentia

tion

Revenue Potential Cost Savings Potential

Revenue Potential:Through various benefits, BPO can increase revenue

by $130 million

Current Bank Cost: Asia Private Bank’s current non-front cost amounts to

$223 million

BPO Net Cost Savings: After investments and annual costs,

Asia Private Bank can save $56 million

BPO Gross Cost Savings:BPO can help Asia Private

Bank to reduce cost by 50% – 75%

Ops.

ASP

ITO

7

8410%–20%of revenue

5%–15%new assets

increase5%–20%of revenue


Industrializing IT with the Help of DevOps

The digital transformation of their IT organization is a major topic for many banks and insurance companies. DevOps (Development and Operations) can be a decisive door opener, transforming IT from a simple service center into an integrated part of the value chain. What needs to be considered and how best to implement it?

Authors: Martin Gruchow | Dr. Philipp Frauenfelder

What is DevOps?Faster, better and less costly are the most common goals when planning to implement DevOps. In the era of digitalization, especially the capability to deliver fast-to-market is becoming an important competitive advantage. The term DevOps, first emerging in 2009, is used to describe a cultural and professional movement that stresses communication, collaboration and integration between software developers and IT operations professionals while automating the process of software delivery and infrastructure changes. The aim is to establish a culture and an environment where building, testing, and releasing software can happen rapidly, frequently, and more reliably. Approaches like continuous integration and continuous delivery help to improve the flow and the quality. Automation is seen as an enabler within this. Most things are not really new within DevOps. The major difference is the goal to consequently measure the output of an IT organization and sensibly combine different well-known methods. The key idea behind DevOps is to break down the silos between development, operations, and other groups, such as business, architecture and testing by encouraging the engineers within these departments to collaborate more ef-fectively. With the progressing evolution from agile to DevOps (via continuous integration and continuous delivery), the

increasing collaboration delivers more and more value to the organization ( 1).

We understand DevOps as a kind of target operating model for the IT aspects of an organization. Below, we elaborate on the un-derlying collection of ideas and principles that can be used to transform IT from a service center into an integrated part of the company’s value chain. While every organization is unique and needs a tailored road map to introduce DevOps, we outline an approach that has proved to be successful for Synpulse clients.

Adapting IT to changing marketsSoftware development as such is very well understood in almost all organizations. Most banks and insurance compa-nies have already introduced «agile software development frameworks», e.g. Scrum or the Scaled Agile Framework (SAFe), to better meet their customers’ needs by increasing the flexibility of their development organization. Although this has proved to be very beneficial, these frameworks only focus on what needs to be developed and when and how this can be done in the most efficient way. They neglect important tasks further downstream in the software value chain, such as test-ing, packaging, deployment, and maintenance. Furthermore, the development teams and the operations team, responsible


for looking after the systems that run the code, exist in two relatively separate worlds.

Here is where the DevOps movement fills the gap by consider-ing to look at the whole IT value chain. The two communities (Dev & Ops) need to learn to cooperate and work together for the good of the organization. Organizations who have success-fully introduced DevOps have shorter development cycles, an increased deployment frequency, and a faster time-to- market. A typical deployment cycle in the financial industry is semi-annual. In contrast, Amazon for instance is deploying on average every 11.7 seconds to their productive IT systems. The benefits of these frequent deployments are obvious! Shorter time-to-market is much easier achievable – a key asset in the time of changing markets. In addition, collaborating or inter-facing with a FinTech/InsurTech company or product is simpler on both ends if they share a similar agility – and the FinTech/InsurTech startups are agile!

The three waysThere are three basic principles – usually referred to as the «three ways» in the DevOps community – which form the foun-dation of all DevOps patterns. They describe the values and phi-losophies that frame the processes and practices of DevOps.

The first way emphasizes the importance of understand-ing the flow of work through the organization, from devel-opment to the IT operations team. The aim is to increase the flow by achieving a profound understanding of the entire system and removing constraints.

The second way is about creating feedback loops to upstream process steps (e.g. automated testing, event management data, shared on-call rotation, etc.). The goal of almost any process improvement initiative within DevOps is to shorten feedback cycles and amplify feedback loops to make the need for change more transparent and also to support the continuous drive for improvement.

The third way puts a spotlight on continuous experimen-tation and learning. On the one hand, organizations should explicitly allocate time to allow their teams to innovate the daily work and to reward them for taking risks. On the other hand, rituals to reflect on one’s own performance need to be constantly practiced to gain mastery in a certain field. This helps to critically assess the added value of a recent change and to retreat quickly if something goes wrong.

1: Steps of the IT Value Chain and Their Relation to the Underlying DevOps Principles

Source: Synpulse

Plan

Agile Development

Continuous Integration

Collaboration

Valu

e

Continuous Delivery

DevOps

Code Build Test Release Deploy Operate


The journey to organizational agilityWhen planning to introduce DevOps, most companies first think about tools to automate their IT processes. In fact, a plethora of tools is available in the market to support the un-derlying practices and principles. However, DevOps is not only about replacing the tools used in the IT organization. While tools can facilitate certain aspects of the transformation, the more significant change must take place in the minds of the employees in all departments and on all seniority levels.

As every organization is unique, there is no universal way of introducing DevOps. Yet, Synpulse was able to observe a bottom-up approach in four steps that has proved to be successful at various clients ( 2).

1. Generally, it is advisable to lay the foundation for DevOps by introducing some kind of agile method within the development team, such as Scrum or SAFe. This funda-mentally new way of working usually finds a lot of support, not only from young, but also from more senior software engineers as it empowers the development team to orga-nize itself rather than following an externally driven plan. The teams will go on a journey and experiment what is the most effective way of working to deliver value to their end-users, and performance will improve.

2. Once the teams have established an agile way of working, the exchange among these teams and other departments needs to be enhanced and the organizational silos need to be broken up. This is usually the most challenging part of the journey, as it involves a painful break with beloved habits and requires a lot of active coaching. To change technology and tools is easy, but to change the mindset of people is tricky. All employees need to look left and right to understand the issues and obstacles of co-workers in preceding and downstream process steps. To foster a positive attitude rather than a destructive atmosphere, mutual trust needs to be built among the teams and an open communication needs to be established. This second step («communicate») will most probably already improve your organization’s performance and reveal bottlenecks in the processes, but it is not the end of the journey.

3. While specific steps can be optimized in an isolated manner, it is essential that the organization is clear about all the departments involved. The sequence and the inter-face of all departments must be known (and documented), from the business department submitting a new request to the IT support organization supporting the new feature in production. Only a bird’s-eye view enables the stan-dardization of the internal procedures and the handovers

2: Approach How to Introduce DevOps

Source: Synpulse

Agile Communicate Document Automate

Improve performance within teams

Establish culture of trust and foster cross-team collaboration

Analyze and document the processes and establish standards

Remove manual interventions in processes by automation


Authors

Martin Gruchow Associate Partner (Synpulse Switzerland)[email protected]

Dr. Philipp Frauenfelder Associate Partner (Topic Expert) (Synpulse Switzerland)[email protected]

in the IT value chain. There are other advantages of a global business process map shared across business and IT functions. Coupled with strong process governance, such a map can be leveraged during the assessment of the change impact of a new feature and facilitates test automation.

4. Only when end-to-end processes are fully understood, bottlenecks are removed, and standards are established, the automation should be started. Automating process steps too early in the transformation can result in paving the cow path.

You have completed the transformation into DevOps? Your company is working in a fully agile manner, and your IT team has achieved an impressive time-to-market? Now the time has come to leverage the investments in your organization. Reacting quickly to new market demands is only the first step. It might be interesting to expand the tool set of your organiza-tion with innovative methods, such as Design Thinking to create and deploy revolutionary products, distribution chan-

nels, or revenue models. Your organization will be ready to launch and evaluate pilot projects in a short time («fail fast» principle). Given a positive outcome, the pilot can be scaled to the whole company within no time.

ConclusionThe transformation towards DevOps is not a walk in the park. The underlying change in the mindset of IT, business, and management is significant and requires a clear vision, strong leadership, and a stringent change management. There is also a plethora of tools on the market to automate all aspects of the IT value chain. To avoid distraction from the social aspects of the transformation, changes in the tooling should be con-sidered late in the process.

DevOps changes a lot in an IT organization. We have men-tioned a few key benefits: Faster time-to-market, short pilot project cycles and better compatibility with FinTech/ InsurTech. In addition, the 2016 state of DevOps report also emphasizes three times fewer deployment failures and 24 times faster time to recovery.

MastheadThe Magazine is published three times a year (English edition). Articles can be accessed via www.synpulse.com. Published by: Synpulse Management Consult-ing | Editor: HBS International GmbH | Realization: Synpulse Management Consulting | Printer: Neidhart + Schön Print AG | Feedback and inquiries to: Synpulse Switzerland AG, Thurgauerstrasse 32, CH-8050 Zurich, phone +41 44 802 2000, fax +41 44 802 2001, [email protected] | Copyright: The reproduction of articles is permitted with the agreement of the publisher if the source is acknowledged. Articles by guest authors do not necessarily represent the opinion of the pub-lisher. | Photos: Shutterstock Inc | Layout/Illustration: HBS International GmbH

44 | Rubrik synpulse

SwitzerlandZurich (Headquarters) | Geneva

GermanyHamburg | Frankfurt | Ulm

United KingdomLondon

SingaporeSingapore

Hong KongHong Kong

USANew York

[email protected]

the magazine - synpulse · to provide consultancy at the best possible rate you need to ......

Documents