Consumers are increasingly self-reliant and see time as a resource that is just as valuable as money. Moving forward, delivering a timely customer experience will be an important factor in winning in the market.
Banks, however, have a hard time delivering on this customer demand for timeliness due to their innate complexity, with business models that reflect the uneven integration of multiple lines of business such as retail, business banking and investment banking. Over time, these organizational processes have often been “spaghetti wired” from legacy systems that are not fully integrated. Recent regulation further complicated matters, adding additional infrastructure that increased operational layers and cost.
Bankers are increasingly aware that this unplanned complexity has gotten out of hand and harms the ability to deliver for customers. In our recent survey of financial services executives, 68% of respondents indicated they have initiatives in place to simplify their business models. How should an organization tackle this task?
Start with a change campaign. With so much at stake, you can start anywhere – beginning, middle or the end – but take the first step. Start by mapping process steps and identifying activities that are duplicative, or do not contribute to efficiency.
Once a root cause has been identified, develop the management routines to determine the legacy drivers in Information Technology (IT), operations, service, channel and organizational structure. Several remedies that can yield immediate productivity are:
- Eliminate hand offs;
- Remove paper processes;
- Standardize data capture and governance;
- Implement voice of customer research on how customers shop, buy and use your products and services.
Embedding these changes is not a function of technology but rather of change management and organizational leadership. Enterprise Resource Planning can provide reports and metrics to identify opportunities. But improvements are a function of leadership attention to the experience drivers that create real value.
Re-imagine the journey. Banks need to re-think the customer journey. As touch-points have grown, so has the number of linkages between processes. A recent client mapping of customer touch-points for a regional bank’s deposit products showed that the customer interacted with the bank through seven different channels, each with eleven discrete touch-points. Mapping of the mortgage process for a national organization revealed 1,500 discrete activities depending on the product offered and state or local procedures.
As one executive put it, “we have met the enemy and it is us.”
These process disconnects create poor customer service. Our research indicates that service failures almost always are caused by process issues such as duplicative procedures; for example, having to enter the same information on multiple systems at multiple times in the customer buying or fulfillment process. These are not only problematic from a customer point of view, but also expensive since they require labor that does not add direct value, and constitute a primary source of error.
Journey mapping puts the customer at the center and examines their feelings, interactions and impressions. Know the task the customer wants to complete, both consciously and unconsciously. Use qualitative research to understand how customers feel about their experience and reveal gaps that need to be filled in order to deliver the outcomes that customers value.
Eliminate the blizzard of choice. The profusion of information has created a proliferation of options and choices for customers. Ironically, the more choices available, the more customers are seeking straightforward, easy-to-use solutions that fit the way they choose to bank. The downside of greater “choice” is that it makes the value proposition more confusing, leading customers and sales staff away from a decision based on strongly perceived benefits to a more simplistic decision based on price.
Customers will pay for value. Advances in research techniques make it easier to make accurate predictions of the price customers are willing to pay for combinations of features, benefits and fees. Fine tuning your processes to accommodate the way customers perceive value can add between 10% and 20% to product revenue.
Understanding buying behavior requires a new rigor of consistency across all parties – marketing, technology, sales and service. Getting everyone grounded in gaps that exist between devices, channels, sales and fulfillment gives a clear picture of what is at stake for the future and can serve to build sustainable improvement.
Standardize and Automate. In today’s digital world, financial institutions are still burdened by paper and duplicative entry that embed re-work expense. This can be further complicated by the decentralization of certain processes. For example, a recent client had best-in-class auto decision capability for its indirect business but used a separate manual underwriting for the branch system, often taking three or more days to make a decision that could be made virtually instantaneously in other parts of the bank. Clearly, infrastructure could be shared via larger service utilities, thereby vastly improving the customer experience and lowering the bank’s cost-to-serve.
While the desire to decentralize to be closer to the market is certainly laudable, it inevitably leads to variability. And that results in more risk, since it becomes more difficult to monitor compliance against a consistent, predictable set of standards. This will become only a bigger burden given the fact that only 60% of the rules mandated by Dodd-Frank have been finalized. Common data and integration architecture for channels, applications, products and services can be used to eliminate duplicative functions, enabling better connectivity and lowering cost through shared services.
Creating a culture of simplification will require that banks make their interaction processes subservient to how customers shop, buy and use services. Given the rapid rate of change that exist in technology and customer behavior, this is best thought of as an ongoing methodology rather than a static, one-off event.
Mr. Kerstein is president and Mr. Hendrix is an advisor at Austin, Tex.-based Peak Performance Consulting Group, which specializes in community and retail banking strategies. They can be reached at [email protected] or [email protected].
