Asset Based Lending
Chief Investment Officer
Commercial Loan Automation
BirdsEye Viewthe jetsons and the flintstones wedding - design thinking and traditional banking
Our inaugural Digital Banking Forum was not only a great success but also a tremendous learning experience. One of the discussion leader’s was Eastern Bank, a 200 year old financial institution, who has spun off a Fintech company -Numerated Technologies to sell Eastern Bank’s Lab developed five-minute small business loan. Their CEO, Bob Rivers, has initiated Eastern Lab 2.0, and it is doing great things. In combination, Eastern sees the importance of digital and has established a digital product management discipline within their technology division. This team, the bank’s development teams, our CTO and Labs 2.0 are all peers who report to the CIO and are helping change the way Eastern Bank thinks and works.
The most instructive aspect of Eastern Bank’s learnings through change is its new approach to the digital world. It has adopted the high tech world’s methodologies for development, testing and innovation, and wrapped them with a customer-centric context.
Here is what we learned from Julie (she’s the Director of Digital Product and Delivery) during our meeting.
CONTEXT AND APPROACH
Our investments – in branches, digital, systems, etc. – are all too often governed by random information gathered at conferences or through board members. Eastern has introduced more discipline and structure into the process of capital investment decisions, starting with a significant investment in understanding customer and employees’ preferences, channel adoption and pain points.
Identify for each project the following:
o Who is responsible
o Who is accountable
o Who should be consulted with
o Who should be informed
This is important because the lines should not be blurred, or else you’ll end up with too many cooks in the kitchen. It is fascinating to see how many internal people have opinions about digital choices – but their opinions aren’t what matters. What should drive digital investment is what customers and employees want and need based on quantitive and qualitative data, not anecdotal information. Further, board buy-in is essential. Using the approach above gives all stakeholders an opportunity to voice their opinion and perspective, but also makes it clear who has the decision power, which is critical to nimble execution.
There is temptation to start throwing more activities into the digital bucket. Resist the temptation to enhance focus and effective execution.
Europe adopts technology faster than we do, so learning from their successes and mistakes is an effective way to get a sense of things to come. Innovation in financial services is happening elsewhere around the world, and solutions are being developed rapidly. Many won’t apply to us, but some can be modified to our culture. Awareness of what’s happening in the space globally is a significant advantage.
We have an excellent source of data on what customers like and not like about our services and delivery systems. Make use of that information to prioritize investment decisions and creatively think about solutions to customer issues. The information is already present. We need to collect it and use it.
The 8-20 rule works in almost everything, including digital development. Using agile development and release concepts allows you to get a feature into market quickly and constantly iterate based on feedback. Focus on getting your product, service or channel to function for the majority and then collect and analyze usage data to drive continuous development and iterations. Ask the tough questions when someone on the team wants to make sure the service ‘is perfect’ and can handle all of the edge cases; why do we have this edge case, how many customers does this edge case apply to, what is the customer feedback data showing. It’s enough to start with the majority to start testing and go to market with. Digital customers are used to some functions not yet available through partial releases and see improvements over time from the rest of their lives. True, they expect precision from us, as we handle their money. Nevertheless, we should be willing to start with something that isn’t perfect, and continue adding and refining as time goes by. Otherwise, when it’s perfect and we’re finally ready, it will be obsolete.
In other words, waiting until our offering is perfected has a significant opportunity cost with it, which we often ignore in our quest for perfection. I’m not advocating sloppiness; I AM advocating timeliness.
This is a core principle of development, which is strongly counterintuitive to us bankers. It is essential to the success of a digital effort, though, and we must embrace it as we embark upon modernizing our banks.
Many of our people have traditionally worked with off the shelf out of the box solutions following a waterfall project management style. Design thinking and agile are new concepts many are uncomfortable with and can sometimes been seen as developing something with imperfections. They strongly believe in sequential execution, which is the enemy of fast results. It is important that they are brought onboard through education and better understanding of our goals. They should not mistake fast failures and agile learning for a bad customer experience, but exactly the opposite – a process by which we can respond to a changing world faster and more efficiently
We are held hostage by our core system providers. They control the pace, shape and content of development, and they charge us every time we want to use our own data. It’s time to unshackle ourselves from the central data repository and accounting system by investing in middleware (service orientated architecture – SOA) that can facilitate our ability to access our data more efficiently and develop our own solutions to customer-critical needs.
Middleware can be developed by you or purchased. Either way, it is a necessary first step to agility and market-responsiveness.
The shift we are talking about is more cultural than anything. We should recognize it and support this culture change through various means to achieve the strategic agility we are looking for toward future prosperity and survival.
DESIGN THINKING – EASY, SIMPLE, STRAIGHTFORWARD
Traditional development is built on the waterfall principle, where each step takes place only after the previous one is perfected. Current development principles are essentially the opposite; several elements are developed concurrently, and on-going iteration occurs as the prototype is released and improved over time. It’s the fastest way to bring market-worthy releases to market while ensuring they are exactly what customers want through on-going iterations and testing.
Technological innovation is so intense these days that new and exciting products, channels and solutions are introduced daily. It is extremely difficult not to get seduced by some of these ideas. Try to avoid the siren’s call and ask yourself – How does this product fit into my strategy? What will it do for my customers or employees? And, if you selected something that doesn’t gain market acceptance, listen to the market and fail quickly.
Customers and employees (internal customers) come first. There must be a customer-centric reason for buying or developing anything. It’s a key principle that should not be compromised.
Once a prototype is developed, it can be tested and retested, adjusted and revised to have the maximum impact on the desired customer group.
All too often we start with development, in part because it is easier than envisioning a strategy and a deliverable. Testing a design before development is central to the agile environment, and who is doing the testing is equally important. Use experienced web users to be your “first line of defense”. They will tell you if something doesn’t make sense or if the experience is too complex, based upon mobile and web-wide design best practices. Start with the design, once you know the desired customer experience, and do not develop until the design and requirements are well-defined. It will save you remediation time after the prototype is developed.
The Eastern approach to development is simple, self-explanatory and effective:
o Journey mapping – start with the experience
o Prototyping – develop a solution
o Customer input – test is with customers
o Iteration – make adjustments
IMPEDIMENTS TO SUCCESS
Risk management is in our DNA and central to our success. It is an important component in the entire development process. But even Risk management should be creative and solution-oriented. All too often we focus on the one exception that could cause problems instead of the 90% of the time where the solution will have a significant positive impact on the customer, either internal or external.
The message is simple: apply risk management tests appropriately and focus on what CAN be done, rather than build less likely scenarios that can kill the idea.
There is no such thing as an all-in core-integrated solution. We should just accept it.
Today’s technology allows you to install middleware that will separate the core system from your development activities such that you can experiment, gather data and create solutions without touching the core. Explore recent middleware platform developments that will free you from tapping into the core for every development and data-gathering effort you undertake. Since our core providers generally have not been responsive or timely to market changes, you should render yourself independent of them and do your own development or bolt-on best-of-breed products.
Start with your definition of success to better understand the business problem you are trying to solve. This impacts requirements and will help you hone those well before you start development. Invest the time upfront – it will pay dividends.
In our quest to get buy-in we involve many people in critical decisions. That’s admirable and desirable. In the digital space, though, time is a critical factor. Empower one person to make non-critical decisions rather than force the process to go into committee discussions in the interest of time, momentum and focus. Use the Committee as you’d use a board – for strategic guidance and mid-course correction, not for daily decision-making.
PMOs are an important additions to banks as we undertake more projects and ideas flow from many directions. At the same time, many a PMO create such painful proposal evaluation requirements that inhibit innovation and free thinking. I’m a strong believer in the accountability and IRR principles, but we should strive to simplify our own project feasibility requirements to encourage creativity and design thinking.
KEYS TO SUCCESS
CEO endorsement of design thinking is the first and most important requirement to success, especially since success entails a cultural shift throughout the enterprise.
Start with the customer and data. No proxy will do.
Involve many but execute and decision using a smaller group. Have cross-disciplinary teams build your digital presence, involving both line and staff, technology and marketing, compliance and legal. Examples of possible team compositions include:
o The Reality Test Committee
§ Chief Architect
§ Chief Technology Officer
§ Head of Digital
§ Head of the Lab
§ Business / Operations / Risk Management
o Scrum teams
§ Include the product owner
§ Ensure cross-silo participation
§ Adopt daily scrum meetings with customer support
§ Use only scrum team for development
Eastern Digital Channels is releasing new features and bug fixes into production every two to five weeks. Just like your App Store, it spells out what has changed and why. It’s great discipline and a good reminder to all users that Eastern is a digitally-minded organization.
This requires professional experience and understanding. Agile development and design thinking aren’t just buzz words. They are real methodologies. For example:
o Set your hypothesis
o Requirements first – use words
o Workflow next – use pictures
o Measurement (not necessarily financial); examples – customer acquisition; operational savings; customer engagement
Small development teams in-house can make an impact if you have the right skill set. Too few of us have limited development knowledge and staffin-house. It’s time to change that.
Let the core do what it does best, and embark upon core extractions through middleware to create your own customer experience reflecting your strategic priorities.
Put a reasonable process in place to prioritize initiatives. A strategic technology committee might not be the best tool to get there…
It’s the very first experience a customer has with us. What is more important than that?
Technology and digital solutions can increase your efficiencies meaningfully while delighting customers. These often do not require incremental resources; they do require zero-base thinking and a commitment to change. Digitizing bad processes doesn’t make them better.
The best way to upskill your workforce in to have them use digital solutions firsthand. Gamifying a digital fitness app is the easiest way to engage your own team in understanding and enjoying the digital space.