| Purpose | Operating strategy |
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Drive efficiency and reduce volume Example: Leading global financial-services firm |
• In-source operations and maintain shared services • Standardize client-facing processes end to end, reducing process steps by 60% and cycle time by 80% for customer on boarding • Consolidate and rationalize IT, including trading pla#086362tforms and mortgage servicing systems |
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Simplify and standardize operations around the world Example: London-based bank |
• Standardize IT platforms by country, with minimal customization (This bank standardized 14 countries in one year.) • Reengineer core investment management functions • Installlean business processes • Consolidate regional data centers through IT global shared services • Outsource to cut costs: for example, 50% ofthe IT development teams in China, India, and Brazil |
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Improve customer experience Example: Local bank dedicated to customer service |
• Maintain shared services within LOBs with emphasis on client relationships • Standardize client-facing processes end to end; reduce process steps by 60% and cycle time by 80% for customer onboarding • Consolidate and rationalize IT |
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Customer-back process transformation |
• Redesign end-to-end processes based on desired client experience • Analyze trade-offs between the level of customization and the value perceived by the client • Use a structured, consistent methodology to drive change |
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Product and service simplification |
• Minimize customization where the client sees no value (aspects increasingly driven by regulation) • Align cost-versus-complexity trade-offs with the strategic direction of the business • Standardize processes and supporting platforms to drive digitization of client experience |
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Aggressive digitization |
• Use digital media to create better front-end client interactions (paperless statements, tablet interfaces, etc.) • Implement straight-through processing to avoid manual processing • Form partnerships with niche and nontraditional service providers to build and deploy digital capabilities |
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Governance and performance management transparency |
• Establish and reinforce clear accountabilities, decision rights, and stake holder roles • Define goals and incentives that are clearly aligned with strategic imperatives • Adhere to a metrics-driven culture with key performance indicators (KPIs), unit cost management, etc. |
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Delivery model optimization |
• Move to shared-services or utility models to maximize scale and reduce costs within regional banks • Integrate and align process-centric IT operations capabilities • Increase integration of third-party providers into the delivery model to add variation to cost and to build capabilities |
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| From too many legacy processes… | …prioritize a few… | ...and address them in successive waves | ||||||
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Prioritization: Select 1–3 processes for each transformation wave |
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| Universal processes* |
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Criteria • Client experience • Efficiency opportunities • Risk reduction • Monetizing current investments and programs |
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Wave1 • Card fulfillment and servicing • Commercial lending • Mortgage origination • Deposit account origination, operations, and servicing |
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| Consumer bank processes |
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Wave2 • Consumer lending • Lead management • Treasury management • On boarding and servicing |
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| Commercial bank processes |
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Wave3 • Client problem resolution • Real estate lending • Others to be determined |
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Challenges Heavy process overhead, too many |
Approach: Implemented a third-party IT solution (Kovax TotalAgility) |
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Automated workflow with assigned responsibilities | |
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Shared view of the process and relevant policies to all participants | |
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Strategic objectives Faster and cheaper access to commission streams |
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Automated interfaces between users through integration of the bank's systems with email severs |
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Results
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Limited execution time | |
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| Automated dynamic resource assignment based on work load, skill set,and availability | ||||||||
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Required data for execution ready at each step | |
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Automated management reporting at each workflow step |
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| Best practices | Simplify product architecture | Case Study: An Australian bank redesigns its product offerings | ||||
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• Rationalize product sets based on what clients value most • Pursue modular product architecture – Tiered, component-based design – Shared common components across product lines – Isolated components that drive cost of complexity |
From a cumber some product environment… With a complex, inflexible product-centric architecture in place, this bank maintained more than1,000 mortgage products and 50 residential secured products. Any minor feature change resulted in the creation of new products, leaving the bank behind competitors in creating valuable services and offerings. |
…to a modular architecture favoring innovation The bank established a simpler, four-tier product architecture (consisting of a customer offer, product bundle, product innovation, and core feature list). The bank set standards for product features, enabling it to innovate without affecting the stable component core. Results: a US $200M revenue increase and $50–$100M in IT simplification benefits. |
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| Best practices | Simplify technology | Case Study: JP Morgan Chase overhauls its IT infrastructure | ||||
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• Rationalize portfolio, targeting one application per major process • Limit the number of business specific apps and put t in place a higher percentage of general- purpose apps • Design shared, central architecture with standardized, consolidated platforms |
From costly strategic IT Investments… In 2004,CEO Jamie Dimon allocated over $600M to the bank’s IT initiatives and a subsequent investment in network overhaul ($2B by 2008). This created significant ongoing IT spending: $8.5B in 2010. IT spending made up 8% of the banks revenue vs. the average of 4% held by its peers in the industry. |
…to rationalization across silos The bank implemented a single platform for consumer and small business banking deposits, eliminating more than 50 fragmented systems. Also, the bank retired more than 50 legacy investment banking platforms, consolidated Chase, Bear, Bank One mortgage servicing systems, and consolidated data centers from 90 to 30. |
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Current state Highly manual and disjointed process |
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15%Overall process cost reduction |
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Target state Streamlined and automated process |
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LOB “business partners”
– Attend all LOB staff meetings – Monitor LOB service needs – Assess and escalate performance issues |
Data-driven management
– Unit costs for supported products – Service quality measurement – Budget variances
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| Dedicated relationship management | Robust reporting and metrics | ||||||
| LOB / Operations | |||||||
| Effective execution of initiatives | Structured governance | ||||||
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Expertise & sustainability
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Top-down engagement
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| LOB-specific | Shared services | Process-centric | |||
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Model description • Operations embedded within LOBs – report to LOB head • Accountability and performance management within LOB Choose this model to achieve: • Functions of sufficient scale within LOBs to allow for reasonable economics • Shared services created within LOBs |
Model description • Operations centralized and set up as shared services • Structured by LOBs for single point of accountability • Some services provided by each area cross LOBs Choose this model to achieve: • Limited scale in individual LOBs • Large degree of commonality in most processes |
Model description • Organized by major functions and activities • Each function or activity serves multiple LOBs • Limited customization by business Choose this model to achieve: • Low cost-to-serve and speed-to-market • Mature operations with standardized processes • Simplified product and service structures • Established collaborative culture between LOBs and operations |
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Example: Capabilities outsourced in sourcing and procure-to-pay (P2P) Sourcing
Procure-to-pay
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End-to-end procurement outsourcing |
Results achieved
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| Phases of outsourcing and objectives | |||||||||
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Transparency Create Improved P2P Process Efficiency |
Control Enforce pricing and billing compliance |
Leverage Develop sustained competitive advanttage |
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| Banks with successful operations transformation programs achieve four benefits: | |||
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Enhanced client experience • Eliminate customer pain points • Improve responsiveness to clients • Streamline process |
Operational and cost efficiency • Reduce cost by driving out variability • Create capacity and scale • Provide cost-effective services |
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Continuous improvement • Define standard processes • Train the organization in process-oriented thinking • Instill a culture of continuous improvement into organization |
Risk mitigation • Ensure consistent and auditable controls • Align operating model to changing regulations |
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