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HOW TO SUCCESSFULLY MEASURE THE IMPACT OF DIGITAL TRANSFORMATION

For many businesses, digital transformation is now a key business priority that requires immediate resolution. With 85% of enterprise decision-makers stating they have a two-year period to make significant inroads into digital transformation or they will fall behind their competitors and suffer financially[1] and $1.18 trillion predicted to be spent globally on digital transformation technology and services in 2019[2].

The reality is that transformation is unique to each individual business, and often fraught with challenges. It’s expensive, time consuming, and changes may need to operate alongside existing legacy systems and BAU governance as they’re being introduced. (Which could be why Capgemini found that 50% of banks and 56% of insurers were found to have barely started the digital transition and are thus being classed as beginners[3].) With less than one in six organisations delivering successful digital transformation programmes[4] and just 12% of global financial institutions considered a ‘digital transformer’ by Gartner[5], it’s clear that many companies struggle to get it right.

 

Ross Timms, Head of Strategy at Rufus Leonard, shares how financial services organisations can overcome the two main barriers to successful digital transformation: definition and impact.

 

Ross Timms

Establish what type of transformation your business needs

To be successful, you need to know why you want to transform, and therefore what kind of transformation your business needs. Following 30 years of helping business leaders transform their organisations – from BT’s first website in 1994 to BBC’s future of voice strategy in 2019 – we typically see three distinct types of transformation, each with their own characteristics:

 

  • Change how you do business: responding to changing consumer demands, running the same fundamental business but delivering it in new ways, with new processes and through new technology.

Example: Fidelity – one of the largest asset managers in the world, which is over 70 years old – have invested $2.5 billion a year on technology through Fidelity Labs and Fidelity Centre for Applied Technology to deliver new and innovative products to the market. With a focus on blockchain, artificial intelligence and virtual reality, they have launched an interactive money check-up, a first-of-its-kind brokerage app with a customised feed based on user assets, and FidSafe which is a free secure online tool to store all of a family’s most important documents. Fidelity have also been transitioning into a new style of business; interestingly, one that competes with tech firms like Nvidea rather than their traditional Wall Street rivals like Charles Schwab.

For Fidelity, their success is clear to see. In 2018, despite a slowdown of stock markets (the worst performance in a decade), Fidelity was able to hit record financial performance; with a 19% operating income rise, 12% boost in revenue to a record $20.4 billion and hit annual income over $6 billion for the first time.

 

  • Change your business: changing your business offering and responding to evolving needs and behaviours by solving problems in new ways.

Example: To create products and services for SMEs, NatWest decided not to use their existing business and infrastructure. Instead they launched Mettle, a new digital-only business current account. Mettle is just one example of an innovative solution coming out of the bank’s portfolio of initiatives, ventures and products to better support SMEs across the UK – responding to customer needs with new features developed quickly.

Plus, NatWest Tyl, the bank’s re-entry into the merchant acquiring market was announced in May; NatWest APtimise, the UK’s only end to end accounts payable solution; and automated lending platform ESME, which announced in March it has already lent over £50m to UK businesses. These all offer business customers more choices in banking.

 

  • Change your market: understanding how changing behaviours will create new markets and being there to meet that demand first.

Example: With a clear transformation strategy set out; moving from a products-based company to a platform, PayPal has delivered innovation, digital experiences and partnerships which have set it totally alone in the digital payments market. The company’s ability to evolve through innovation while providing customers with more freedom in how they want to pay has been key to this.

Most recently, PayPal have created partnerships with banks to enable customers to sign-up to PayPal using their bank card, link reward points from multiple banks to their PayPal wallet, and used its open technology platform to expand partnerships with the likes of Google and Apple to allow payment using PayPal account and fingerprint authentication.

In 2018’s full year results, PayPal posted growth across the board due to its transformation efforts. This included revenue growth of 18% to $15.45 billion, a 17% increase in active accounts to 267 million and 9.9 billion payment transactions which was a rise of 27%.

The drive to digital transformation needs to balance two things: the practical need and the requirement for a north star. The former is driven by pressure on profit and the need to move at the speed of the consumer. The latter is driven by your company’s mission, purpose or vision. Aligning your brand to your technology gives your platform a purpose, a role beyond the practical and a clear point of focus which drives transformation efforts.

 

Define your clear point of focus 

Defining the purpose of your transformation programme is integral to measuring its impact and success. Once you’ve defined your ‘why?’ you can distil this into a single point of focus that explicitly meets top-line commercial objectives.

Looking back at our three brand examples, all of them can demonstrate this single point of focus. Fidelity aligned everything back to their ‘Community Bank’ vison. NatWest decided they need to offer simple banking in an SME environment. And PayPal have always had a pinpoint focus on democratising financial services to enable everyone to participate fully in the global economy. That single point of focus gave each of these businesses a clear steer on how to define both growth and performance objectives.

In turn, this single point of focus acts as a guiding star for how to leverage your brand, how to shape your customer experiences, understand what’s required of the organisation and your technology platforms. Ask yourselves, ‘how might we defend or improve our brand market position/ensure ongoing user relevance/create internal alignment/maximise platform performance?’.

 

Measuring the impact of transformation

Understanding this creates a clear platform to identify and align KPIs across the organisation. Do you need to increase brand value/equity or increase share price? Do you need to create channel shift through self-serve or improve customer satisfaction? Do you need to reduce employee churn or improve workforce utilisation? Or, finally, do you need to increase platform utilisation or ensure security of data and information?

This approach makes sure that a micro view on performance aligns back to the macro measurement of impact and progress. It gives the business the levers it needs to keep everyone on course over a multi-year programme of significant change. And, crucially, it provides a clear goal to galvanise everyone in the business.

In recent years, we’ve helped brands like the Aviva, AA and Lloyd’s Register tackle large-scale digital transformation. As a result of facing off the challenge of delivering successful transformation, we’ve created the Business Impact Matrix. Built on the principles explored here, the tool establishes a clear point of focus for all business units, aligning growth and performance activities. It ensures that all customer-facing and colleague-facing activities align to a shared goal and clearly aligned objectives. The tool drives a process of prioritisation, helping to align separate agendas and providing a clear framework to decide what to do first, second and so on.

However, you choose to define success, bringing both vision and impact into a single tool is the biggest single step any organisation can take to make sure they are part of the 15% of companies that are successful with their transformation ambitions.[6]

 

[1] Forbes

[2]  IDC – Worldwide Semiannual Digital Transformation Spending Guide

[3] Capgemini

[4] The Digital Helix

[5] Gartner

[6] The Digital Helix

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Technology

HOW CHARITIES CAN MEET TOMORROW’S DIGITAL CHALLENGES?

By Steve Georgiou, Business Consultant at Xpedition 

 

Charities are under constant scrutiny for how they handle their finances. Budgets are often squeezed and as a result, it can be hard to justify spending on mediums such as new technology, which aren’t always seen as “necessities.”

And yet, there’s a new generation of workers waiting in the wings who have grown up using technology in all aspects of life.  There are also 57% of charity employees who believe the sectors’ development is being hindered by lack of embracing new technology. For those that are willing, a digital strategy has never been more important for a charity’s future outlook.

 

The Next Generation

Many organisations are not prioritising the technological expectations of today’s younger generation. -. Everything outside of the workplace for the upcoming generation is already technology-driven, including the skills they’re learning right now. It’s already disrupting industries and career plans, and by the time this generation steps into employment, the way we live and work will have become even more advanced.

Competition in the Third Sector has always been on the up. Donation methods have changed, securing funds has never been more competitive, reporting is now a lot more stringent, and the next generation of employees have defined efficient methods of ensuring the organisation they are employed by is not left behind.

For charities that are using legacy financial systems that are often old, outdated and costly to maintain, if they do not take the steps now to digitally transform, they’ll fall further behind. Good governance dictates Charities should be investing in modern technology to support the organisation in both its medium- and long-term digital strategy. Ultimately, Charities want to engage stakeholders and employees, simplify processes, streamline efficiency and guide change – but they cannot do this without investing in modern technology to enable change in this fast-moving digital world we live in.

 

A Digital Future 

In times gone by, financial systems were predominantly used to support the back-office finance function. This has all changed. With advances in technology, such as the latest all-in-one financial management solutions, there are now tangible benefits that add value to the whole organisation.

These tools can strengthen decision making, reduce administration time and provide real-time, accurate reporting, all of which are valuable assets for tomorrow’s demands.

There is a real case to be made for a fully digital third sector using financial technology one which thrives and gives not-for-profits huge benefits:

 

Data Management and Analysis

The contemporary digital landscape is all about big and beautiful data. Job roles are evolving to cater for the data boom, organisations are now hiring increasing numbers of Data Analysts and Business Analysts. And one of the most significant benefits that the third sector can expect to see by taking on digital methods is greater data transparency.

The world’s most valuable resource is no longer oil, but data. Data is being transformed into a core asset, one which is being used to tackle charity-wide challenges. Daily admin duties such as data analysis and entry are being taken over more and more by financial management solutions.  This not only removes the need for online time-heavy tedious tasks, but also reduces the number of different sources people have to use to find and analyse data.

Whether it is finance, fundraising, HR or anything else, the efforts of the organisation should be in the analysis of the data to make better informed decisions in the best interests of the charity.

 

Use Cloud to Reduce TCO 

The resistance to change and the associated investment have been barriers to digital transformation for charities. Every organisation wants to achieve greater efficiency and free-up further funding for their frontline

Activities, such as maintaining hardware and the disruption of upgrading are all a thing of the past.

From maintenance to mobility, cloud computing can help you to significantly reduce the Total Cost of Ownership (TCO). With the cloud, there is no need for onsite hardware or expensive upgrades – you are simply sent a URL for storage. This offers you the flexibility to scale your data storage capacity depending on your needs at the time, avoiding the need for expensive hardware. This on-demand, “pay as you grow” approach avoids hedging your bets on unnecessary data storage. The cloud also has greater mobility, allowing for remote workers to access communications from anywhere, with no further technology needed. Backup and restore can be initiated from any location, using multiple devices, and does not need maintenance – reducing the need for a dedicated IT person.

 

Consider Digital, before your Charity becomes marginalised.

With a new generation of workers waiting in the wings, and financial management technology that has the power to provide value for all aspects of the organisation, a digital strategy has never been more important for a charity’s financial efforts. They will not settle for a business that is stuck a decade behind due to not embracing change.

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Technology

COUNTING THE COST OF SILENT CYBER

– Akber Datoo, Founding Partner, D2 Legal Technology

 

Damaged reputation. Financial loss. Punitive capital adequacy provision. Silent cyber is one of the biggest issues facing the insurance industry. Yet despite the Prudential Regulatory Authority’s (PRA) demands for robust action plans, few firms have put in place the document digitisation required to truly understand the level of risk. Further, it is somewhat ironic that an industry that is predicated on pricing risk, is failing to assess and understand this risk that exists today in its back catalogue. From determining the current silent cyber position to identifying policy wording changes and analysing the legacy book, Akber Datoo, Founding Partner, D2 Legal Technology, highlights the need to digitise policy documents.

 

Non Affirmative Loss

“Silent Cyber” is the term given to cyber related losses that may/or may not fall under a traditional property and liability policies that were not designed for that purpose.

The concerns of silent cyber have recently come to the fore and the shock waves created by the Mondelez / Zurich Insurance case have reverberated around the market. Whilst publicity may have temporarily abated over the past few months, very few insurance companies have begun to truly address the risk posed by silent cyber. In an industry predicated on strong reputation, the decision by Zurich to reject a claim from a client whose business had been devastated by the NotPetya cyber-attack in 2017 made headlines around the world – not least for citing exclusion for ‘hostile or warlike action in time of peace or war’ by a ’government or sovereign power’.

Yet as the cost of such attacks are being counted, the impact of silent cyber on the industry as a whole is becoming painfully apparent. PCS Global Cyber has recently attributed 90% of the insurance industry’s losses relating to the NotPetya cyber-attack to non-affirmative (silent) cyber, and the rest to affirmative losses.

Certainly, the PRA believes the UK insurance industry can do more to ensure the effective management of affirmative and non-affirmative cyber risk exposures. It has ordered firms to develop an action plan, with clear milestones and dates by which action will be taken.

 

Divergent Attitudes

Despite the cost to the industry, there remains a concerning lack of consistency in terms of risk awareness and planning as well as risk appetite and understanding. The PRA’s own survey in 2018 revealed significant divergence in firms’ views of the potential exposure to silent cyber. Within Marine, Aviation and Transport (MAT), Property and Miscellaneous lines, exposure was rated at anywhere between zero and the full limits.

With PCS Global Cyber believing the cost to the industry of NotPetya associated claims has now exceeded $3 billion, there is ever greater focus on insurance companies’ cyber stress tests. Fears that gross losses could run into the multiples of annual cyber premiums are very real. However, to date such exercises are based on minimal fact: firms lack robust or reliable claims data relating to silent cyber. As a result, models are immature and there is little faith in the resultant capital adequacy calculations. Just how much capital should the regulator demand firms to set aside against possible exposures when the silent cyber risk is so poorly understood?

In addition to the model and assessment demanded by the PRA, firms need to look closely at existing policy documentation to gain better insight into risk. What is the current position? Does wording need to be amended to address silent cyber risk? How can the legacy book be analysed and key data and wording from the contracts extracted to assess the potential silent cyber exposure going forward?

 

Document Digitisation

In many ways, the insurance industry is better placed than many for the challenges ahead. Document digitisation has been on the agenda for some time and the industry has already created clause libraries to make it easier for firms to gain access to vetted policy wordings and regularly used clauses. However, the low take-up of these libraries is disappointing. Not only do firms have a somewhat confusing choice – between the Lloyd’s Wording Repository, the IUA (International Underwriting Association) Clauses Document Library and the Xchanging Model Wordings Library, but the checklist structure is not providing the required solution.

Insurance companies and brokers need to better understand how to use these clause libraries within current business models, preferably in tandem with a document generation tool to improve data management. The goal is to create data driven contracts, where documents are drafted based on known outlooks. But to get to that point, firms need to actively embrace document digitisation to gain a better handle over the current risk position and create a foundation for rapidly changing wording to avoid any ambiguity regarding silent cyber. Moreover, we need the link wordings in clause libraries to classified business outcomes, and then derive business intelligence from policy portfolios.

 

Conclusion

No firm wants to risk the reputational damage associated with refusing a high profile claim – nor endure the huge losses associated with attacks such as NotPetya. With the rise in cyber attacks, this is an issue that has to be addressed immediately: firms need to act now and embrace the opportunity of digitisation strategies within policy documentation to mitigate the potentially devastating silent cyber risk.

 

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