Micro is the biggest thing
Call it “innovation”, “transformation” or just “business”, banks are spending time and money in the pursuit of the gear shift that will protect margins and grow revenue in the digital era. The time for big, bold moves is upon us, yet it appears that the biggest move of all is tiny: the trend towards the bespoke and the specific across industries that have historically capitalised on scale, volume and repeatable activity.
Customers like tailored service, digital natives expect it. Digitally native providers are built to deliver what feels like a highly personalised experience as technology is demolishing the cost barrier and opening up a new world of opportunity for “pull” financial marketplaces. They leverage re-usable components to create an exchange as unique and bespoke as an individual client, moulded by the client, without costly ad hoc change requests.
Micro payments, for example, are a hugely fragmented volume business that used to cost more to process than it generated. Aggregate cheaply and process automatically, and you have accessed an untapped revenue stream.
That’s great news for digital natives. Not so good for organisations where mainframes are older than me. Quite simply, most banks aren’t built for “digital” and yet digital they must be or they risk becoming irrelevant.
In this era of seamless, frictionless and instant connectivity, the pursuit of relevance is more pressing than ever. New needs are emerging, client segments are changing and fragmenting and what you used to do as a bank is being questioned alongside how you used to do it. This pursuit of relevance is an ongoing state, which has three distinct phases that cannot be skipped but can be accelerated.
Big change is needed for great impact. But the moments that make or break customer interactions are ‘micro’. So how do you get to do the small things that could generate the big things? How do you become digital when your starting point is a legacy infrastructure of great complexity?
You can’t buy “digital”. You can buy technology and harness help and expertise. You can and you must learn and leverage along the way. But you also need to adapt your own organisation to the new thinking that goes with the digital era. This is a not a project, it is an all-consuming quest for relevance where everything must be in scope.
Firstly, define what your organisation does and why and go back to what clients need from you. What is different now is that technology has gone from being the means through which you delivered services to a language that helps the client re-define their needs. In that context, it is not what you used to do that makes you relevant. It is what you will do next.
Secondly, you don’t have a clean slate, so don’t plan for one. You can’t build a new parallel infrastructure to switch everything over to, wholesale. The cost and systemic risk associated with such approaches is the stuff of horror movies. What you have is an immensely complex technology landscape that does what you needed it to do yesterday. Having figured out what you need to do today, you will be able to work backwards from what you need to what you have. Then the design begins.
This way, you stay in business, your shareholders get long term value reassurance and analysts will notice the vision you have put in place.
Digital doesn’t start with IT; it starts with business purpose, with strategy and vision. The building and associated programmes can and should be small. Not just for the ease of organisational adoption but because they make for better business, increasing agility, within the right framework.
Building “small” means “not all at once”, through approaches including wrappers and API layers. However, before you heave a sigh of relief, small also means “easier”, not “easy”:
- Wrappers and layers are a stepping stone to the process that allows you to reach your desired future without compromising today’s business. They are a manageable step in a long journey, not the destination. They also come with a realisation that your technology will never be as static as it has been over the past few years. And it didn’t feel static then.
- The benefit of APIs is only as good as your business plan and the data that travels through them. If you expose a suboptimal service, you will get suboptimal results.
- No technology is here to stay. So design for business, hire for talent and future-proof your technical landscape. Swapping things out is normal, so make sure your infrastructure is built to last through ease of replacement and adoption of new solutions.
- Have a data strategy: Obvious and yet often overlooked. Focus on, the services clients consume and the data you need to deliver but also on what else you can deliver with the data you have. Focus on the data you handle but don’t use and find value.
- Untangle the spaghetti and make each component part smaller and easier to manage, grandfather, swap out. Agility demands quick responses to the need of change, because eventually everything will go.
Your running costs will reduce with permanent bottom line reductions as multiple licenses and redundant systems are retired. The board will love you.
By this point you can visualise the fatigue of requirements gathering, business cases, user testing and relentless re-planning for an exercise that is cumbersome and doesn’t come with a big-bang release of a shiny new toy. Maintaining focus is part of the challenge and what will separate those who will succeed from those who won’t.
The journey was about re-establishing relevance, aligning with your client’s changing needs and ensuring the technology is fit for your ever-changing purpose. That is what the painful process of assessing, future-proofing and untangling was for.
Now the fun begins. While the inter-personal may be suffering in the digital era, the individual is at the centre of a universe of bespoke services, where each client can have services as bespoke as they are unique. That sounds like another steep curve of hard work but actually this is where the effort begins to deliver the goods. So here are three little secrets:
- Clients are not as unique as they think. You are not as unique as you think. A move to micro-services allows for a greater degree of re-usability without compromising the bespoke element and tailored feel of the service clients are consuming.
- Micro-services are much better suited for agility and responding to changing market requirements, for capturing ‘new new’ value with low cost of customer acquisition. Easier to change, easier to test, faster to market. And uniquely suited at capturing value that would have been otherwise ‘leaked’ (too bespoke, too small, too niche, too infrequent).
- The technology and mind-set that defines the digital era is less cumbersome than any previous tool set. Time to market and time to value is shorter. Using the technology to deliver value to clients has the immeasurably beneficial side-effect of delivering value to your employees. Their careers can accelerate in line with what the era affords as they can demonstrate skill and delivery within weeks rather than years.
The digital world creates bespoke marketplaces, down to the individual level, and an expectation that needs will be met in a way that feels and often is personal. In that world, micro-services are king. What do those look like, in line with your purpose?
The implication is stark: “digital” is not about the tech. it’s about what you do with it. Think big about your purpose, build small but relentlessly towards continued relevance, and deliver micro.
By Leda Glyptis, Sapient Global Markets