Cultural changes required to still be standing in the aftermath of the Digital Disruption caused by Open Banking and PSD2

Global CIO Banking Summit 2017 - Workshop 1Jeremy Brown

Director, Red Hat Open Innovation Labs - EMEA

7th Feb 2017

TO BE THE CATALYST IN COMMUNITIES OF CUSTOMERS, CONTRIBUTORS AND PARTNERS.

CREATING BETTER TECHNOLOGYTHE OPEN SOURCE WAY

RED HAT’S MISSION STATEMENT

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UBER

In San Francisco Uber has 3x revenue of the entire prior taxi

and limousine industry!

AIRBNB

Without owning a single room Airbnb has more rooms on

offer than some of the largest hotel groups in the world!

KICKSTARTER

Top Kickstarters raise tens of millions of dollars from tens of

thousands of individual backers, amounts of capital that once required top-tier

investment firms!

The WTF Economy

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Open Banking

The Open Banking Standard is driven by the Open Bank Working Group (OBWG), set up in September 2015 as part of an initiative of UK HM Treasury to explore how data could be used to help people transact, save, borrow,

lend and invest their money

This standard will guide how open banking data should be created, shared and used by its

owners and those who access it

PSD2

PSD2 is a data and technology driven Directive that aims to drive increased competition, innovation and transparency across the European payments market, while also

enhancing the security of internet payments and account access. (November 2015)

Euro Banking Association (EBA) Consultation Paper on RTS on SCA & common and secure

communication under PSD2

It’s Not Limited to Silicon Valley

Disruption in Banking - Open Banking will offer tremendous potential for Banks and Financial Institutions to innovate at pace, create new revenue streams and disrupt the disruptors

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“We need banking but we don’t need banks anymore. Do you think someday we can open bank account or

ask for loan without physically have to come to

the bank?”

Bill Gates Antony Jenkins, former CEO of Barclays

“We will see massive pressure on incumbent

banks, which will struggle to implement new

technologies at the same pace as their new rivals.

That will make it increasingly challenging for them to deliver the returns and profitability that their shareholders demand.”

Taavet Hinrikus co-founder of Transferwise

“The entire banking industry can be disrupted for the better and bricks

and mortar banks are heading for tough times"

"Every vertical in banking is a huge opportunity,"

What if Google, Apple, Facebook or Amazon became a bank?

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Because something is happening hereBut you don’t know what it isDo you, Mister Jones?

Bob Dylan, Ballad Of A Thin Man

Responding to Disruption

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Error #1: Not Establishing a Great Enough Sense of Urgency

Error #2: Not Creating a Powerful Enough Guiding Coalition

Error #3: Lacking a Vision

Error #4: Under Communicating the Vision by a Factor of Ten

Error #5: Not Removing Obstacles to the New Vision

Error #6: Not Systematically Planning For and Creating Short-term Wins

Error #7: Declaring Victory Too Soon

Error #8: Not Anchoring Changes in the Corporation’s Culture

HBR: Leading Change - Why Transformation Efforts FailBy John P. Kotter

OPEN SOURCE IS NOT JUST CODE; IT’S CULTURE

Collaboration

Transparency (both access and the ability to act)

Shared problems are solved faster

Working together creates necessary

standardization

+

OPEN SOURCECULTURE

The Open Organisation

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"an organization that engages participative communities both inside and out—responds to

opportunities more quickly, has access to resources and talent outside the organization, and inspires, motivates, and empowers people

at all levels to act with accountability."

- Jim Whitehurst, CEO of Red Hat

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● Greater agility, as members are more capable of working toward goals in unison and with shared vision;

● Faster innovation, as ideas from both inside and outside the organization receive more equitable consideration and rapid experimentation, and;

● Increased engagement, as members clearly see connections between their particular activities and an organization's overarching values, mission, and spirit.

But openness is fluid. Openness is multifaceted. Openness is contested.

Openness Can Lead to

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● Transparency● Inclusivity● Adaptability● Collaboration● Community

Truly open organizations embody them all—and they connect them in powerful and productive ways

The Basic Conditions for Openness

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● Autonomy — Our desire to be self directed. It increases engagement over compliance.

● Mastery — The urge to get better skills.● Purpose — The desire to do something that has meaning and is

important. Businesses that only focus on profits without valuing purpose will end up with poor customer service and unhappy employees.

What Do We Want?From the book “Drive: The Surprising Truth About What Motivates Us” by Daniel Pink

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● Decentralised & Autonomous - top down goal setting but bottom up decision making● Two Pizza Teams - The basic building block of your organisation● Automation & Self Service

○ Automation is a basic requirement, need to reduce lead times○ Self Service de-couples teams, allows autonomy

● APIs & Platform Theory○ De-couple teams, build a virtuous cycle in your ecosystem○ Think Platforms and become a student of Platform Theory

Keys & Principles

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Wrong Question!

How do I move faster?

Decentralise to increase autonomy and to move faster

Hierarchical or Flat?

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You can’t dodge Conway’s Law so work in “two-pizza teams”[1]

“organizations which design systems ... are constrained to produce designs which are copies of the communication structures of these organizations”

— M. Conway

If you can't feed a team with two pizzas, it's too large.

— Jeff Bezos

[1] It’s worth reading The Science Behind Why Jeff Bezos’s Two-Pizza Team Rule Works

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Automation & Self Service - Reduces lead time, not just cycle times

lead time

cycle time

What we have learnt from our participation in open source communities is that it’s not enough to be agile, you must be adaptable. Lead times are one good metric to help you measure your adaptability through automation and self service

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“Optionality” - Give yourself options - Release the value of additional optional investment opportunities available only after having made an initial investment

● Private IaaS / Public Cloud - Optionality for your basic infrastructure● PaaS - Optionality for your code● APIs - Optionality for your business

Create Digital Platforms

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● People don’t resist change - we are an evolving adaptive species● People are not stupid (overall)● They will resist loss of power ● Their resistance is smart response to dumb method!● The more resistance you experience the more likely it is that your methods suck!● Instead of fighting resistance to change, watch out for common mistakes in

implementing change● There are symptoms of struggle with adaption and the new that should not be confused

with resistance to the change itself● Keep going, change has no beginning or end just constant adaptation

If you are experiencing resistance...It’s not me it's you (or your method)!

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