STRATEGY CONSULTING DIGITAL TECHNOLOGY OPERATIONS

BY SARAH KRUGER AND WARREN PARRY

JOIN IN THE RACE OR BE LEFT BEHINDHOW ‘CHANGE’ IS CHANGING THE COMPETITIVE LANDSCAPE IN FINANCIAL SERVICES

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CHANGE OR BE LEFT BEHIND IN A RACE TO EMBRACE THE NEW COMPETITIVE LANDSCAPE IN FINANCIAL SERVICES In a sector which prized its stability and efficiency, change has become a new strategic priority.

Financial services (FS) organizations are undergoing radical transformation in response to an eclectic mix of new regulations, more demanding and empowered customers, digital disruption, cost challenges, mergers and divestments. They risk losing the battle to retain customers, employees and revenues as new digital technologies cause disruption and nimbler players enter the market. In the face of this unsettling combination of forces, leaders seek to find new opportunities for increasing premium growth, improving profitability and sustainably reducing costs – while struggling to change legacies inherited from the past.

Change is not new to banks and insurers. But the kind of change they face is more demanding and faster-paced than ever. It is now more transformational. It affects not only what these organizations do, and how they do it, but also their business model, their workforce and talent strategies and even their corporate culture. Change – once an activity attached to programs and projects – now needs to become a core capability residing at the heart of the organization. Only in this way can FS firms take advantage of digital innovation and a more fluid and flexible workforce.

Agility is a prized strategic capability. Achieving it requires organizations to do more with less at a faster pace. Taking on more iterative and

experimental programs with less clearly defined objectives and outcomes calls for new skills and capabilities – but delivers the benefits of change more quickly than ever. With budgets for discretionary change under increasing pressure, due to the growing demand for mandatory change, FS firms are forced to do more with less.

Most banks and insurers are in their ‘comfort zone’ when it comes to smaller projects, more extensive technology change and regulatory compliance. However, their track record of working simultaneously across multiple parts of the business is less impressive. Those that struggle to embark on multi-disciplinary transformational change that alters the fabric of their business – from customer channels to corporate culture and business models – risk falling behind in a rapidly evolving market.

Each organization will identify a different set of changes needed to sustain its competitiveness. But one thing is indisputably the same for all FS firms: ‘change fitness’ has become a core competence. An effective, professional change capability, that can use data and analytics to understand the status of change, enables the enterprise to deal with whatever threats emerge as the industry transforms, and to capitalize on the opportunities that invariably accompany these threats.

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How can an organization evaluate its change fitness, and monitor its various change initiatives to determine whether it is on track to deliver the expected benefits?

Accenture uses Change Tracking to analyze and benchmark organizations’ change efforts. Over the past 15 years we have studied 650 major change initiatives at 220 organizations across 50 industries – including 35 financial services companies with 68 initiatives. Our database consists of the findings collected from more than a million employees, who range from front-line staffers through leadership at all levels, and include team managers, divisional heads and corporate executives. The resulting analysis of that dataset – representing the cumulative wisdom of experienced change travelers – allows change managers to assess their change fitness, learn instantly when their change program drifts off track, and determine which interventions are needed to get back on track.

An analysis of the FS sector shows that it has stronger change capabilities than other industries, and is among the best performing – with the majority of its change programs on track. But being OK in a competitive world is to under-perform, and the challenge for most FS organizations is to move from ‘good’ to ‘great’.

HOW DO WE KNOW IF WE ARE ON TRACK TO ACHIEVING OUR CHANGE OUTCOMES?

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Figure 1. Key issues for firms undergoing transformation, and how financial services providers compare with the cross-industry top performers.

WHAT THIS DIAGRAM SHOWSThe difference between the dark and light-blue bars is the extent to which the average FS organization lags (or in case of Risks & Roadblocks, surpasses) the high performers in all industry sectors with regard to the various attributes of change.

However, there is still a distinct gap between the majority of FS organizations and the ‘high performers’ across all industries. The latter group, comprising organizations that are known to undergo fast-paced change, includes the digital market leaders and many start-up companies.

Analytics-based outputs from Change Tracking show where the gaps are and where cracks are likely to appear under the pressure of more change taking place. They also identify the recommended actions to strengthen the change capability proactively.

Among the strengths that can clearly be seen (Figure 1) are FS firms’ communication capabilities and their success in establishing a clear vision and direction. They have low levels of fear and frustration, and strong business and team leadership.

Seen from the strength of the light-blue bars, financial organizations need little or no improvement to reach high performance

in communication. If their change strategy consists primarily of enhancing communication to sell the vision – a common focus in FS change management programs – then they are completely missing the mark. A greater effort in an already high-performing area will yield diminishing returns, and may have the least impact on overall performance.

Moreover, leaders often think change is a matter of selling the vision of an innovative digital future. Our research tells us this is typically not a major constraint in financial services – employees understand and accept this vision of the future.

Identified weaknesses in the areas of passion and drive, accountability, and skills and staffing are where the real change efforts need to be applied. Our research shows that accountability, and passion and drive, are vital to maintaining stability and control, and to managing change in a fluid environment.

Business performanceduring the change program

Realization of change program benefits

CHANGE OUTCOMES POORER BETTERSAME AS BEFORE

AVERAGE

LOW HIGHMODERATE

NORM

OBSTACLES & TURBULENCE

DRIVERS OF CHANGE SUCCESS

CommunicationVision and directionFear and frustrationTeam leadershipBusiness leadershipTeamworkPassion and driveAccountabilitySkills and staffingSystems and processes

Risks and roadblocksAmount of changePace of the changeStage of change

FS industry average

Cross-industry high performers

HIGH PERFORMANCELOW PERFORMANCE

HIGH PERFORMANCELOW PERFORMANCE

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Yet they are currently where FS firms achieve the lowest scores. They need to be increased by 87 percent and 97 percent respectively, so that organizations can implement the vision they have defined and avoid fragmentation as the pace and amount of change ramp up.

Other factors that make a significant difference are clarification of roles (needs to be increased by 73 percent) and making goals more measurable (+91 percent).

Another is improving accountability (+118 percent). But this is not accountability in a vacuum. Teamwork, which turns accountability into passion and drive, also needs a huge increase (+105 percent). This is the glue that keeps things together when the pace ramps up. These capabilities are also harder to develop when working with a liquid workforce made up of partners, contractors, employees and vendors.

These results reveal a fundamental challenge confronting the FS industry. New digital strategies require a culture that supports and sustains the execution effort. But to date, successful financial organizations have focused on driving effectiveness – strategic cost reduction, simplification and re-engineering – and successfully managing risk. Their culture is at odds with enabling agility and innovation. This is one of the main reasons why niche players that don’t have these encumbrances can so easily enter their marketplace.

The performance scores bear this out. They are highest for effectiveness and ability to manage cost / risk, while the scores for customer service – paramount in operating and providing

flexible services in a digital environment – are much lower.

We know from our research that the highest-performing organizations have the greatest amount of change taking place at a fast pace. They are delivering business benefits more quickly, but they demand a strong capacity to manage change. If an organization ramps up the amount and pace of change without building the necessary capabilities, weaknesses become exposed and the organization can lose control of the change initiative. Expected benefits fall through the cracks and a gap opens up between the intentions of leaders and the achievements of the staff who are implementing the change (see Figure 2).

WHERE STRATEGY COMES UP AGAINST CULTURE

Figure 2. An analysis of an organization’s change capability can identify fault lines that pose grave danger – but which can be addressed tactically.

LEAVE THEIR PEOPLE BEHIND

RACE AHEAD

CRACK THAT LEAVES THEM WEAK TO COMPETE

Passion and driveAccountabilitySkills and staffingSystems and processes

CommunicationVision and directionFear and frustrationTeam leadershipBusiness leadershipTeamwork

FS industry average

Cross-industry high performers

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In a fast, fluid environment it is imperative that change directors recognize the importance of leadership at all levels. They must also appreciate how each level of leadership – from the C-suite, to business leadership, to team leadership – holds the keys to different parts of the equation for success. Few organizations can control the forces of the marketplace. Strong, cohesive leadership provides the strength they need when they relax their controls in favor of agility and flexibility.

Leaders at all levels need to re-examine and adapt their roles in order to meet the needs of fast-paced change. The requirements vary according to the levels of leadership:

THE C-SUITE: BUILD UPON THE STRONG FOUNDATION OF VISION AND COMMUNICATION

• Focus on the future, and don’t hide behindregulations and cost reduction measures.

• There is no need to monopolize ‘ownership’of change; rather actively build a culture of accountability across all levels.

BUSINESS UNIT LEADERS: TRANSLATE FROM THE ‘BIG PICTURE’ TO PRACTICAL DETAILS USING MORE FLEXIBLE CAPABILITIES

• Keep up with the fast-moving externalpressures of digital disruption by first applying digital innovation from within – build the workforce of the future. The use of robotics and automation will not only cut costs, but also free up employees from task-oriented activities and empower them to take more responsibility. Leverage technology to break away from the traditional hierarchy, and operate with a collaborative model using interconnected networks.

• Build reusable talent blocks so that‘learning to learn’ is the core skill. Coach and enable employees to constantly develop new skills needed by the organization. Have them focus on the skills that will become even more important in the age of the machine: idea development, experimentation, communication, analysis, and the ability to make sense of data. This way, as financial organizations evolve to take on innovative technologies and meet customer needs, each employee will be capable of supporting this goal.

• Seek the support of change analytics.When creating new products, services and customer channels, business leaders should gain confidence from the insights that change analytics can provide about their internal business areas. It will allow them to see which teams require additional guidance, and to adopt adaptive measures to address under-performance.

TEAM LEADERSHIP: FOSTER ACCOUNTABILITY, TEAMWORK, PASSION AND DRIVE

• To get the most value from the workforceof the future and reusable talent blocks, team leaders must foster accountability, teamwork, passion and drive.

• Focus on performance management atthe team level to empower team leaders to lead change. HR should incentivize learning, innovation and collaboration at a team level through modern performance management frameworks. Move away from relying solely on team KPIs that are fixed and statistical, and add fluid goals which are qualitative and personal.

IN A FAST-PACED ENVIRONMENT, STRONG LEADERSHIP HOLDS THE KEY TO SUCCESSFUL CHANGE

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A leading global insurer decided to take drastic action to stem the defection of mainly younger customers to its more digitized rivals that were able to offer more personalized and relevant products and services. Its goal: to become the most customer-centric provider in its market segment.

The carrier realized that nothing less than an enterprise-wide transformation would succeed. But it was concerned that a global change program of this scale would be difficult to manage and monitor.

To give visibility to whether or not the program was on track, Accenture conducted a Change Tracking survey to extract hard facts and

figures. Close to 1,000 staff members from 20 business units responded to an online survey that collected their views about what was going on across all levels. Their perspectives revealed the strength of the key drivers critical to the success of the change program and highlighted how people’s experiences were impacting on benefits realization and business performance.

The good news was that senior management teams were well positioned in ‘high performance’. They clearly agreed with the vision, their capability as leaders was strong and they were achieving high trust, credibility and accountability. Most importantly, their passion and drive was high – a critical driver of improvements in customer service levels.

The more challenging news was that disconnects below top management were putting the program benefits at risk. Staff frustration with a lack of resources and poorly defined processes were slowing things down. Clearly, leaders had work to do in building accountability and positive momentum in the levels below them.

These and other insights enabled leaders to intervene with precision and efficiency, taking appropriate actions to bring the program back on track. Key among these were improvements, by the business leadership, to the organization structures, systems and processes, and to

policies and procedures. They also included addressing the skills deficiencies that were jeopardizing enactment of the change. Much more than just training, this entailed on-the-job coaching, mentoring, shadowing, secondments and exposure to project work.

The result was that the business leaders worked with the team leaders to ‘smartly’ solve the resources constraints. Business performance immediately started to rise and the pace of change accelerated, creating positive steps toward building a more agile culture into the heart of their organization.

Figure 3. Change Tracking clearly identified where deficiencies at different staffing levels were impeding the insurer’s change program, allowing it to intervene and quickly get things on track.

TIMELY INTERVENTION PUTSINSURER’S CHANGE PROGRAM BACK ON TRACK TO SUCCESS

VISION LEADERSHIP RESOURCES DISCIPLINE ENERGY

Level 1-2 (n=47)Level 3 (n=243)Level 4-6 (n=683)

EMPLOYEE LEVELS Vi

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There are many myths surrounding the art of change management, and using guesswork or old tried-and-tested formulas simply doesn’t cut it in the future we are facing. There is no longer such a thing as one size fits all. Every large organization committed to transformation encounters different obstacles in different parts of the enterprise. The failure to identify and address these obstacles as they emerge can impede progress; even jeopardize the entire program.

The development of advanced analytics, coupled with massive data sets, enables FS organizations to elevate change management from just an art to one underpinned and guided by science. The insights they provide allow firms to plan their changes effectively, gain a clear understanding of their change fitness, address the gaps that are exposed, and focus on the change interventions that will actually have an effective impact. They also allow them to maintain a clear and accurate picture of their progress, and to take effective remedial action as soon as problems arise.

What this amounts to is simply the professionalization of the enterprise’s change capability. What would have been a luxury a decade or two ago, when change came along sporadically, has now become a necessity – a core competence for any firm hoping to keep pace with the times and seize the opportunities of the digital era.

TIME TO TAKE A MORE DYNAMIC AND ANALYTICAL APPROACH TO CHANGE

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ABOUT ACCENTUREAccenture is a leading global professionalservices company, providing a broad range ofservices and solutions in strategy, consulting,digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largestdelivery network – Accenture works at theintersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 373,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

Copyright © 2016 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.

CONTACT THE AUTHORSSARAH KRUGERTalent & Organization Lead for Financial Services, Australiasarah.a.kruger@accenture.com WARREN PARRYManaging Director, Global Change Tracking Leadwarren.parry@accenture.com

CONTRIBUTORJOY WANGTalent & Organization Practitioner, Financial Services, Australia

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