Over the past 10 years, change in financial services has felt like a tough endurance cycle race. The race is starting to speed up, as the pressure intensifies and financial services organizations realize their responses to it will determine their future prosperity. A few of them have honed their agility and mastered change.
To understand how banks and insurers are tackling change, Accenture commissioned the FS Change Survey—a global study in which we interviewed 787 senior executives who are responsible for developing their organizations’ change strategy and/or implementing their programs.
We speak to Andrew Woolf, Accenture’s Global Lead for Financial Services Talent & Organization, about why change is the battleground for the future of banking and insurance as well as what the change leaders are doing to lead in the new digital economy.
Q: The rate of change in the technology, regulatory and consumer spaces is accelerating. How are banks and insurers keeping up?
Change is becoming the new normal for banks and insurers. Since the financial crisis, they’ve operated in an environment of rapid regulatory change and growing cost pressure. Now, they’re increasingly finding themselves challenged by changing consumer expectations and the advent of new competition from fintech, insurtech and other digital disruptors. On top of all this, the torrent of new digital innovations presents firms with all kinds of new opportunities – but they come with their own set of challenges.
Our research indicates that insurance carriers and banks are not, for the most part, complacent about the need to transform their business models and strengthen their change capabilities. However, there is a small group that have a significantly greater commitment to change. We call them the change leaders, and they’re prospering because they have taken their change capability to a different level than that of their peers.
Q: What are the change priorities for financial services companies at the moment?
Banks and insurance carriers reported that they’re stepping up their investment in change programs across the board. It’s not surprising that efficiency and cost reduction remain near the top of the list of change priorities for banks and insurers alike. Financial services companies in many parts of the world have yet to see their financial returns go back to pre-crisis levels and are focusing on improving profitability by reducing running costs.
Risk and regulatory compliance is also a change priority, with the heavier compliance burden being another legacy of the financial crisis. Most of our respondents told us that their strategic change portfolio is inhibited by the need to invest in regulatory change.
Yet, despite the mandatory change burden, banks and insurance carriers alike are investing significantly in the customer experience and in new digital technologies and channels. Among the digital technologies rated as most important for transformation are big data and analytics, mobile, cloud, social, the digital eco-system and robotics. For banks, blockchain is a priority, and for insurers, the Internet of Things ranks highly.
It’s important to note that these investment priorities are tightly interwoven, as new digital technologies are used both to improve the customer experience and lower the cost to serve.
Q: Change programs have a bad reputation. They’re often associated with long, complex projects that fail to deliver the intended benefits. Is this still the case?
There’s less tolerance today for change programs that fail or take too long to deliver. One of the most striking findings regarding banks’ and insurers’ change investments is the demand for more rapid payback: around 80 percent of respondents said their shareholders expect change programs to deliver the targeted benefits within 18 months or less.
Clearly, the days of prolonged multi-year programs with back-loaded benefits are long gone, a fact which change leaders appreciate more than other players. Financial services organizations understand that they need to develop the ability to change continuously and rapidly.
This will include constant small changes and adaptive moves inside their current business model, as well as large-scale transformation that changes ‘who we are, what we do, the customers we serve and the way we do things around here’.
Q: Let’s go back to the concept of change leaders. What makes them different to the rest of the pack and what can other financial services organizations learn from them?
Approximately 10 percent of the firms we surveyed are achieving significantly better results from their change investments, and report markedly better commercial performance as a result of this change. These are the change leaders, and we identified three main factors at the root of their greater success.
Firstly, they have a well-defined digital strategy, a clear vision of the changes that are required to implement this strategy, and a leadership that is committed to the successful execution of these changes.
Secondly, change leaders foster a culture that embraces change. They harness the passion and drive of their people, enabling the organization to be more agile and responsive to its customers and other market forces.
And thirdly, they have a more professional and effective change capability that delivers the required change outcomes and performance enhancement.
Together, these factors help them execute greater volumes of change at a faster pace and with stronger disciplines. The change leaders have shown the way. They are comfortable with rapid, non-stop transformation, and they are generating the change outcomes their shareholders demand. Others would do well to learn from them.