Transform your dinosaur: portfolio management in Financial Services

For banks and insurers, it is necessary to deliver excellent client service. Such service is usually powered by efficient and well-organized processes. In an optimal situation, these processes are straightforward and fully automated. In reality, we see a different and more challenging picture...

Often, due to several reasons, processes can only be automated up to 80 or 90 percent, which means that 10 to 20 percent is spent on manual labor instead of servicing your client. Therefore, more time-consuming handling is needed to provide service to the client – with consequences. 

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How is it possible to reach client centricity targets while dealing with such efficiency challenges? This article provides some theoretical and practical considerations to optimize and improve process performance, for effective innovation portfolio management in both the short and long-term. We would like to help you assess your innovation portfolio, so we have combined everything we will discuss in a tool. The tool gives you the possibility to map your current innovation activities, while first outlining the bigger picture. You can find it at the end of the article.

To optimize performance in both the long and short-term several improvements can be made. Nagji and Tuff distinguish three areas to manage your innovation portfolio: core, transformational and adjacent. We incorporate two core improvements, which are related to existing customers and markets using existing products and technologies; and transformational gains, which go further by developing new products for new markets, also known as a breakthrough.

Core Process Optimization

Optimizing the core means adding new functionalities and features to existing products using technologies that are already (or almost) in place. A client-facing example might be Tikkie, an ABN AMRO initiative, or another example – work-related – could be the robotization of manual labor using Robotic Process Automation (RPA). That might not sound as fancy as something disruptive, but it is necessary to secure long-term success. Improvements made on both client and organizational levels will pay off later as satisfied clients are more willing to stay.

Low hanging fruit will immediately show up after even the simplest brainstorming session. Just do it – get started

How can you discover such improvements? Low hanging fruit will immediately show up after even the simplest brainstorming session. Just do it – get started. For example, a Dutch insurer organized a LEAN session on their payment process and discovered that current account statements were not self-explanatory, which caused a lot of mail and phone traffic from clients. But the question remained: how to implement the discovered improvements? Often, corporations turn to their own toolbox of systems and technologies and, therefore, solutions are always implemented the same way as before. It has to fit the corporate architecture, right? 

We recommend going beyond what you already have in place. Which tool or technology might offer different solutions than the ones you already use? Experiment with new stuff – and be confident. Visit seminars and participate in knowledge-sharing sessions. The insurer mentioned above started out experimenting with RPA, which was already embedded in the organization within six months. Now, they are looking forward to extending their horizon again with process mining.

Transformational Process Optimization

In contrast to optimizing the core, transformational initiatives create new business opportunities for your organization – something that is essential in innovation portfolio management to make the real difference and to stay relevant as a business. Do you think banks and insurers are transformational? Amazon and Google arethey’re exploring steps to tap into the insurance market. They are not afraid to transform their businesses to keep their customer service excellent.

We believe that technologies such as blockchain, artificial intelligence, and the Internet of Things (IoT) offer enormous possibilities to digitally transform an organization. Consider the example of Bundelz’ Pay as You Drive (PAYD), which creates customer value by involving a telecom partner. PAYD is car insurance that leverages IoT technology and enables customers to pay insurance based on the kilometers driven. Involving more partners in the ecosystem, such as payment services providers, parking services providers, and retailers, can be considered transformational, which adds its own value to the customer.

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Currently, PAYD services are limited to insurance, but just imagine the possibilities for developing it further… For instance, let's say you (a consumer of PAYD insurance), are going to watch a movie in the city and you have decided to make a trip by car to the cinema downtown. As you drive your car, the parking services provider (now part of the PAYD ecosystem) directs you to the closest available parking spot next to the cinema. While you are enjoying the movie, your car becomes repurposed as a shopping cart, enabling grocery shops to deliver previously ordered food – on demand - to your car. 

The PAYD example outlines a transformative initiative that can change the business model of traditional banks and insurers. This empowers them to stay relevant and competitive in the future.

Must-win, or nice-to-have?

The financial services landscape is changing. It is not a question anymore if large technological organizations will take a position in the financial services landscape. The question is: when and to what extent will they position themselves as prominent actors? For banks and insurers, it is important to optimize core processes to deliver excellent client service. But working on the core is not enough to stay relevant anymore. Banks and insurers must develop transformational initiatives that create new business value, but most importantly add customer value.

The technological opportunities to work on the core and transformational initiatives are enormous and available to all organizations. To become or remain a relevant player in the financial services sector it is crucial to master these technologies or find a partner that does so. It is important to think about what the possibilities of digitization are, and thus what it can do for customer experience, operations, and business models. Adopting new technologies, in combination with strong leadership that understands the need for digital transformation – that is the key to pushing the organization through transformation successfully, and repeatedly.

Setting a schedule

Timing is crucial in deciding which types of innovation to focus on. In practical terms, that means you should start exploring the possibilities now. Be aware, Nagji and Tuff prescribe guidelines that 70 percent of your improvements should be focusing on your core. In addition, 20 percent of your portfolio should focus on adjacent (‘in-between’) improvements (i.e. supplementing core activities by adding new technologies). The final 10 percent of your portfolio should explore transformational activities, although transformative activities potentially have a higher Return on Investment.

It’s not needed to specify the timing or term, just analyze your current portfolio now.

In sum, it’s not needed to specify the timing or term, just analyze your current portfolio now. Often, improving your core processes is a combination of implementing low hanging fruit, together with well-considered process or system changes which contribute to making an impact in the here and now. In contrast, transformational process developments might require a separate team, location and budget, without knowing exactly what is coming.

Portfolio management in financial services - Colorful String - by Accenture

What about your innovation portfolio management?

Download the innovation portfolio management tool

While reading this article you might ask yourself where to start or how to get your innovation portfolio divide right. The purpose of this tool is twofold. The first part helps you to plot the horizon of your current activities. It gives answers about what you are doing, right here and now. Second, it gives you a blank space to write down your activities and consider how you want them to be divided. This enables you to identify gaps between current and future states and come up with plans to start bridging these gaps now. 

Also, you might want to use the tool to spark discussion between your colleagues and upper management about the divide, and whether a possible shift is needed. Improving business processes and focusing on innovation is crucial to stay relevant as an organization, so make sure you apply the right focus.


Authors: Kevin Peters Marijn van de Poel