Insights

Source Global Research: Ecosystems In Financial Services

This article first appeared on Source Global Research on August 27, 2019.

Clients are starting to adapt to the ecosystem model when it comes to setting up their partner and supplier relationships. One of the biggest catalysts of that shift has been disruption and innovation; and few sectors have experienced as much recent disruption as financial services. It seems that almost every day, new fintechs emerge with propositions that threaten to redefine even the idea of a bank itself. Clients in this sector are under immense pressure to make sure they have the right approach to technology and innovation.

Deborah O’Neill has extensive experience helping financial services clients unlock digital and IT opportunities. In her role as Head of UK Digital at Oliver Wyman, she has helped shape the work that the firm does in this space. She has also written multiple articles that have appeared in Harvard Business Review and elsewhere, tackling complex questions around how organisations should think about their technology capabilities. We had the chance to ask her about the changes she sees coming in how financial services clients approach make-buy questions. 

 

To start off, can you tell me a little bit about the history of Oliver Wyman Digital and Oliver Wyman Labs?

Oliver Wyman Digital was created in response to the demand for fit-for-purpose data infrastructure and analytical capabilities in a changing world. Businesses need technology that empowers their teams rather than replace them, and which is built with the end user in mind. My teams and I work to deliver systems that provide the right information to the right people at the right time. We co-create, host, and provide data and analytics solutions across a range of industries–including retail, banking, and insurance–to help companies make sense of their data and use it to make better business decisions.

Our success is based on combining technical expertise with creativity and a deep understanding of the challenges businesses face. Our teams are made up of people with a broad range of backgrounds and experiences; we have exceptional data engineers, designers and software developers working alongside our business consultant and organisational effectiveness teams. This diversity is vital to ensure that our work has the intended outcome.

What we are doing is helping businesses achieve their goals faster by having better IT, data, and systems. Sometimes this means providing them with data and analytics capabilities that we've built ourselves–for example, we offer retailers the best tools to run successful promotions campaigns. When Oliver Wyman provides clients with data and analytics, we do it in a way that empowers their teams to be self-sufficient in the long term by giving them control and insight into the system. We don't believe in selling a 'black box' solution that churns out numbers which teams can't understand or adjust.

What I help companies build are data and insight systems that are future-proof. This means they are adaptable to current and future developments, such as regulatory changes and technology advances, and are flexible to expand to provide new features and functionalities.

How do you decide the right approach for a given client in terms of how much to rely on your existing intellectual property?

At our core, we're problem solvers who aren't afraid to start from a blank page. We don't ask 'How can we make our existing product fit what the client asks for?' we ask: 'What do the client's people and business really need?'. We relish the opportunity to co-create from scratch bespoke data, technology, and analytics solutions.

So do you see the role of Oliver Wyman in these types of engagements as something akin to a provider of a managed service?

Consulting firms should definitely look to build more long-term relationships with clients. Many, including Oliver Wyman, already do. The best ongoing relationships won't be outsourcing deals: because if you take something like analytics away from the client, they can't understand what drives the numbers and reports you generate, meaning they can't make the right business decisions, and so you're not really helping them in the long run.

My role is to enable clients to become self-sufficient and future-proof when it comes to handling data and making insight-driven decisions. Across Oliver Wyman Digital, we help businesses set up new capabilities that capitalise on the opportunities created by a digital world. This work includes helping clients find the right people and partner organisations and evolves into becoming trusted advisors to the most senior people in business.

As with everything we do, how we allocate teams to our clients is always bespoke. For example, at one client, we started with a team of 50 to get a new digital business unit up and running. After six months of this intensive work, we transitioned the business unit over to the client's team. Because the work we did is so robust and user-friendly, the client team can run it day-to-day and make changes as needed. Now, we have just four people working with the client, and they are only called in to help solve the trickiest of new problems.

Our success is based on combining technical expertise with creativity and a deep understanding of the challenges businesses face. Our teams are made up of people with a broad range of backgrounds and experiences; we have exceptional data engineers, designers and software developers working alongside our business consultant and organisational effectiveness teams. This diversity is vital to ensure that our work has the intended outcome.

Are you seeing any trends at the moment in how your clients think about make-buy decisions—in terms of what they’re willing to outsource and what they want to do in-house?

Right now, a lot of our financial services work revolves around helping businesses break their reliance on a single technology platform or service. In a world where technology changes rapidly, committing to a single system will only set you up to being behind the times again in another five or ten years. We advocate developing a bespoke system that cherry picks.

There's a definite trend of businesses wanting to bring more of their technology in-house. They don't want to have to pay someone to solve all their technology problems. Our clients want to have smaller, more effective teams tackling the most important challenges facing their business. They want to be able to work across different technology platforms to quickly develop the tools they need. However, to get started, we are often asked to help them build this capability and, in some cases, provide on-demand support.

Financial services companies are becoming more open to working with fintech companies because these specialist start-ups often have the best and most adaptable solution to a problem. For example, take identity verification on a mobile banking app. Overall, it is faster and cheaper to buy in a programme that compares a selfie to a passport photo than it is to develop the technology in-house.  I see traditional technology outsourcing evolving into partnerships between one big business and many specialist technology companies to co-create the best possible bespoke technology ecosystem. I expect the companies that use many smaller, high performing technology components will be more adaptable and successful than those who rely on one or two big platforms.

Technology in business is only going to become more important. That's just the way the financial services industry is going. Technology functions are becoming more agile, meaning they can respond faster to businesses' needs. Some businesses must first adapt their set-up and functions before they are able to fully take advantage of what technology can do for them.

How are your clients setting themselves up specifically to make good use of automation and robotics? And has automation impacted what business functions clients see as “core” and “non-core”?

When talking about automation in financial services, it's important to draw a distinction between robotic process automation–RPA–and process digitalisation. RPA has fallen a little out of favour with many of our financial services clients who are trying to transform their businesses. This is because it can only automate existing steps and doesn't fundamentally fix an underlying issue. It lacks flexibility and, importantly, can add extra complexity to already fragile systems. Many financial services companies are more interested in exploring how new technology can reimagine a process from scratch, free of any legacy architecture. This is process digitalisation. Whereas RPA would copy one line of data over from one system to another, process digitalisation would ask why the two systems can't work from the same dataset. Furthermore, it would address the issue in a way that allows any part of the business to access and use the data, thereby enabling an expanded range of insights and services.

Before building and deploying automation and AI in any business, first we check that the organisation is ready for it. Sometimes there is no existing data science team, or when there is one it isn't integrated with the business or producing useful information. In such cases, business will get more value if we don't spend time and money building new technology, and instead cultivate the best working practices and support the hiring and training of the right people to make sense of their existing data.

We hear from a lot of clients and consultants that a big part of the solution to the technology challenges you’ve mentioned is cultivating the right ecosystem of different providers. Is that a mindset that you’re seeing financial services clients adopt?

A lot of clients are trying to make their technology more modular. This is being pushed by their technology teams, who understand that the problems they face are better solved by an ecosystem of small, specialist fintechs and modular technology solutions than they are an end-to-end, often outsourced, single provider. This philosophical shift is the right one but requires senior leaders outside of the technology team to understand the issue and see it as a priority. In my experience, executive-level sponsorship is essential to successfully create a new technology ecosystem that benefits the whole business.

Many of our financial services clients are expressing frustration with being locked into long-term outsourcing deals with large vendors who don't really understand their changing or specific needs or, when they do, can't meet these needs fast enough.

Banks often work with fintechs to find the middle ground between building a new capability in-house and outsourcing from a single vendor.  In doing so, they are creating a technology ecosystem of multiple parts, where they can build, buy, and rent the technology capabilities they need. For example, a bank could look to rent the cloud services to run their analytics platform, buy in external support to set up the right business processes and tools, while building and owning the data and the insights it generates.

So how do you as a consultant help clients move towards an “ecosystem” mindset?

There are two schools of thought when it comes to helping a business transform its technology ecosystem. The first is to start again from scratch – we call this 'greenfielding' – so the new technology is unencumbered by old systems. The second is to make incremental changes to the existing technology to make it more efficient, bit by bit. Both are valid approaches.  Our job as consultants at Oliver Wyman is to bring together our sector-specific expertise with our digital capabilities to understand what makes the most sense for any individual client. It can be one or the other or a blend of the two.