Author Archives: Alan Street

About Alan Street

I work at IBM.

What is a Banking Multi-Channel Architecture?

This entry is part 13 of 31 in the series Defining words

I was referred by a client to a good article by a fellow IBMer on the subject of multi-channel architectures in banking so I though I would pass it along.

Finding the balance between reusing components and maintaining flexibility and agility on each channel is a subject that I spend a lot of time on myself and find quite interesting. This article covers the fundamentals you need to understand before tackling more complex topics.

If you are here then you must be interested in the topic. I encourage you to give it a read.

A MULTI-CHANNEL SYSTEM ARCHITECTURE FOR BANKING by Chris Pavlovski

What is DevOps?

This entry is part 11 of 31 in the series Defining words

One area of business strategy growing in importance is strategy around the business of IT. I think of “the business of IT” as how IT delivers services internally vs. IT Strategy which is (how I use the term) how IT directly supports business capabilities.

A über topic in the business of IT is DevOps. It is on my radar because it supports key business capabilities such as ability to bring new product features to market quickly and the ability to experiment with customers through continuous innovation. I will leave finding how I just contradicted myself as an exercise for the reader.

I am creating dozens of hooks for future blog posts here!

Wikipedia says: “DevOps (a portmanteau of development and operations) is a software development method that stresses communication, collaboration and integration between software developers and information technology (IT) professionals.^[1] DevOps is a response to the interdependence of software development and IT operations. It aims to help an organization rapidly produce software products and services”

I really enjoy hearing about how leading practices are used in real life by small cutting-edge enterprises, but these disclosures are rare. I stumbled upon a great write-up on how iProperty has implemented DevOps on Andy Kelk’s blog. Andy says: “DevOps is to operations what Agile is to software development. It’s about increasing communication, collaboration and achieving results as a team and not in silos.” He also recommends a few books which will no-doubt end up on my reading list in the future.

What is the best mobile strategy for large banks?

This entry is part 1 of 1 in the series Mobile Banking

The first thing that I can say about mobile strategy for large banks is that I can not cover it sufficiently in a blog post. Like business strategy, we will need to peel it back layer-by-layer.

In any kind of IT strategy investigation I recommend step 1 be a diligent survey of reading material and this usually involves lots of books, articles and analyst reports. So let’s get started with Gartner Magic Quadrant for Mobile Application Development Platforms, 7 August 2013 ID:G00248487. I believe that you can access this one for free!

Building a business case for investments in customer experience

Good news! I found another great resource for connecting customer loyalty to customer experience!

Forrester: The Business Impact Of Customer Experience, 2012.

A comment in the first paragraph sums it up: “Years of Forrester data confirm the strong relationship between the quality of a firm’s customer experience (as measured by Forrester’s Customer Experience Index [CXi]) and loyalty measures like willingness to consider the company for another purchase, likelihood to switch business, and likelihood to recommend.”

But it raises two questions:

What is the CXi and what does it measure?
How does this translate into cash?

The CXi measures: (still looking into this one).

The financial payoff breaks down into the following:

Additional purchases from existing customers
Cost reductions from lower customer churn
New customers resulting from referrals.

A customer with a bank having an above-average CXi score is 12% more likely to consider another purchase than with a bank having a below-average customer experience score. Conversely, the above-average bank is 12% less likely to have a customer defect. The above average bank is 15% more likely to have customers recommend the bank to friends. The competitive advantage is even more positive for credit card issuers.

For U.S. banks, the annual revenue boost can be up to $252M. They provide a spreadsheet so you can customize this calculation.

I am not going to beat the drum for strategic design again but you can read about the benefits here if interested.

Connecting customer loyalty to improved customer experience

One of the most important issues I deal with regularly is how to estimate the business benefits of improving customer experience.

One good source that I turned up is IDC’s Business Strategy: Digital Services Impact on Customer Retention and Acquisition resulting from customer and bank surveys in Europe and the U.S. An interesting idea is the link between the usage level of digital channels and the customer’s satisfaction with that channel. I would have guessed that such a correlation exists and the IDC report supports a darn-near linear relationship. I like the idea of using the usage level of your mobile app as an approximate measure of customer satisfaction with the mobile channel and as a component of overall customer satisfaction.

They add that the low adoption rates indicate that the banks have failed to design the mobile apps from the customer’s perspective — a strong argument for taking a strategic design approach, in my view. They point out specific areas where their research indicates banks should focus, such as new-account-opening and chat. Security and convenience are listed as the most important factors to customers.

An approach to determining what someone needs in order to stay (that frequently works) is to ask them. According to customers: “In all countries, over 80% of respondents felt that digital services were either very or somewhat important in keeping them as a client. In Germany, that number was over 90%.” In fact, 14% of respondents said that they had closed an account because of poor/missing digital services.

If you are considering investing in digital channels as a means to improve customer experience then you are not alone. Nearly 80% of the banks in the U.S. have this strategy.

What are the business benefits (and value) of Strategic Design?

Strategic Design can be used to redesign organizations to improve how they are experienced by people. A primary focus is on customers, of course. The point of doing that is to increase the benefits customers perceive they are receiving from the organization. The point of doing that is to increase customer loyalty.

So a primary business benefit of strategic design is increased customer loyalty.

The business value of strategic design is therefore increased lifetime customer value and profits.

As I noted in another blog post, lifetime customer value is calculated as the present value of future revenues from a customer and depends on customer loyalty. In banking, a 5% increase in customer loyalty lifts lifetime profits from that customer by 85%. This is because of high customer acquisition costs such as advertising, on-boarding, and financial inducement (a lower price or special promotional deal) required to get customers to switch banks or choose one bank over another for a particular product.

That said, there are other benefits of Strategic Design, such as higher quality leads (referrals), improved brand equity, and increased sales conversions of new customers.

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What are business benefits and value?

This entry is part 10 of 31 in the series Defining words

Ironically, the most common request I get from business people nowadays is to explain the business benefits and/or value of some course of action that we are proposing.

In the past, business leaders wanted to accomplish some goal for good reason and we were asked to propose a way to do it. They knew the benefits already and had a sense for the expected value.

Now, business leaders are asking technology experts for ideas on how best to compete. The line between business capabilities and technology enablers is blurring. I am not just referring to products such as Blogsy, where the technology is the product. In financial services, from the customer’s perspective, the mobile app is becoming indistinguishable from the bank. Instead of solving a well-defined problem we are trying to figure out how to make customers more loyal or something like that and the technology is the primary knob to tweak.

When an IT or transformation team sells business stakeholders on solutions, projects, and initiatives they are selling products and services to meet business needs and wants that are derived from the ultimate consumers’ needs and wants. This is true even for corporate banking, just more indirectly.

The value to the business stakeholders is a function of the expected benefits to the business (derived from benefits to the ultimate consumer) and are calculated based upon the present value of the resulting future cash flows.

For example, lifetime customer value is calculated as the present value of future revenues from a customer and depends on customer loyalty. In banking, a 5% increase in customer loyalty lifts lifetime profits from that customer by 85%. This is because of high customer acquisition costs such as advertising, on-boarding, and financial inducement (a lower price or special promotional deal) required to get customers to switch banks or choose one bank over another for a particular product.

So the business benefit expected is the 5% increase in customer loyalty. The business value is the present value of the changes to future revenues and costs.

How to make customers more loyal is another matter.

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What is Strategic Design?

This entry is part 9 of 31 in the series Defining words

I work with a lot of people who have a strong aversion to the word “strategic” so I really enjoy terms like “strategic design”. When I say such things, the first dear friend to roll their eyes gets the most credit for calling me on another ridiculous tangent into obscure techno babble.

Then I tell them to “Google it” and look down my nose at them like they haven’t read an important book in decades.

Google offers up Wikipedia, where you will learn that “Strategic design is the application of future-oriented design principles in order to increase an organization’s innovative and competitive qualities.“

Intersection says “The challenges enterprises face in a hyperconnected, highly dynamic, and technology-pervaded world require them to think holistically about their relationships to people. The design competency can help enterprises to consciously shape the way they are experienced over time, to provide afacevisible and approachable to everyone interacting with them. To tackle problems on this level, the practice of design needs to become more strategic and relevant to problem settings typical to the enterprise.“

My hope is that each person goes off and learns that everything we have been doing has been a futile and myopic attempt to optimize a single variable in a complex system. We have been like a group of oblivious surgeons furiously operating away without even realizing they were all trying to save the same patient.

So how do you broaden your perspective and work across disciplines in a well-orchestrated team to make an enterprise work better for everyone involved? That is the subject of INTERSECTION, How enterprise design bridges the gap between business, technology and people.

There is a useful article about the book by Gerd Waloszek on the SAP Design Guild, complete with summary tables that helped me get my mind around the book.

There are other books on strategic design. What drew me to this particular book was the extensive definitions of words, lists of things to think about and do, and a process for putting it into practice.

I encourage you to read the book and then go around saying “strategic design” and see how people react.

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Alan’s Reading List Summary

I have peppered my blog posts with great books, articles, videos and Podcasts for architects to reference. If you are not keen to wade through all of my long-winded ramblings and rants then you can find them all listed on the “Reading list”, below.

As a bonus, I list them in the order I would read them if my brain was wiped and I had to read them all again.

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Chinese noodle soup for the discouraged soul

I was thinking it was worth 10 minutes to make a donation to the Philippines. There were a dozen bank account numbers all over the internet. Just transfer to the account. How easy! Everyone must be doing it!

So I fired up Xoom. I like the site because I can transfer money to Brazil for only a $4 fee. Oops. They need the organization’s street address and I can only guess which address they want. Not so simple. Visions of spending hours tracking down my money (like the first time I tried to transfer money to Brazil) flashed through my mind.

So I jumped over to my Bank of America Web banking. $35 in fees was sounding better all the time. But still, the freaking street address was required. Who has a street address these days? It’s like a pencil. Christ. Let go of the past, world.

No worries! There on the same Web site was the logo for the mini-mart where my father bought me tamales as a boy in Las Vegas, proudly stating I can donate there. And what are the chances, there is a location one block away from my condo in Kuala Lumpur! It seems God always gives me the red carpet! One problem…my requests brought only looks of confusion. No tamales. Even bricks and mortar are failing me.

I was hungry and I could smell the Chinese noodle soup kitchen across the hall. I guess I will eat my soup thinking of people who have none.

Later, with some blood sugar reaching my brain, Google was able to lead me to http://www.americares.org, who took my donation via credit card. Thanks Americares!

Do you ever get the feeling, even in the best weather, things are just too damn hard in this world? I think a few people save a few minutes or a few dollars by not taking the time to imagine how things will work in the real world and the rest of us stumble over it until we figure it out. But we are thousands of people duplicating the stumbling thousands of times. Can we just pay one guy to think it through before putting it out there? Remember the ultimate user might be just some hungry guy on his way to get some soup.

I think the Chinese noodle soup for the discouraged soul (or blood sugar for the starving brain) lies in something called strategic design. More on that later…

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