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Event_FST Sydney RT_Transcript FINAL_Q4 14

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Scott Leader

The document summarizes a discussion between heads of innovation, digital, technology and customer experience from various banking and insurance companies on strategies for transforming to survive and thrive in a digital world. David Hackshall from Wesfarmers Insurance discusses how technology has led to changes in social behavior and customer expectations, and the need for organizations to focus on customer experience, leverage data to personalize interactions, and build loyalty programs. Representatives from Commonwealth Bank of Australia, Westpac, TAL, ING Direct and AMP discuss their approaches to driving innovation through initiatives like innovation labs, prototyping, testing ideas quickly, and collaborating both internally and externally.

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Transforming to Survive and Thrive in a Digital World Top row (from left to right): Keith Winsor, Director – Head of Implementation and On-Boarding – Global Transactional Services, Westpac; Geoff Henderson, Head of Operations and Performance, Lumley Insurance; Christopher Daley, Global Head of Markets Digital Channels, Commonwealth Bank of Australia; Scott Leader, Executive Director, Pegasystems; Jeremy Simmons, General Manager Customer Strategy, TAL; Mike Baldwin, Head of Innovation and Implementation – Global Transactional Services, Westpac; Mark Murphy, Head of Delivery, TAL; Weston Chisholm, Account Executive, Pegasystems; Dr Munib Karavdic, Director Design and Innovation, AMP. Bottom row (from left to right): Lee-Anne Walker, Head of Design & Innovation Operations – Design, New Ventures & Innovation, AMP; Tasos Hatzimichailidis, General Manager Sales Operations & Transformation, Allianz; Caroline Rockett, Head of Technology, Wesfarmers Insurance; David Hackshall, Chief Information Officer, Wesfarmers Insurance; Enda Mahoney, Head of Digital, Personal Banking, Macquarie Bank; Tom Higgins, Head of Technology Services, IAG; Janelle McGuinness, Head of Digital & Emerging Channels, ING Direct; Valentina Dunoski, Director, (Head of) Digitisation and Customer Experience, Commonwealth Bank of Australia. FST Media and Pegasystems hosted an exclusive luncheon with a select group of heads of innovation, digital, technology and customer experience in banking and insurance to discuss transformation strategies to survive and thrive in a digital world. David Hackshall, CIO of Wesfarmers Insurance, shared his insights in driving and delivering innovation to meet expanding and evolving customer expectations. DAVID HACKSHALL, WESFARMERS INSURANCE: I am going to share my views and opinions based on my experience at Wesfarmers, but also at some other organisations that I have worked for in the past. I would break them down into three key areas for discussion: Firstly, how technology has led social change and how that social change has impacted behaviour and how businesses now interact with their customer base. Secondly, what is the digital journey? Thirdly, what is the impact on the organisations that we all work for? Firstly, technology-led social behaviour; we all live in a society that has evolved through innovation – technological or mechanical. However, every single innovation that we have seen has ultimately resulted in a change of
TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 2 behaviour – you cast your mind right back to the wheel; we no longer drag things around, we push them around in wheelbarrows. Take commercial aviation – we do not think twice about jumping on a flight down to Canberra, Melbourne or Perth. It has expedited our ability to get from point A to B and has brought about a level of convenience that, as a society, we now expect. That convenience leads to a framework in which people will make decisions. This framework of decision-making has evolved in the digital world where, through the introduction of mobile devices and automation, consumer behaviour has now manifested itself into a new set of demands that are the impost for change within organisations in how they interact with their consumer base. What makes travelling with a given airline a good experience for me? One is simplicity – as I may have already checked in online, I go straight through securityattheairport;havemyownqueueandboard the flight. The fundamental shift is the consumer experience that is driving where the consumer will shop. Another one will be information. Has ‘TripAdvisor’ influenced your decision of staying at point A or point B? And TripAdvisor’s information comes from the social interactions and the community. We are seeing innovation not only in automation and simplicity of engagement, but also the level of collaboration in the aggregation of data and how that data brings about a decision-making framework for consumers. The financial services sector needs to look at social attributes of consumers and how they drive decision-making. With insurance, in particular, transactions occur typically once a year with the insurance premium renewal. That represents a challenge in terms of the consumer interaction. I would suggest more interaction with the client in between renewal periods is going to be fundamental to driving or retaining consumers within your portfolio of business. That brings me to loyalty programs as ultimately businesses are here to attract, retain and grow customers and revenue. A lot can be done and learnt from other segments of the marketplace. With the Qantas loyalty and ‘Frequent Flyer’ program, Coles’ ‘Flybuys’ and Woolworth’s ‘Rewards’ program, all of them leverage social data, transaction data, and gear towards building a level of loyalty and rewarding it. If you compare that to our sector, I would say we are very much lagging behind. We contribute to that sector through the selling of loyalty points, but not nearly enough in terms of generating a customer loyalty to brand. One of the challenges is thatovertheyears,wehavebecomeaverytransient society – if you are engaging in a transaction that is taking too long, you are going to lose the customer. Conversely, when it comes to loyalty, if people do not feel rewarded and valued, they will leave you. So we go back to this theme of grow, attract, retain and grow. There is a lot to be said about the convergence of data – either internally or how data can be augmented through external providers, and the marriage of data-sets to generate more targeted marketing and sales. One of the things we have seen is a move away from a shotgun approach of traditional marketing to a lot more focused and targeted marketing towards the consumer. In order to do that, you must understand where the data- sets are and how to interpret those data-sets within your organisation. The retail environment is becoming incredibly astute at using data to target very specific sales strategiestotheconsumer.Previously,organisations may have undertaken a catalogue letterbox campaign. Today, they tailor the catalogue based on postcode. This way, the campaign can be more targeted. They are using the marriage of external data (demographic) and internal data to generate transactions that are specific to a particular community or a subset of data. That is becoming the norm. Another component is what people call the ‘geekification’ of marketing. There seems to be an undercurrent of tension, particularly hyped up by the media, in relation to the role of technology and technologists within organisations, and the role of marketing and the IT spend trends. We are seeing an empowerment of the marketing function with the introduction of social engagement, an empowered consumer, the enormous amounts of data and how organisations interact and attract their clients. It is a natural progression of marketing spend as marketers focus will be where the eyeballs are; more and more towards digital screens. It is a spend shift of the marketing function; enabled by data and technology. What do organisations need to do in order to prepare for this? There is definitely an opportunity for a ‘customer experience’ role at every organisation. Put yourself in the shoes of the customer – how do you become easy to do business with? I can see an evolution coming with roles within organisations. That will happen for a couple of different reasons: one is the breakdown of silos, as organisations realize that the customer does not care about how you are internally structured; and this structure should not come at the expense of a positive customer experience. The other is the ‘moment-of-truth’ for customers, which is when customers initiate an interaction with you and not necessarily when you wish to interact with them. How customers behave socially should influence your decisions on how you frame your transactions. From an insurance perspective, the ‘moment-of- truth’ may be the moment you write a new policy “How customers behave socially should influence your decisions on how you frame your transactions.” – David Hackshall, Wesfarmers Insurance
TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 3 and what value you add for customers so they can make the best financial and risk decision for the level of cover they need. Is the consumer going directly to insurers as opposed to using brokers? The broker market may not go away but may well evolve into a service for advice rather than being a conduit to the insurer. Time will tell. SCOTT LEADER, PEGASYSTEMS: Christopher, how are the rapidly-changing customer expectations shaping your organisation’s ability to provide best- in-class customer service? CHRISTOPHER DALEY, COMMONWEALTH BANK OF AUSTRALIA: With Institutional Banking and Markets at CBA, we are creating the environment for innovation to reach its true potential. With ‘client- centric design’, we are conducting client workshops to create a service-based architecture where it can release app-based, quick-to-market products. We are doing so through an Innovation Lab, a place where we can co-create and explore ideas. We have also released other products through creating the environment for innovation. Cardless cash is seen as a disruptor in the retail market, but that idea came from a person in a branch in the retail network. As, CBA Chief Executive, Ian Narev, said, the best ideas come from the front-line not from his direct leadership team. The top-down needs to create an environment where you can do this. The other part includes going to places like Silicon Valley and looking at Spotify and start-ups, getting ideas and bringing them back to create the best environment to innovate for our clients. It is all about the client and how you look at client experience, what the financial institution wants to deliver to the client and how the client engages you. The only way is through partnering with clients and co-creating to form these partnerships and delivering what they want. SCOTT LEADER, PEGASYSTEMS: Mike, from Westpac’s perspective, how are you looking to drive innovation through the organisation? MIKE BALDWIN, WESTPAC: One thing about innovation is solving customer problems better and more easily. Ideas can come from anywhere – and probably the best ones do come from the frontline – and we have very flexible and configurable platforms to solve those problems, especially in the corporate institutional segment. In the retail mass market, you need more standardised solutions. A lot of solutions these days are about automation, digitisation and getting rid of the paper and manual processes,reducingriskandmakingthingseasierfor our customers. Anybody can be a part of innovation – whether they come up with an idea to help solve a customer problem or simplify a process, or whether they want to work on a project to implement an idea from someone else. We have a full framework and structure so that everybody can participate and The Hive is just one more piece. That is an area where we can use professionals to help lift our own innovation capabilities like generating an idea, creating or incubating a prototype, commercialising and bringing it to market. SCOTT LEADER, PEGASYSTEMS: Jeremy, you made some interesting points around embedding innovation in some of the business programs. Would you like to comment further on that from a talent perspective? JEREMY SIMMONS, TAL: We appointed one of our CXOs last year as Chief Innovation and Disruption Officers, which is a great role. It is about not centralising the whole idea, framework or paradigm within four or seven people. Our journey has been about taking time to understand the research, insights and studies around what the consumer is telling us about life insurance. What are their perceptions and experiences? We do digital not because it is fashionable but because it seems like the appropriate thing to do. We are trying to solve customer and partner problems better than anyone else, making their experiences something they want from us. For us, the beginning of the journey is an integrated multi-channel experience using digital, both at the front and back. The back-end has been neglected because the focus has been on making the sales while customers are screaming out to us about eight expectations. Innovation can help the frontline people in talking to partners and empowering them without becoming bureaucratic. It is providing those frameworks through our team and not looking at it as a centralised model, but spreading across that organisational path. MIKE BALDWIN, WESTPAC: It is more about the culture and not a specific initiative on innovation. Digitisation is one trend that can foster a lot of innovation. For example, the ability to digitise forms and paper can change customer experience. And in the corporate institutional space, we are helping insurance customers digitise the experience for their customers as well. We are not just impacting our customers’ processes, we are impacting the processes that they use with their customers. As an example, when a paper claim form is being filled out after an accident, it is assessed, approved, and then the claim is going to go back to the service provider to get paid along the way. You can digitise that whole process and enable the service provider to receive payment when they provide the service, and enable the claim information to be accessible a digital environment that is connected and transparent to “Innovation can help the frontline people in talking to partners and empowering them without becoming bureaucratic.” – Jeremy Simmons, TAL “Digitisation is one trend that can foster a lot of innovation… in the corporate institutional space, we are helping insurance customers digitise the experience for their customers as well. We are not just impacting our customers’ processes, we are impacting the processes that they use with their customers.” – Mike Baldwin, Westpac
TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 4 everyone. It is about that end-to-end experience and what the customers are doing. Innovation can help drive a lot of that. JANELLE MCGUINNESS, ING DIRECT: It is about how you successfully bring innovation to the market. In the broader corporate environment, it is about how you navigate an idea to execution through processes, teams and silos. The start- ups do not have the systems, people, silos and all the structures in place that sometimes [impede] innovation. You do need to have some process to foster those ideas and evaluate those ideas towards something that is going to add value to customers. How you use human-centred design and processes so that you can test, learn and potentially fail on quickly? Because customers are moving quickly with their uptake of things, they are probably more willing to try and accept that things are better, more so than [expecting] something is perfect. At our organisation, it is about having something to try and test quickly so we know whether we will be successful or not. DR MUNIB KARAVDIC, AMP: What we found at AMP is that going through the ideation process is probably much easier than go to market. We introduced a concept like a ‘prototype first’, then built a Minimum Viable Offers (MVOs) and tested live in the market. In doing this process, we face a some misunderstanding from the rest of the organisation. We realised that we needed to start putting many functions in the organisation on Human Centred Design discipline otherwise we will always encounter problems. VALENTINA DUNOSKI, COMMONWEALTH BANK OF AUSTRALIA: I have been with CBA for nearly two years and one of the rewarding things has been the organisation’s willingness for us to bring a brand new idea to market and not expect us to get it absolutely right 110 per cent the first time. I had the opportunity to work on ‘Pi’, which has been a journey for the organisation for nearly three years and we have gone through various iterations of not only the devices, but the ecosystem and how the components all fit. The first product that we launched in my portfolio was a product that went out to a very niche market and then we brought out an adaptation of that product, which sold over 2,000 devices within the first two weeks of its launch. If you are willing to put in an investment, you learn and adapt along the way. And that has been a delightful cultural impact that is thriving through our organisation, both in the business as well as the technology side. Our Chief Information Officer, David Whiteing, is focused on building a platform and setting up that platform where we can add value. We have brought in partners externally that help us understand what our customers are looking for. It is not just our own individual ideas and thoughts, it is about what our customer is looking for and how we can meet that journey. SCOTT LEADER, PEGASYSTEMS: Many organi- sations feel that they have to do it themselves, but that is not the way that the world works anymore. Collaboration is critical. And particularly around the agility required to deliver, many organisations just do not have that capability ingrained within their culture and culture plays a very important role. To some extent, you need to spin out a start-up and protect it from your own organisation in order for it to become successful otherwise it runs the risk of being cannibalised by the bigger animal. VALENTINA DUNOSKI, COMMONWEALTH BANK OF AUSTRALIA: True. Or follow a lot of little start- ups and nurture them. You could also sponsor them inthebackgroundbecausemanyofthoselittlestart- ups have some brilliant ideas. They do not have the restraints typical of large organisations and can quickly adapt to something if it is not working right. DR MUNIB KARAVDIC, AMP: There is always the dilemma when to bring start-ups back into corporation. While we need to bring these start- ups back at some point of time, are we delaying elimination of their creativity by keeping them in isolated environment (outside corporation)? One way of thinking about this is more in the way of how we can create the environment within the corporate world. How can we make sure that the rest of the organisation understands that? It is a tougher job but at the same time, probably in the long-term, would yield greater benefits. DAVID HACKSHALL, WESFARMERS INSURANCE: Iwouldagree.Thatiswhyitiscultural.Andchanging culture is like turning a shipping liner around – it takes time and you cannot do it immediately. It can take years, or you can change 51 per cent of the staff – both not very practical options in terms of today’s agile market. Internal cannibalisation of innovation in order just to protect the legacy can stifle the growth journey. ENDA MAHONEY, MACQUARIE BANK: At Macquarie we currently innovate to the power of one, the Macquarie customer. But we have many partners seeking to build their own customer experience. We are heading towards a future of innovation to the power of N, where we provide basic banking services to our partners, and they innovate on top, they build the customer experience that best suits their community. A good example is Woolworths, Macquarie is the banking back-end and Woolworths are building a unique shopping and “Because customers are moving quickly with their uptake of things, they are probably more willing to try and accept that things are better, more so than [expecting] something is perfect.” – Janelle McGuinness, ING Direct “If you are willing to put in an investment, you learn and adapt along the way.” – Valentina Dunoski, Commonwealth Bank of Australia
TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 5 banking experience on top designed around their customer base. SCOTT LEADER, PEGASYSTEMS: Looking at innovation, whether you spin off a start-up or keep it internal, there are clearly some investments to be made. How do you measure the return on that innovation? TOM HIGGINS, IAG: Innovation and customer experience are popular because 95 per cent of organisations say they are going to become leaders through customer experience. If we took all our combined corporate strategies, you would see the samethingagainandagain.Itisprettyuninnovative. We all understand and read the same books, we talk about the same things as if it is new, but it has been around for about 20 or 30 years. Innovation, from my perspective, is about culture – it starts with the systems, processes and symbols that you value in an organisation. Organisations have already set their innovation capability by the systems, processes and tools and are reinforcing that by the financial systems and processes that control the organisation. If you are running your organisation’s portfolio like you would run an investment portfolio with various levels of risk and investment, then you get more innovation. But you have to go to the core elements of your organisation to break out of the straightjacket of the world that we live in. You have to examine the fundamentals of your organisation and how they systemically impact innovation. SCOTT LEADER, PEGASYSTEMS: To quote [Amazon’s] Jeff Bezos: “I am not worried about the competitors, I know who they are; I am worried about the two guys in the garage who I do not know.” To that end, looking at your industry, Mark, what challenges do you see posed by start-ups in the insurance space? MARK MURPHY, TAL: Insurance is a fairly conservative industry. There are certainly barriers to start-ups getting into this industry, but there are some risks through new players entering the market. Innovation is about the culture of your organisation and deep industry knowledge within your organisation as well – this is why I am a bit sceptical about start-ups being able to get traction quickly. If you have a culture of engagement within your organisation and you have a solid underlying architecture you will be able to move quickly as well. The cycle times with innovation are important. You have to be able to innovate and gather feedback quickly and move on from whether it is successful, partially successful or a failure. It is within our capability to do these things, but with start-ups, it is hard to predict if they will succeed because of their lack of that deep industry knowledge. SCOTT LEADER, PEGASYSTEMS: One barrier-to- entry is regulation. How can digital transformation impact some of those barriers-to-entry? GEOFF HENDERSON, LUMLEY INSURANCE: I have had three start-ups in my career. The barriers that we face with start-ups in our industry are mostly regulatory – coming through the Australian Prudential Regulatory Authority (APRA) and Australian Securities and Investment Commission (ASIC) – are just becoming tougher and tougher. Having said that, technology is allowing vehicles like Lloyd’s, in particular, to enter this market without physicallybeingherethroughunderwritingagencies providing support in areas where traditional reinsurers and insurers do not participate. It does make it easier to enter but it is easier to exit as well. The challenge we have seen in innovation in the last 20 years is that innovation through technology has predominantly led to the commoditisation of our products. That is a threat that we face as an industry. I see a change needed in the future around how do we tailor products to our customers and educate them more efficiently. CHRISTOPHER DALEY, COMMONWEALTH BANK OF AUSTRALIA: We have talked about having the culture to innovate but it is also about the tools to test and learn. Some of the tools that we have created lately in the Innovation Lab are measuring eye movement of clients. Another one is the ‘Oculus Rift’ technology where you wear the headphones and goggles, and you have a joystick and have a predetermined experience programmed in the system that you would like the client to go through. How do you get into the shoes of your client? What tools can you create in the business to help incubate these ideas? It is a myth that big companies cannot innovate. We can innovate. We can see from the eyes of our client with this technology and deliver what they want. We can also have the breadth and depth to deliver product. A start-up might focus on one product and that is great, but you could have a multitude of products. If you are innovating across all your products, it is very powerful to deliver one broad range of products to your client the way they want to receive it. ENDA MAHONEY, MACQUARIE BANK: Start-ups do vertical innovation; they will be the first to market with something new, whereas corporates will do horizontal innovation, where we take a new idea and apply it across channels and businesses. That is one way we protect ourselves from start-ups in Australia. DR MUNIB KARAVDIC, AMP: As an industry, we have made the concept of insurance very complex and boring. When we started doing the human- “If you are running your organisation’s portfolio like you would run an investment portfolio with various levels of risk and investment, then you get more innovation.” – Tom Higgins, IAG “If you are innovating across all your products, it is very powerful to deliver one broad range of products to your client the way they want to receive it.” – Christopher Daley, Commonwealth Bank of Australia
TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 6 centred design about wealth protection and asked people, “How do you protect your families or your assets?,” the answer was paying off mortgages. This research helped me to realise that, as an industry, we have a significant noble purpose, but do not express that to customers. We do not understand emotional feelings that customers are dealing with. The noble purpose is how we help people to have a much more comfortable life not thinking about some of worst things that they can face. JEREMYSIMMONSTAL:The life insurance industry has stood behind the complexity of the product and it has not been about human-centred design and the customer. It has been forced down a pipeline. You cannot force the consumer down one channel because they are having experiences outside of your market. The test of their patience with you will be their best experience with Apple, Telstra or NetBank. There are conversations around how quickly channels are moving and we are definitely not about disintermediating at all; we have brilliant partnerships and a very strong heritage in intermediation, but at the same time we have to understand that consumers are choosing their own path now. You need the foresight to see what those trends are going to be in the next three years because some of these platforms and ecosystems take time to develop and you have to start getting those short- term results and making your business sustainable, attracting and retaining [customers] while you look at where your revenues are going to come from in the future. We have to be smart enough to not try to rebuild the world within a mid-sized organisation. We have to build the right partnerships and data- sets, and more strategically, the things we want to do with consumers. SCOTT LEADER, PEGASYSTEMS: Caroline, what are some initiatives that Wesfarmers is driving to improve customer experience? CAROLINEROCKETT,WESFARMERSINSURANCE: We have been acquired by IAG, and so many of the ideasarenowrollingupintothebroaderorganisation in terms of making sure that we are heading in the same direction. The area that is continuing on its path in the Wesfarmers space is the Coles side of the business, the innovation piece, and looking at how to take its budget offerings further into the market. Flexible architecture, the ability to do things straight through flow-through processing, have been looked at in the Wesfarmers space, particularly in the Coles line of business. MIKE BALDWIN, WESTPAC: From a banking perspective, one of the trends on customer experience through digitisation is self-service and transparency. Twenty, 30 or 40 years ago, banking was all in-branch and the systems were designed to provide services to customers. Customers want to do that themselves. They want us to expose every single capability. Digitisation is helping us to enable those services and the user interface to enable our customers to serve themselves, which is great for us. It provides better customer experience and lowers cost. That is one of the big changes we will see in banking in the years ahead as well as more services and capabilities will be exposed to customers over time. SCOTT LEADER, PEGASYSTEMS: We all hear about theacronymSMAC(social,mobile,analytics,cloud). Looking at the convergence of all of these, Tasos, for your business what are some of the challenges that represents? TASOS HATZIMICHAILIDIS, ALLIANZ: Generally speaking, we are much more focused on the last two letters. We are a broad player across all distribution channels, including direct and intermediated channels. For us, it is about understanding the end-customer and the customer journey across the sales partners, the relationship and account management functions, and how we utilise that self-serve capability at the end-customer level. We also want to be omni- device. It is critically important that we get the end- customer journey through the intermediary right as well as self-serve and our staff touch points. Over the years, we have used cloud extensively with our intermediated business to facilitate our account management and facilitate a single system of engagement. KEITH WINSOR, WESTPAC: The way in which Westpac approaches [challenges] is by leveraging and addressing a customer problem. We work closely with our customers to deeply understand their business, challenges and needs. As a bank we bring depth of knowledge and experience as we support a broad range of customers – institutional, through to commercial and retail branch customers. Our solutions are also able to support the full spectrum of customer preferences as well, from baby boomers in retirement to Gen Ys. This is essential insight as we support our customers and our customers’ customers. The challenges can range from enabling fast and instantaneous interactions via mobile devices through to efficient processes support cheques issuing. Our expertise is in capturing all of those needs and working through ideas in partnership to deliver a great customer experience. We are also able to draw on experience and potentially bring in third parties to generate novel and disruptive solutions? Our solutions are also informed by “As an industry, we have a significant noble purpose, but do not express that to customers. We do not understand emotional feelings that customers are dealing with.” – Dr Munib Karavdic, AMP “For us, it is about understanding the end-customer and the customer journey across the sales partners, the relationship and account management functions, and how we utilise that self-serve capability at the end customer level.” – Tasos Hatzimichailidis, Allianz
TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 7 the increasing richness of data that is available around the customer and the customer experience. The challenge we all face is how best to use the information in making good choices. And that comes to being able to develop a prototype quickly, test something in the real environment, learn and evolve. JANELLE MCGUINNESS, ING DIRECT: It is the transformation within the organisation that needs to happen so we know what customers are using and how to respond. It is about how your organisation supports that. Do you have people who know all the different types of mobile devices and how they work because customers are using those things and expect this. It is how we change as organisations and whether we have the right people with the right skillsets and mindsets. LEE-ANNE WALKER, AMP: That is something we have been focusing on as well through the introduction of human-centred design, how we position our teams and achieve true collaboration, breaking down silos. That is what we find effective in terms of bringing in the right people at the right time to collaborate. When we are building, testing and learning, it is not just that we have understood the [customer] experience, we have created something and brought in the technology team and utilised their interpretation on what that experience should be like. SCOTT LEADER, PEGASYSTEMS: With the growth of digital it has certainly transformed the need for business technology and marketing executives to collaborate. Enda, from Macquarie Bank’s perspective, how do you facilitate that collaboration through the organisation? ENDA MAHONEY, MACQUARIE BANK: We have had to attack the old culture. Digital is universal, it is about living breathing products and experiences, but the business models are based on projects and programs. We have had to replace the project culture with a product culture, view every feature as candidates and make decisions around value rather than, spreadsheets. MIKEBALDWIN,WESTPAC:Thepaceoftechnology change has enabled the disintermediation of our business. And it is not just the processes and products that are changing, the culture is also changing. As an example we don’t always have to build it ourselves – we can partner and nurture start-ups. We can invest in other companies and collaborate where we don’t have years of experience or the intellectual property. We are also being more agile than we have in the past. With agile development we use that mindset of ‘go-out- and-test’, ‘put-things-in front-of-the-customer, adjust, tune, so it is not a waterfall methodology where we spend a long time getting the business requirements document and building the specifications, and the testing and implementing. It is important to understand and show customers visually what we are doing as we progress so that we can tune and adjust to get to the right solution in the end. MARK MURPHY, TAL: The openness that agile gives us is the transparency to see what is going on all the time. That is fundamental to being able to see how well a project is going. One dilemma with agile is that you have to get the underlying parts right. You cannot build the architecture of the system in a two- week sprint. You have to be reasonable about the way you go about it. The big challenge with agile is scaling up. MIKEBALDWIN,WESTPAC:Some of that scalability comes through breaking it down into minimum viable products. Even if it is a big project that is going to take multiple years, you have to have something to test and build. MARK MURPHY, TAL: Absolutely and short cycle times. But having eight or 10 parallel streams still throws quite a logistic challenge. SCOTT LEADER, PEGASYSTEMS: What is the one thing that keeps you up at night when you look at the emerging digital world? TOM HIGGINS, IAG: Not changing the systems and the process of the organisation fast enough to be able to meet the challenges of the future. We talked about scaled agile. We have had to completely change everything we do. We also have to recognise when the toolset does not fit the problem. We have all seen teams who focus on the methodology hoping if they follow the methodology they will reach the outcome. You have to understand where the right tool is to be used. Agile is a great too but if you extend it beyond the problem domain, you end up in the same problem as every other misused tool. I describe this as the assembler problem. You can write just about everything in an assembler, and there is no doubt that you probably should not. VALENTINA DUNOSKI, COMMONWEALTH BANK OF AUSTRALIA: Working with ‘Pi’, it was our approach on working as quickly as possible on the things that we need to be focusing on to ensure that someone else does not beat us to market. In this particular digital environment, everybody can work at a similar pace to yourself and the things that “We have had to replace the project culture with a product culture, view every feature as candidates and make decisions around value rather than, spreadsheets.” – Enda Mahoney, Macquarie Bank “The openness that agile gives us is the transparency to see what is going on all the time. That is fundamental to being able to see how well a project is going.” – Mark Murphy, TAL
TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD we are doing are easy to replicate and we have a similar approach of putting the customer first in the things that we deliver. It is about building it quickly enough and taking out the marketplace before someone else does. WESTON CHISHOLM, PEGASYSTEMS: It is about how do we deal with a structure for a future that I do not yet understand. It is like what Apple is doing with their new ‘iWatch’ – that is an organisation that is confident enough that it understands the essence of its customers. LEE-ANNE WALKER, AMP: The main concern is we are getting some deep understanding of consumers and our customers. It is about how can we be bold enough and have the support to be bold? TOM HIGGINS, IAG: We will face ‘co-opetition’ eventually and that starts small. It might start with shared source code and shared ideas. We look around the table and we think these are our competitors but they are not in many cases our future competitors that will really impact our business model are currently unknown to us, so we need to just maintain that perspective as well. DR MUNIB KARAVDIC, AMP: One of my concerns is whetherwehaveenoughtalentthatwillhelpusdrive this change. If you have a small team of people who are enthusiastic about this change and do not have similar mindsets in the rest of the organisation, that is the problem. How can the rest of an organisation becomes keen to adapt this change? SCOTT LEADER, PEGASYSTEMS: It has been quite a wide-ranging discussion today and I thank you all for your insights and comments. Just by way of summary,wetalkedalotaboutinnovation and there were differing views – if we are indeed innovating, what the different structures of innovation are, and how do we set up start-ups outside the corporate organisation and the challenges of when we try to bring them in. With the emerging technologies around digital, innovation is going to be a key theme. We talked a lot about learning from overseas experiences, innovation labs, The Hive at Westpac. Thank you all. It has been an enjoyable lunch. * About Pegasystems Empowered customers and digital technologies are challenging large organisations and government agencies to transform how they do business. A customer-centric strategy is essential to staying competitive, and a new approach to software is critical to that strategy. Pegasystems software unites customer engagement with business process to power digital transformation. About FST Media FST Media produces the most successful technology conferences, roundtables and publications for the banking, insurance and wealth management sectors across the Asia Pacific region. With extensive management experience in conference production, journalism and business development, FST Media prides its reputation on unparalleled access to senior financial services executives, and the delivery of high-quality information on trends and disruptions in the financial services sector. “… everybody can work at a similar pace to yourself and the things that we are doing are easy to replicate and we have a similar approach of putting the customer first in the things that we deliver. It is about building it quickly enough and taking out the marketplace before someone else does.” – Valentina Dunoski, Commonwealth Bank of Australia

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Event_FST Sydney RT_Transcript FINAL_Q4 14

  • 1. Transforming to Survive and Thrive in a Digital World Top row (from left to right): Keith Winsor, Director – Head of Implementation and On-Boarding – Global Transactional Services, Westpac; Geoff Henderson, Head of Operations and Performance, Lumley Insurance; Christopher Daley, Global Head of Markets Digital Channels, Commonwealth Bank of Australia; Scott Leader, Executive Director, Pegasystems; Jeremy Simmons, General Manager Customer Strategy, TAL; Mike Baldwin, Head of Innovation and Implementation – Global Transactional Services, Westpac; Mark Murphy, Head of Delivery, TAL; Weston Chisholm, Account Executive, Pegasystems; Dr Munib Karavdic, Director Design and Innovation, AMP. Bottom row (from left to right): Lee-Anne Walker, Head of Design & Innovation Operations – Design, New Ventures & Innovation, AMP; Tasos Hatzimichailidis, General Manager Sales Operations & Transformation, Allianz; Caroline Rockett, Head of Technology, Wesfarmers Insurance; David Hackshall, Chief Information Officer, Wesfarmers Insurance; Enda Mahoney, Head of Digital, Personal Banking, Macquarie Bank; Tom Higgins, Head of Technology Services, IAG; Janelle McGuinness, Head of Digital & Emerging Channels, ING Direct; Valentina Dunoski, Director, (Head of) Digitisation and Customer Experience, Commonwealth Bank of Australia. FST Media and Pegasystems hosted an exclusive luncheon with a select group of heads of innovation, digital, technology and customer experience in banking and insurance to discuss transformation strategies to survive and thrive in a digital world. David Hackshall, CIO of Wesfarmers Insurance, shared his insights in driving and delivering innovation to meet expanding and evolving customer expectations. DAVID HACKSHALL, WESFARMERS INSURANCE: I am going to share my views and opinions based on my experience at Wesfarmers, but also at some other organisations that I have worked for in the past. I would break them down into three key areas for discussion: Firstly, how technology has led social change and how that social change has impacted behaviour and how businesses now interact with their customer base. Secondly, what is the digital journey? Thirdly, what is the impact on the organisations that we all work for? Firstly, technology-led social behaviour; we all live in a society that has evolved through innovation – technological or mechanical. However, every single innovation that we have seen has ultimately resulted in a change of
  • 2. TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 2 behaviour – you cast your mind right back to the wheel; we no longer drag things around, we push them around in wheelbarrows. Take commercial aviation – we do not think twice about jumping on a flight down to Canberra, Melbourne or Perth. It has expedited our ability to get from point A to B and has brought about a level of convenience that, as a society, we now expect. That convenience leads to a framework in which people will make decisions. This framework of decision-making has evolved in the digital world where, through the introduction of mobile devices and automation, consumer behaviour has now manifested itself into a new set of demands that are the impost for change within organisations in how they interact with their consumer base. What makes travelling with a given airline a good experience for me? One is simplicity – as I may have already checked in online, I go straight through securityattheairport;havemyownqueueandboard the flight. The fundamental shift is the consumer experience that is driving where the consumer will shop. Another one will be information. Has ‘TripAdvisor’ influenced your decision of staying at point A or point B? And TripAdvisor’s information comes from the social interactions and the community. We are seeing innovation not only in automation and simplicity of engagement, but also the level of collaboration in the aggregation of data and how that data brings about a decision-making framework for consumers. The financial services sector needs to look at social attributes of consumers and how they drive decision-making. With insurance, in particular, transactions occur typically once a year with the insurance premium renewal. That represents a challenge in terms of the consumer interaction. I would suggest more interaction with the client in between renewal periods is going to be fundamental to driving or retaining consumers within your portfolio of business. That brings me to loyalty programs as ultimately businesses are here to attract, retain and grow customers and revenue. A lot can be done and learnt from other segments of the marketplace. With the Qantas loyalty and ‘Frequent Flyer’ program, Coles’ ‘Flybuys’ and Woolworth’s ‘Rewards’ program, all of them leverage social data, transaction data, and gear towards building a level of loyalty and rewarding it. If you compare that to our sector, I would say we are very much lagging behind. We contribute to that sector through the selling of loyalty points, but not nearly enough in terms of generating a customer loyalty to brand. One of the challenges is thatovertheyears,wehavebecomeaverytransient society – if you are engaging in a transaction that is taking too long, you are going to lose the customer. Conversely, when it comes to loyalty, if people do not feel rewarded and valued, they will leave you. So we go back to this theme of grow, attract, retain and grow. There is a lot to be said about the convergence of data – either internally or how data can be augmented through external providers, and the marriage of data-sets to generate more targeted marketing and sales. One of the things we have seen is a move away from a shotgun approach of traditional marketing to a lot more focused and targeted marketing towards the consumer. In order to do that, you must understand where the data- sets are and how to interpret those data-sets within your organisation. The retail environment is becoming incredibly astute at using data to target very specific sales strategiestotheconsumer.Previously,organisations may have undertaken a catalogue letterbox campaign. Today, they tailor the catalogue based on postcode. This way, the campaign can be more targeted. They are using the marriage of external data (demographic) and internal data to generate transactions that are specific to a particular community or a subset of data. That is becoming the norm. Another component is what people call the ‘geekification’ of marketing. There seems to be an undercurrent of tension, particularly hyped up by the media, in relation to the role of technology and technologists within organisations, and the role of marketing and the IT spend trends. We are seeing an empowerment of the marketing function with the introduction of social engagement, an empowered consumer, the enormous amounts of data and how organisations interact and attract their clients. It is a natural progression of marketing spend as marketers focus will be where the eyeballs are; more and more towards digital screens. It is a spend shift of the marketing function; enabled by data and technology. What do organisations need to do in order to prepare for this? There is definitely an opportunity for a ‘customer experience’ role at every organisation. Put yourself in the shoes of the customer – how do you become easy to do business with? I can see an evolution coming with roles within organisations. That will happen for a couple of different reasons: one is the breakdown of silos, as organisations realize that the customer does not care about how you are internally structured; and this structure should not come at the expense of a positive customer experience. The other is the ‘moment-of-truth’ for customers, which is when customers initiate an interaction with you and not necessarily when you wish to interact with them. How customers behave socially should influence your decisions on how you frame your transactions. From an insurance perspective, the ‘moment-of- truth’ may be the moment you write a new policy “How customers behave socially should influence your decisions on how you frame your transactions.” – David Hackshall, Wesfarmers Insurance
  • 3. TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 3 and what value you add for customers so they can make the best financial and risk decision for the level of cover they need. Is the consumer going directly to insurers as opposed to using brokers? The broker market may not go away but may well evolve into a service for advice rather than being a conduit to the insurer. Time will tell. SCOTT LEADER, PEGASYSTEMS: Christopher, how are the rapidly-changing customer expectations shaping your organisation’s ability to provide best- in-class customer service? CHRISTOPHER DALEY, COMMONWEALTH BANK OF AUSTRALIA: With Institutional Banking and Markets at CBA, we are creating the environment for innovation to reach its true potential. With ‘client- centric design’, we are conducting client workshops to create a service-based architecture where it can release app-based, quick-to-market products. We are doing so through an Innovation Lab, a place where we can co-create and explore ideas. We have also released other products through creating the environment for innovation. Cardless cash is seen as a disruptor in the retail market, but that idea came from a person in a branch in the retail network. As, CBA Chief Executive, Ian Narev, said, the best ideas come from the front-line not from his direct leadership team. The top-down needs to create an environment where you can do this. The other part includes going to places like Silicon Valley and looking at Spotify and start-ups, getting ideas and bringing them back to create the best environment to innovate for our clients. It is all about the client and how you look at client experience, what the financial institution wants to deliver to the client and how the client engages you. The only way is through partnering with clients and co-creating to form these partnerships and delivering what they want. SCOTT LEADER, PEGASYSTEMS: Mike, from Westpac’s perspective, how are you looking to drive innovation through the organisation? MIKE BALDWIN, WESTPAC: One thing about innovation is solving customer problems better and more easily. Ideas can come from anywhere – and probably the best ones do come from the frontline – and we have very flexible and configurable platforms to solve those problems, especially in the corporate institutional segment. In the retail mass market, you need more standardised solutions. A lot of solutions these days are about automation, digitisation and getting rid of the paper and manual processes,reducingriskandmakingthingseasierfor our customers. Anybody can be a part of innovation – whether they come up with an idea to help solve a customer problem or simplify a process, or whether they want to work on a project to implement an idea from someone else. We have a full framework and structure so that everybody can participate and The Hive is just one more piece. That is an area where we can use professionals to help lift our own innovation capabilities like generating an idea, creating or incubating a prototype, commercialising and bringing it to market. SCOTT LEADER, PEGASYSTEMS: Jeremy, you made some interesting points around embedding innovation in some of the business programs. Would you like to comment further on that from a talent perspective? JEREMY SIMMONS, TAL: We appointed one of our CXOs last year as Chief Innovation and Disruption Officers, which is a great role. It is about not centralising the whole idea, framework or paradigm within four or seven people. Our journey has been about taking time to understand the research, insights and studies around what the consumer is telling us about life insurance. What are their perceptions and experiences? We do digital not because it is fashionable but because it seems like the appropriate thing to do. We are trying to solve customer and partner problems better than anyone else, making their experiences something they want from us. For us, the beginning of the journey is an integrated multi-channel experience using digital, both at the front and back. The back-end has been neglected because the focus has been on making the sales while customers are screaming out to us about eight expectations. Innovation can help the frontline people in talking to partners and empowering them without becoming bureaucratic. It is providing those frameworks through our team and not looking at it as a centralised model, but spreading across that organisational path. MIKE BALDWIN, WESTPAC: It is more about the culture and not a specific initiative on innovation. Digitisation is one trend that can foster a lot of innovation. For example, the ability to digitise forms and paper can change customer experience. And in the corporate institutional space, we are helping insurance customers digitise the experience for their customers as well. We are not just impacting our customers’ processes, we are impacting the processes that they use with their customers. As an example, when a paper claim form is being filled out after an accident, it is assessed, approved, and then the claim is going to go back to the service provider to get paid along the way. You can digitise that whole process and enable the service provider to receive payment when they provide the service, and enable the claim information to be accessible a digital environment that is connected and transparent to “Innovation can help the frontline people in talking to partners and empowering them without becoming bureaucratic.” – Jeremy Simmons, TAL “Digitisation is one trend that can foster a lot of innovation… in the corporate institutional space, we are helping insurance customers digitise the experience for their customers as well. We are not just impacting our customers’ processes, we are impacting the processes that they use with their customers.” – Mike Baldwin, Westpac
  • 4. TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 4 everyone. It is about that end-to-end experience and what the customers are doing. Innovation can help drive a lot of that. JANELLE MCGUINNESS, ING DIRECT: It is about how you successfully bring innovation to the market. In the broader corporate environment, it is about how you navigate an idea to execution through processes, teams and silos. The start- ups do not have the systems, people, silos and all the structures in place that sometimes [impede] innovation. You do need to have some process to foster those ideas and evaluate those ideas towards something that is going to add value to customers. How you use human-centred design and processes so that you can test, learn and potentially fail on quickly? Because customers are moving quickly with their uptake of things, they are probably more willing to try and accept that things are better, more so than [expecting] something is perfect. At our organisation, it is about having something to try and test quickly so we know whether we will be successful or not. DR MUNIB KARAVDIC, AMP: What we found at AMP is that going through the ideation process is probably much easier than go to market. We introduced a concept like a ‘prototype first’, then built a Minimum Viable Offers (MVOs) and tested live in the market. In doing this process, we face a some misunderstanding from the rest of the organisation. We realised that we needed to start putting many functions in the organisation on Human Centred Design discipline otherwise we will always encounter problems. VALENTINA DUNOSKI, COMMONWEALTH BANK OF AUSTRALIA: I have been with CBA for nearly two years and one of the rewarding things has been the organisation’s willingness for us to bring a brand new idea to market and not expect us to get it absolutely right 110 per cent the first time. I had the opportunity to work on ‘Pi’, which has been a journey for the organisation for nearly three years and we have gone through various iterations of not only the devices, but the ecosystem and how the components all fit. The first product that we launched in my portfolio was a product that went out to a very niche market and then we brought out an adaptation of that product, which sold over 2,000 devices within the first two weeks of its launch. If you are willing to put in an investment, you learn and adapt along the way. And that has been a delightful cultural impact that is thriving through our organisation, both in the business as well as the technology side. Our Chief Information Officer, David Whiteing, is focused on building a platform and setting up that platform where we can add value. We have brought in partners externally that help us understand what our customers are looking for. It is not just our own individual ideas and thoughts, it is about what our customer is looking for and how we can meet that journey. SCOTT LEADER, PEGASYSTEMS: Many organi- sations feel that they have to do it themselves, but that is not the way that the world works anymore. Collaboration is critical. And particularly around the agility required to deliver, many organisations just do not have that capability ingrained within their culture and culture plays a very important role. To some extent, you need to spin out a start-up and protect it from your own organisation in order for it to become successful otherwise it runs the risk of being cannibalised by the bigger animal. VALENTINA DUNOSKI, COMMONWEALTH BANK OF AUSTRALIA: True. Or follow a lot of little start- ups and nurture them. You could also sponsor them inthebackgroundbecausemanyofthoselittlestart- ups have some brilliant ideas. They do not have the restraints typical of large organisations and can quickly adapt to something if it is not working right. DR MUNIB KARAVDIC, AMP: There is always the dilemma when to bring start-ups back into corporation. While we need to bring these start- ups back at some point of time, are we delaying elimination of their creativity by keeping them in isolated environment (outside corporation)? One way of thinking about this is more in the way of how we can create the environment within the corporate world. How can we make sure that the rest of the organisation understands that? It is a tougher job but at the same time, probably in the long-term, would yield greater benefits. DAVID HACKSHALL, WESFARMERS INSURANCE: Iwouldagree.Thatiswhyitiscultural.Andchanging culture is like turning a shipping liner around – it takes time and you cannot do it immediately. It can take years, or you can change 51 per cent of the staff – both not very practical options in terms of today’s agile market. Internal cannibalisation of innovation in order just to protect the legacy can stifle the growth journey. ENDA MAHONEY, MACQUARIE BANK: At Macquarie we currently innovate to the power of one, the Macquarie customer. But we have many partners seeking to build their own customer experience. We are heading towards a future of innovation to the power of N, where we provide basic banking services to our partners, and they innovate on top, they build the customer experience that best suits their community. A good example is Woolworths, Macquarie is the banking back-end and Woolworths are building a unique shopping and “Because customers are moving quickly with their uptake of things, they are probably more willing to try and accept that things are better, more so than [expecting] something is perfect.” – Janelle McGuinness, ING Direct “If you are willing to put in an investment, you learn and adapt along the way.” – Valentina Dunoski, Commonwealth Bank of Australia
  • 5. TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 5 banking experience on top designed around their customer base. SCOTT LEADER, PEGASYSTEMS: Looking at innovation, whether you spin off a start-up or keep it internal, there are clearly some investments to be made. How do you measure the return on that innovation? TOM HIGGINS, IAG: Innovation and customer experience are popular because 95 per cent of organisations say they are going to become leaders through customer experience. If we took all our combined corporate strategies, you would see the samethingagainandagain.Itisprettyuninnovative. We all understand and read the same books, we talk about the same things as if it is new, but it has been around for about 20 or 30 years. Innovation, from my perspective, is about culture – it starts with the systems, processes and symbols that you value in an organisation. Organisations have already set their innovation capability by the systems, processes and tools and are reinforcing that by the financial systems and processes that control the organisation. If you are running your organisation’s portfolio like you would run an investment portfolio with various levels of risk and investment, then you get more innovation. But you have to go to the core elements of your organisation to break out of the straightjacket of the world that we live in. You have to examine the fundamentals of your organisation and how they systemically impact innovation. SCOTT LEADER, PEGASYSTEMS: To quote [Amazon’s] Jeff Bezos: “I am not worried about the competitors, I know who they are; I am worried about the two guys in the garage who I do not know.” To that end, looking at your industry, Mark, what challenges do you see posed by start-ups in the insurance space? MARK MURPHY, TAL: Insurance is a fairly conservative industry. There are certainly barriers to start-ups getting into this industry, but there are some risks through new players entering the market. Innovation is about the culture of your organisation and deep industry knowledge within your organisation as well – this is why I am a bit sceptical about start-ups being able to get traction quickly. If you have a culture of engagement within your organisation and you have a solid underlying architecture you will be able to move quickly as well. The cycle times with innovation are important. You have to be able to innovate and gather feedback quickly and move on from whether it is successful, partially successful or a failure. It is within our capability to do these things, but with start-ups, it is hard to predict if they will succeed because of their lack of that deep industry knowledge. SCOTT LEADER, PEGASYSTEMS: One barrier-to- entry is regulation. How can digital transformation impact some of those barriers-to-entry? GEOFF HENDERSON, LUMLEY INSURANCE: I have had three start-ups in my career. The barriers that we face with start-ups in our industry are mostly regulatory – coming through the Australian Prudential Regulatory Authority (APRA) and Australian Securities and Investment Commission (ASIC) – are just becoming tougher and tougher. Having said that, technology is allowing vehicles like Lloyd’s, in particular, to enter this market without physicallybeingherethroughunderwritingagencies providing support in areas where traditional reinsurers and insurers do not participate. It does make it easier to enter but it is easier to exit as well. The challenge we have seen in innovation in the last 20 years is that innovation through technology has predominantly led to the commoditisation of our products. That is a threat that we face as an industry. I see a change needed in the future around how do we tailor products to our customers and educate them more efficiently. CHRISTOPHER DALEY, COMMONWEALTH BANK OF AUSTRALIA: We have talked about having the culture to innovate but it is also about the tools to test and learn. Some of the tools that we have created lately in the Innovation Lab are measuring eye movement of clients. Another one is the ‘Oculus Rift’ technology where you wear the headphones and goggles, and you have a joystick and have a predetermined experience programmed in the system that you would like the client to go through. How do you get into the shoes of your client? What tools can you create in the business to help incubate these ideas? It is a myth that big companies cannot innovate. We can innovate. We can see from the eyes of our client with this technology and deliver what they want. We can also have the breadth and depth to deliver product. A start-up might focus on one product and that is great, but you could have a multitude of products. If you are innovating across all your products, it is very powerful to deliver one broad range of products to your client the way they want to receive it. ENDA MAHONEY, MACQUARIE BANK: Start-ups do vertical innovation; they will be the first to market with something new, whereas corporates will do horizontal innovation, where we take a new idea and apply it across channels and businesses. That is one way we protect ourselves from start-ups in Australia. DR MUNIB KARAVDIC, AMP: As an industry, we have made the concept of insurance very complex and boring. When we started doing the human- “If you are running your organisation’s portfolio like you would run an investment portfolio with various levels of risk and investment, then you get more innovation.” – Tom Higgins, IAG “If you are innovating across all your products, it is very powerful to deliver one broad range of products to your client the way they want to receive it.” – Christopher Daley, Commonwealth Bank of Australia
  • 6. TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 6 centred design about wealth protection and asked people, “How do you protect your families or your assets?,” the answer was paying off mortgages. This research helped me to realise that, as an industry, we have a significant noble purpose, but do not express that to customers. We do not understand emotional feelings that customers are dealing with. The noble purpose is how we help people to have a much more comfortable life not thinking about some of worst things that they can face. JEREMYSIMMONSTAL:The life insurance industry has stood behind the complexity of the product and it has not been about human-centred design and the customer. It has been forced down a pipeline. You cannot force the consumer down one channel because they are having experiences outside of your market. The test of their patience with you will be their best experience with Apple, Telstra or NetBank. There are conversations around how quickly channels are moving and we are definitely not about disintermediating at all; we have brilliant partnerships and a very strong heritage in intermediation, but at the same time we have to understand that consumers are choosing their own path now. You need the foresight to see what those trends are going to be in the next three years because some of these platforms and ecosystems take time to develop and you have to start getting those short- term results and making your business sustainable, attracting and retaining [customers] while you look at where your revenues are going to come from in the future. We have to be smart enough to not try to rebuild the world within a mid-sized organisation. We have to build the right partnerships and data- sets, and more strategically, the things we want to do with consumers. SCOTT LEADER, PEGASYSTEMS: Caroline, what are some initiatives that Wesfarmers is driving to improve customer experience? CAROLINEROCKETT,WESFARMERSINSURANCE: We have been acquired by IAG, and so many of the ideasarenowrollingupintothebroaderorganisation in terms of making sure that we are heading in the same direction. The area that is continuing on its path in the Wesfarmers space is the Coles side of the business, the innovation piece, and looking at how to take its budget offerings further into the market. Flexible architecture, the ability to do things straight through flow-through processing, have been looked at in the Wesfarmers space, particularly in the Coles line of business. MIKE BALDWIN, WESTPAC: From a banking perspective, one of the trends on customer experience through digitisation is self-service and transparency. Twenty, 30 or 40 years ago, banking was all in-branch and the systems were designed to provide services to customers. Customers want to do that themselves. They want us to expose every single capability. Digitisation is helping us to enable those services and the user interface to enable our customers to serve themselves, which is great for us. It provides better customer experience and lowers cost. That is one of the big changes we will see in banking in the years ahead as well as more services and capabilities will be exposed to customers over time. SCOTT LEADER, PEGASYSTEMS: We all hear about theacronymSMAC(social,mobile,analytics,cloud). Looking at the convergence of all of these, Tasos, for your business what are some of the challenges that represents? TASOS HATZIMICHAILIDIS, ALLIANZ: Generally speaking, we are much more focused on the last two letters. We are a broad player across all distribution channels, including direct and intermediated channels. For us, it is about understanding the end-customer and the customer journey across the sales partners, the relationship and account management functions, and how we utilise that self-serve capability at the end-customer level. We also want to be omni- device. It is critically important that we get the end- customer journey through the intermediary right as well as self-serve and our staff touch points. Over the years, we have used cloud extensively with our intermediated business to facilitate our account management and facilitate a single system of engagement. KEITH WINSOR, WESTPAC: The way in which Westpac approaches [challenges] is by leveraging and addressing a customer problem. We work closely with our customers to deeply understand their business, challenges and needs. As a bank we bring depth of knowledge and experience as we support a broad range of customers – institutional, through to commercial and retail branch customers. Our solutions are also able to support the full spectrum of customer preferences as well, from baby boomers in retirement to Gen Ys. This is essential insight as we support our customers and our customers’ customers. The challenges can range from enabling fast and instantaneous interactions via mobile devices through to efficient processes support cheques issuing. Our expertise is in capturing all of those needs and working through ideas in partnership to deliver a great customer experience. We are also able to draw on experience and potentially bring in third parties to generate novel and disruptive solutions? Our solutions are also informed by “As an industry, we have a significant noble purpose, but do not express that to customers. We do not understand emotional feelings that customers are dealing with.” – Dr Munib Karavdic, AMP “For us, it is about understanding the end-customer and the customer journey across the sales partners, the relationship and account management functions, and how we utilise that self-serve capability at the end customer level.” – Tasos Hatzimichailidis, Allianz
  • 7. TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD 7 the increasing richness of data that is available around the customer and the customer experience. The challenge we all face is how best to use the information in making good choices. And that comes to being able to develop a prototype quickly, test something in the real environment, learn and evolve. JANELLE MCGUINNESS, ING DIRECT: It is the transformation within the organisation that needs to happen so we know what customers are using and how to respond. It is about how your organisation supports that. Do you have people who know all the different types of mobile devices and how they work because customers are using those things and expect this. It is how we change as organisations and whether we have the right people with the right skillsets and mindsets. LEE-ANNE WALKER, AMP: That is something we have been focusing on as well through the introduction of human-centred design, how we position our teams and achieve true collaboration, breaking down silos. That is what we find effective in terms of bringing in the right people at the right time to collaborate. When we are building, testing and learning, it is not just that we have understood the [customer] experience, we have created something and brought in the technology team and utilised their interpretation on what that experience should be like. SCOTT LEADER, PEGASYSTEMS: With the growth of digital it has certainly transformed the need for business technology and marketing executives to collaborate. Enda, from Macquarie Bank’s perspective, how do you facilitate that collaboration through the organisation? ENDA MAHONEY, MACQUARIE BANK: We have had to attack the old culture. Digital is universal, it is about living breathing products and experiences, but the business models are based on projects and programs. We have had to replace the project culture with a product culture, view every feature as candidates and make decisions around value rather than, spreadsheets. MIKEBALDWIN,WESTPAC:Thepaceoftechnology change has enabled the disintermediation of our business. And it is not just the processes and products that are changing, the culture is also changing. As an example we don’t always have to build it ourselves – we can partner and nurture start-ups. We can invest in other companies and collaborate where we don’t have years of experience or the intellectual property. We are also being more agile than we have in the past. With agile development we use that mindset of ‘go-out- and-test’, ‘put-things-in front-of-the-customer, adjust, tune, so it is not a waterfall methodology where we spend a long time getting the business requirements document and building the specifications, and the testing and implementing. It is important to understand and show customers visually what we are doing as we progress so that we can tune and adjust to get to the right solution in the end. MARK MURPHY, TAL: The openness that agile gives us is the transparency to see what is going on all the time. That is fundamental to being able to see how well a project is going. One dilemma with agile is that you have to get the underlying parts right. You cannot build the architecture of the system in a two- week sprint. You have to be reasonable about the way you go about it. The big challenge with agile is scaling up. MIKEBALDWIN,WESTPAC:Some of that scalability comes through breaking it down into minimum viable products. Even if it is a big project that is going to take multiple years, you have to have something to test and build. MARK MURPHY, TAL: Absolutely and short cycle times. But having eight or 10 parallel streams still throws quite a logistic challenge. SCOTT LEADER, PEGASYSTEMS: What is the one thing that keeps you up at night when you look at the emerging digital world? TOM HIGGINS, IAG: Not changing the systems and the process of the organisation fast enough to be able to meet the challenges of the future. We talked about scaled agile. We have had to completely change everything we do. We also have to recognise when the toolset does not fit the problem. We have all seen teams who focus on the methodology hoping if they follow the methodology they will reach the outcome. You have to understand where the right tool is to be used. Agile is a great too but if you extend it beyond the problem domain, you end up in the same problem as every other misused tool. I describe this as the assembler problem. You can write just about everything in an assembler, and there is no doubt that you probably should not. VALENTINA DUNOSKI, COMMONWEALTH BANK OF AUSTRALIA: Working with ‘Pi’, it was our approach on working as quickly as possible on the things that we need to be focusing on to ensure that someone else does not beat us to market. In this particular digital environment, everybody can work at a similar pace to yourself and the things that “We have had to replace the project culture with a product culture, view every feature as candidates and make decisions around value rather than, spreadsheets.” – Enda Mahoney, Macquarie Bank “The openness that agile gives us is the transparency to see what is going on all the time. That is fundamental to being able to see how well a project is going.” – Mark Murphy, TAL
  • 8. TRANSFORMING TO SURVIVE AND THRIVE IN A DIGITAL WORLD we are doing are easy to replicate and we have a similar approach of putting the customer first in the things that we deliver. It is about building it quickly enough and taking out the marketplace before someone else does. WESTON CHISHOLM, PEGASYSTEMS: It is about how do we deal with a structure for a future that I do not yet understand. It is like what Apple is doing with their new ‘iWatch’ – that is an organisation that is confident enough that it understands the essence of its customers. LEE-ANNE WALKER, AMP: The main concern is we are getting some deep understanding of consumers and our customers. It is about how can we be bold enough and have the support to be bold? TOM HIGGINS, IAG: We will face ‘co-opetition’ eventually and that starts small. It might start with shared source code and shared ideas. We look around the table and we think these are our competitors but they are not in many cases our future competitors that will really impact our business model are currently unknown to us, so we need to just maintain that perspective as well. DR MUNIB KARAVDIC, AMP: One of my concerns is whetherwehaveenoughtalentthatwillhelpusdrive this change. If you have a small team of people who are enthusiastic about this change and do not have similar mindsets in the rest of the organisation, that is the problem. How can the rest of an organisation becomes keen to adapt this change? SCOTT LEADER, PEGASYSTEMS: It has been quite a wide-ranging discussion today and I thank you all for your insights and comments. Just by way of summary,wetalkedalotaboutinnovation and there were differing views – if we are indeed innovating, what the different structures of innovation are, and how do we set up start-ups outside the corporate organisation and the challenges of when we try to bring them in. With the emerging technologies around digital, innovation is going to be a key theme. We talked a lot about learning from overseas experiences, innovation labs, The Hive at Westpac. Thank you all. It has been an enjoyable lunch. * About Pegasystems Empowered customers and digital technologies are challenging large organisations and government agencies to transform how they do business. A customer-centric strategy is essential to staying competitive, and a new approach to software is critical to that strategy. Pegasystems software unites customer engagement with business process to power digital transformation. About FST Media FST Media produces the most successful technology conferences, roundtables and publications for the banking, insurance and wealth management sectors across the Asia Pacific region. With extensive management experience in conference production, journalism and business development, FST Media prides its reputation on unparalleled access to senior financial services executives, and the delivery of high-quality information on trends and disruptions in the financial services sector. “… everybody can work at a similar pace to yourself and the things that we are doing are easy to replicate and we have a similar approach of putting the customer first in the things that we deliver. It is about building it quickly enough and taking out the marketplace before someone else does.” – Valentina Dunoski, Commonwealth Bank of Australia