Matyas Fekete, a consultant at KAE, explores some of the main similarities and differences in digi-bank business and operating models. During the COVID-19 crisis, technology resources have been steered toward two main goals: solving customer needs quickly and facilitatingthe work of customer-facing teams. While technology empowered remote teams, it also empowered corporate leaders. McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. Flip the odds. Read the Bain Brief: New Bank Strategies Require New Operating Models The authors wish to thank Jonathan Green, Alberto Montagner, Charlotte Relyea, Guilherme Riederer, Daniel Rona, Lars Schor, and Patrick Simon for their contributions to this article. On February 12, 2020, just two weeks into his tenure and before there were even a dozen reported cases of COVID-19 in the United Kingdom, BP CEO Bernard Looney spoke to a live audience at London’s Royal Lancaster Hotel and laid out an ambitious reframing of the energy giant’s mission as “Reimagining energy for people and our planet.” The traditional compliance model was designed in a different era and with a different purpose in mind, largely as an enforcement arm for the legal function. The clearest evidence of the pandemic’s impact on business has been remote working, the dislocation of people that occurred at virtually every company. To capture this opportunity, banks must take a strategic, rather than tactical, approach. We also look at the process by which companies can evaluate the changes they made during the pandemic, decide which shifts they want to make permanent, and embark on a broader transformation to make this speed and efficiency the standard going forward. The exigencies of the pandemic have given many companies a tangible experience of operating at unprecedented speed (exhibit). Reflection is a crucial first step because so many COVID-19 crisis changes were fueled by adrenaline rather than careful planning. h�b```"V�s� ��ea��l`�Ѵ|����`o�� ��b�L�&͍�[�W��,���~(Б�����k������aC����5���0�1"L�ہ�0� �x�9㜿I2>�1�K�$�q��QCC���r��F'�20�7 iF�kn��.��4}D��@� IN2� We use cookies essential for this site to function well. One reason: when CEO Kristin Peck gave local leaders in 45 countries greater latitude than ever, she also had a dashboard of leading indicators created to allow her and other leaders to monitor dynamic shifts in all those markets more closely. Executives at the company say that their emphasis on teams empowered to quickly solve the call-center crisis allowed the system to get back up in days, as opposed to the months it would have taken if the company had relied on its standard hierarchy. Finally, deploying at scale is typically unleashed by a deep transformation in one area (a frontrunner that is a good representation of what’s possible at scale), followed swiftly by company-wide transformation. Please try again later. Banking business models of the future Dr. Daniel Kobler Partner Banking Innovation Leader Deloitte Dr. Stefan Bucherer Senior Manager Consulting Deloitte Lean management has already played a significant role in putting in place processes, capabilities, and tools to improve how businesses operate. If the source of trust in payments is wrung away from the traditional banking system, the results will be Why banks need advanced operating models? CEOs are actively taking advantage of this particularly malleable moment, where new ideas are becoming the foundation of new ways of doing business, to reinvent their companies in ways that simply make more sense for today’s—and tomorrow’s—economy. In addition, the introduction of cryptocurrencies, such as bitcoin, as well as the underlying ledger blockchain, is proving to be a disruptive force unto itself. One telco, for example, originally planned to train 400 employees in agile practices and product management over three months. Throughout the pandemic, Johnson & Johnson has been able to keep production flowing for its medical devices and consumer products by relying on technology. Never miss an insight. In 2014, a major European bank announced a multiyear plan to revamp its operating model to improve customer satisfaction and reduce overall costs by up to 35 percent. An international bank reskilled and redeployed hundreds of employees from advisory jobs to customer-experience roles. During the COVID-19 crisis, technology resources have been steered toward two main goals: solving customer needs quickly and facilitating the work of customer-facing teams. For the better part of this century, large- and medium-size companies have been wrestling with whether and how much or how little to adopt a set of concepts birthed largely in Silicon Valley. And empowerment truly happens only when leaders let go of traditional hierarchical management. McKinsey estimates that the top 15 US banks spend approximately $3 billion each year, combined, on disputes processing. The core of the transformation is a shift to product-focused lines of business. Many companies have tested aspects of such models before and during the crisis with convincing results: total clarity on priorities and goals, nimble resource allocation, and reduced handovers can boost productivity by 20 to 40 percent. We strive to provide individuals with disabilities equal access to our website. Remote work itself is the tip of the iceberg. Often, this also requires a fundamental change in how leaders operate and enable their teams to make decisions. Best-practice banks are able to create more value through a structurally better IT operating model that is more efficient, scalable, and flexible and gives them a head start in digital banking. zeb project experience suggests that successful TOM projects in general address six dimensions (see Figure 1): At that point, companies will be making a series of what we believe are ten to 20 critical design decisions across their operating models. To make these kinds of flatter, more collaborative models work, companies must create rigorous processes, build capabilities, and enable decision making at the lowest possible layer. Many business leaders are telling us that the tangible experiences they’ve had during the pandemic have given them confidence to launch broader transformations. Thousands of hourly staffers now take at-home customer-service and sales roles. Compliance organizations used to promulgate regulations and internal bank policy largely in an advisory capacity with a limited focus on actual risk identification and management. Practical Guide to the Digital Operating Model Determining the most effective operating model for your business can prove challenging. The next normal arrives: Trends that will define 2021—and beyond. The very strongest companies are already acting on this opportunity to reinvent themselves with deliberation and speed. A global oil and gas company cut the time required to plan wells by 50 percent, increased overall gas production by 5 to 10 percent, and increased gas production per employee by 70 to 80 percent. Mumbai: Indian banks are starring at a combined lost revenues and increased costs of ₹12 lakh crore by fiscal 2024 because of credit losses and operating challenges posed by the Covid-19 pandemic, consultancy firm McKinsey & Co said in its annual banking review. Payments remains among the best-performing Much effort and money today goes into operating legacy processes and dealing with regulatory requirements to keep the bank running; Gartner estimates that banks on average spend roughly 60% of their IT budgets to maintain legacy IT systems vs. just 24% to grow the business and 16% to transform it. While purpose can dictate clarity in priorities, it is equally necessary for organizations to build the mechanism to cascade these priorities to the front line. McKinsey research suggests that by 2025, these numbers will be closer to 25 and 40 percent, respectively. Based on that success, the company has standardized a rapid redeployment process that will pay off long after the pandemic is over. In our experience, a set of common beliefs often helped reassure some leaders that they didn’t really need to dive into these new ways of doing business: the company already operates at great efficiency; large companies can’t possibly move as fast as a start-up; their employees can’t be mobilized and energized quickly; you can’t put customers first all the time. 1 endstream endobj 45 0 obj <> endobj 46 0 obj <. 2 Spurred by their experience during the COVID-19 crisis, more and more companies are shifting their people model to one that values skills-based mobility and contributions instead of location-based work and standard functional expectations. This fundamentally links to strategy. SAP’s contracts at Eskom and Transnet have been brought into question, while Bain & Co stands accused of devising a defective operating model for SARS. Other companies found that the pandemic confirmed their purpose in a highly tangible way. 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