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ISITC September 2015 Industry Forum & Working Groups September 13 - 15, 2015


Back to the Future

How the Middle & Back Office Will

Take The Wheel in Driving Digital

Transformation


Digital Transformation

• Changes brought about by the

application of digital technologies to

improve aspects of an

organization’s business

• These technologies improve

processes and interactions and, at

times, enable new types of

innovation and creativity in a

particular domain, rather than simply

enhancing and supporting traditional

methods Source: Aite Group, Wikipedia, 2014


Historical Breakthrough Cycles

Taylorism

Time &

Motion

O&M OR

IE

TQM JIT

Six Sigma Lean

Scientific Management

Computerized Process Flow

BPM

Re-engineering

Source: EY Analysis, Gartner, Forrester

Digital

Transformation

STP


Digital

Exponential Information

Growth

Unprecedented Connectivity

Advances in User Interface

Design

Source: EY, 2014

Underlying Drivers


Exponential Information Growth

Information Doubling Every Two Years…

Source: IDC, 2014

* iPad Air: 0.29” thick, 12 GB


Unprecedented Connectivity

Announcing the New Pope in St. Peter’s Square…

Source: PMA Newsline, 2013


Advances in User Interface

Design

Emotional

Engagement Visceral Behavioral Reflective + + =

Attractiveness Pleasure & Effectiveness of Use

Gamification

Value & Memorability

Source: EY, 2014

“The future of work revolves around personal passions, joy, play and making a difference. Digital designs must be repeatable, beautiful and simple experiences that engage these aims and make emotional connections with users”


On the Cusp of a Big Moment

Is anyone really ready?


Rapid Evolution (& Disruption)

Automated Advice &

Investment Management Mobile Payments

New Market Entrants Digital Currency

Peer-to-Peer Lending

Crowdfunding

Reinvented Branch Networks


Digital Focus Areas

% of respondents

Source: EY, MIT Sloan Management Review, 2014

Most focus

now is on

improving

the client

experience True

disruptive

innovation


Digital Initiatives of the Day

• Revamped secure client websites and portals

• New digital channels – automated advice

• Advisor workstation & tool upgrades

• Improved customizable performance

reporting

• Analytic engines – client and business

focused

• Social media management systems

• Streamlined on-boarding

• Cross-selling initiatives


How will it impact middle and back?

• What increasing demands will digital place

on operations?

• Is the back office ready to execute on the

rapidly evolving visions for digital?

• Does the digitization of operations present

an even bigger opportunity to improve

client satisfaction?

• What constitutes operational priorities,

and how should these effectively be

addressed in the organizational agenda?


Future Demands

• More new products will be introduced more rapidly

• Products and services will demand omni-channel

• Transactions in higher volumes will need to be processed

faster, with minimal errors

• Performance and client reporting will need to be real-time,

synchronized, and more granular than ever before

• More data will be required to drive client and business

analytics

• Legacy systems will require rationalization and seamless

interfacing

• Cybersecurity will become more challenging


Are the Middle & Back Office Ready?

• Manual processes with limited workflow

support

• Fragmented, complex and aging legacy

platforms

• Siloes, “bronze” sources of data

• Paper-based documents

• Disconnected cross-departmental

processes

• Policies vs processes in terms of business

logic

• Cannot overlook the “stack”


Current Focus in Operations

Source: EY

85% 82% 82% 76%

68% 66% 65% 63%

Seeking to

significantly

reduce

costs

Investing

in infra-

structure

Investing in

reporting

capabilities

Negotiating

with service

providers to

lower costs

Seeking to

merge/

acquire to

increase scale

Migrating to

cloud

platforms

Moving to

lower-cost

locations

Outsourcing

non-core

functions

% of respondents


Synchronicity with the

Digital Agenda

Processes

Platforms

Data

• Target High value “moments of truth” for the client should be targeted

• Critical-to-client requirements must be quantified and measured

• Operational workflows must be mapped front to back, showing

interaction with applications/people/data, redesigned, automated

• Use client self-service to increase agility

• Paper must move to digital; data must be captured

• Establish golden sources

• Data must be shared

• Use analyses for converting data to information and insights

• Document management and digital signature capabilities

• User-configurable BPM workflow and service-based interfaces

• Core platform modernization

• Cloud-based services


Challenges and Pitfalls

• The middle and back office can be overlooked in the clamor to

“fix the front door”

• Efforts can tend to focus on UI/UX and gloss over

requirements for the operational “stack”

• Detailed, rich process mapping can resemble a “lost art” in the

current day (but there’s no substitute)

• Application rationalization can take several years and

constitute large capital outlays

• Large transformation efforts are complex, multi-generational

and have a poor track record

• It can be challenging to obtain and keep upper management

focused on back-office transformation


Some questions to ponder…

• What if digital transformation of operations presented an

even bigger opportunity to win client hearts and minds

than front-office initiated initiatives?

• What if those sources of historical client friction could be

addressed successfully?

• What if the focus for digital transformation moved to the

middle and back office?


Client Friction Points

Product Management Investment Management Wealth Management Securities Lending Foreign Exchange

Portfolio Administration

Sales & Marketing

Trade Processing

Relationship Management

Payment Processing

Client Service

Performance Measurement

Reconciliation

Accounting & Valuation

Portfolio Management

Middle Office

Front Office

Back Office

“High fees vs performance

doesn’t seem to make sense at

times”

“Sometimes I am suspicious of

advice”

“I can’t get access to the right

experts”

“What are others like me

investing in?”

“It takes too long to get an

account opened”

“There are too many

documents to sign”

“Why can’t I see my portfolio

updates in real time?”

“I can’t see all my account

information in one place”

“I can’t see across my

accounts”

“I can’t see across my

accounts”

“My advisor never calls me”

Reporting

Operations-Centric

Issues


Grabbing Executive Attention

Develop Business

Cases

Conduct Ideation and Prioritization

Assess Client Experience

Define Target State and Road Map

• Accurate and complete

voice of the customer

• Persona-based

• Cross-channel

• Meeting customer needs

• Leading practices

integration

• Value-based framework

• Driver-based models

• Quantifies “soft” benefits

• Stakeholder buy-in

• Clearly articulated vision

• Focus on

implementable strategy

• High-level project timing

and resource needs

Step 1 Step 2 Step 3 Step 4

Unique

Approach

Elements

Key

Deliverables

• Target Personas

• Assessment Templates

• Assessment Database

• CE Audit

• Industry & Competitor

Research

• Candidate Initiatives

• Prioritization Matrix

• Business Cases

• Initiative Summaries

• Blueprint

• Execution Road Map


One Example – Client Onboarding

Develop Business

Cases

Conduct Ideation and Prioritization

Assess Client Experience

Define Target State and Road Map

• Takes too long (average

= 21 days)

• Too many different

people to talk to

• No one knows what’s

going on

• Asking again and again

for information you

already have

• You don’t know me as a

client

• Clients dropping out of

process because it’s too

onerous

• Reduce cycle time from

21 days to 2 days

• Consolidate touch

points – account opening

group

• Alerts and status

dashboard

• BPM workflow

application

• Client and product

wizards and profiles

• Secure online interface

• BAM and heads-up

displays

• Document solutions and

electronic signature

• Enhanced client

experience and

satisfaction: greater

assets and revenues

• Improved cost avoidance

• Improved tech efficiency

• Reduced administrative

and paper expenses

• Five-year cumulative

benefits $113 MM

• Improved advisor

productivity enabling

pursuit of opportunities

• Enlarged product

revenues through

additional cross-selling

• Enhanced employee

satisfaction/reduced

turnover

• Phase 0 “Mobilize the

Program” (1-3 months)

• Phase 1 “Elaborate the

Design” (4-6 months)

• Phase 2 “Deliver

Foundation” (1-3 months)

• Phase 3 “Scale Rapidly”

(10-12 months)

• Phase 4 “Achieve the

Vision” (13-15 months)

Step 1 Step 2 Step 3 Step 4


Parting Thoughts

• Digital will continue to transform our industry sector

• The demands digital will place on the back office will

be increasingly strenuous

• Prime focus will need to pivot from cost reduction to

client experience enablement

• The view of the middle and back office will shift in

terms of its strategic nature and the latent

opportunity

• Grabbing executive attention will require linking

potential projects to digital strategic objectives


Get Ready to Go Back to the

Future

Taylorism

Time &

Motion

O&MOR

IE

TQMJIT

Six SigmaLean

Scientific Management

Computerized Process Flow

BPM

Re-engineering

Source: EY Analysis, Gartner, Forrester

Digital

Transformation

STP

In time, the middle and

back will be taking the

wheel on Digital

Transformation

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