CHAPTER 7

Starting the Journey: Developing a Strategy and Roadmap to Guide Your Business Transformation

What we've learned so far: To improve an organization's maturity level, a business transformation effort is required to improve and align the capabilities of the organization's four pillars: people, information processes, technical infrastructure, and culture. Structuring and launching a business transformation initiative is a journey that should be well planned and executed. To plan the journey, organizations need to address three key requirements:

1. Secure continuous executive sponsorship.
2. Assess current capabilities and dynamics of the four organizational pillars (people, processes, technical infrastructure, and culture) using a structured maturity model to determine the starting/baseline and target points.
3. Align the capabilities of the four pillars with the organization's business objectives with the support of a Center of Excellence to develop the four pillars.

As you've read throughout this book, a business transformation strategy is necessary to make this happen.

KNOWING WHERE TO START

It is not easy to transform an organization, especially as it relates to information maturity. When an organization makes the decision to embrace information maturity, the “where to start” question isn't simple to answer. Should a Center of Excellence be chartered? Are there people on staff who can guide us? Will this require the help of an outside consultant? Everyone nods eagerly when you tell them how information, properly aligned, can help them make decisions quickly and effectively. But moving to more mature levels, breaking down silos, transforming the culture—this is tough stuff. It can't be done in a few months, or even a year or maybe several years. You need to start somewhere. And this is what this chapter is about: getting started.

Let's start by reviewing how two organizations successfully planned and executed their business transformation strategy, and the business results they managed to achieve.

RIYAD BANK'S ENTERPRISE BUSINESS INTELLIGENCE COMPETENCY CENTER

Riyad Bank is one of the largest financial institutions in the Middle East with US$49 billion in assets. It has 251 branches, including locations in Houston, London, and Singapore, along with 20 self-service branches and 2,600 ATMs. The bank has the best credit rating of any financial institution based in Saudi Arabia.

Challenges and Objectives

With the highest bank rating in Saudi Arabia, Riyad Bank was growing and experiencing many of the typical informational and organizational challenges such as information silos, business alignment, and the need for infrastructure enhancements and optimization. The bank was also launching a customer-centric initiative, and wanted to improve its information quality and its business performance monitoring capabilities.

Riyad Bank realized that a business transformation effort was needed to implement its customer-centric initiative. The bank needed to better understand its customers so it could develop and promote the appropriate financial products and services to the right customers, manage risk, and arm its decision makers with consistent and accurate information to help them make better decisions. The bank knew that a technology solution alone was not the answer.

Enterprise Plan with a Phased Approach

To effectively implement its customer-centric strategy, Riyad Bank used a comprehensive and enterprise-focused business transformation approach to evaluate the organization's maturity in developing and using information. The bank used the SAS information maturity model to evaluate its current capabilities, determine the target maturity level, and develop a roadmap to enhance its capabilities and reach the desired maturity level. The bank carefully evaluated the skills of its workforce, the current internal information processes, the capabilities and architecture of its information environment, and, of course, its internal culture. The investment in this evaluation enabled the bank to develop a roadmap to change its information management practices and operating model. The bank implemented organizational and business changes, including the establishment of an enterprise Business Intelligence Competency Center (BICC) to lead its business transformation effort. The focus of the BICC organization was not limited to business intelligence. It included all the analytical, performance management, and data integration efforts as well. This BICC organization is one of the best practices implementations of the concept of the Enterprise Business Analytics Centers of Excellence that was explored in Chapter 6. Riyad Bank chose the name “BICC” for the implementation.

The bank also understood the expected business impact of all the new changes it was planning to introduce, and decided to take a phased approach to gradually roll out new capabilities and change the operating model and culture. To do that successfully, the bank used its business priorities and decided to focus on one critical business function first: its retail banking business unit.

Evolution and Expansion over Time

The BICC organization started with fewer than 10 resources, and quickly grew to a staff of 29 employees. The group included technical staff from the business units who had managed their unit's siloed information systems. The BICC organization reports to the Deputy CEO, who provides it with enterprise visibility and reach. “Our BICC team consists of a mix of business, analytical, and technical resources with a good business understanding of the operation and priorities of the business units we support,” says Mr. Yassir Al-Suwais, Senior Vice President, Enterprise Business Intelligence Competency Center.

Initially the BICC organization focused on helping promote the use of the information to support business decisions, including a function devoted to change management and communication. “Now the role of the BICC organization started to shift towards delivering business advisory services by partnering with our business unit stakeholders and working together to figure out how we can apply analytics to expand our business and grow revenue,” says Mr. Adil Belhouari, AVP and Manager of BICC Analytics & Data Mining group.

Business Benefits from the New Organization

This wasn't just an exercise in using data. The bank had specific goals in mind. On the marketing side, it wanted to enhance cross-selling, attract new customers, increase sales, develop strategic partnerships for customer loyalty programs, and support channel activities. It wanted to do all this while decreasing the costs of marketing projects. During its short time in existence, the BICC organization has already increased cross-sell wins by 35 percent, helped the retail business unit to identify its most valuable customers, and launched programs to retain them. The team is now continuing to add value by using analytics to segment customers, develop retention, and churn models, and using LTV models to win back lost customers.

The bank's operations group specifically wanted to see if there was a less expensive way to keep ATMs adequately stocked with cash. The BICC team figured out how to reduce the amount of ATM dormant cash by 35 percent by optimizing its replenishment process. The BICC organization is also supporting the risk team in its effort to comply with Basel II and developing risk models to monitor and control risk.

These early successes represent comparatively simple wins—the low-hanging fruit of taking an enterprise-wide information approach.

To continue to succeed, Riyad Bank understood that it needed an enterprise-wide set of metrics. One of the BICC's current tasks is to survey business units and help develop a set of metrics that can measure the business value from the BICC contribution.

Future Expansion

The progress achieved by the BICC organization encouraged Riyad Bank's executives to continue its mission of evolving the organization's maturity level by investing in new enterprise-wide projects such as data quality management, big data analytics, and a customer experience analytics program.

E.SUN BANK'S CUSTOMER RISK VALUE ORGANIZATION

E.SUN is one of the leading banks in Taiwan, and was named by The Banker as one of the top global 500 banking brands in 2013.

E.SUN Bank developed a strategic Center of Excellence organization to improve its CRM marketing capabilities. The organization is called Customer Risk Value (CRV), and it was an expansion of an existing team that provided risk intelligence support. The most innovative approach in the E.SUN Bank case is how it is measuring the performance and business impact of this organization, as explained later in this section.

The CRV organization has 36 resources to support risk and marketing analytics requirements for the bank. The team is structured into three groups to handle Analytics CRM (ACRM), Operational CRM (OCRM), and an Analytical Data Warehouse. The groups within the CRV organization included three teams: Campaign Analytics, Data Mining, and Operational CRM.

E.SUN bank developed career paths to not only attract highly skilled resources, but also to develop and retain these critical resources by providing them with a well-defined path to develop their skills and grow their career potential. The career path covered both campaign and analytical data mining resources.

• The career path for campaign resources—data analytics → insighter → tactical planner → strategic planner → PM → consultant
• The career path for mining resources—data analytics → insighter → modeling → modeling resolution → modeling system or decision manager → consultant

E.SUN realized the importance of having the right talent. The bank developed a training program and was able to develop 95 percent of the skills and talents it needed. In addition, 20 percent of the CRV staff comes from the bank business units.

How the CRV Focus Evolved over Time

The CRV team was established in 2006 with an initial focus on the risk intelligence function. The team provided analytical services to support the risk team in making decisions. The focus of the CRV organization was expanded in 2008 to also support the marketing function. The CRV organization now supports the bank's effort to promote a customer-centric approach versus a product-centric approach. This approach required the development and extensive use of analytical methods and capabilities.

The team offered analytical services, including customer segmentations, propensity to buy analytical models, and other services to support the marketing team. The expansion continued to offer strategic services including campaign services, data mining, support for the OCRM function, and the development and maintenance of the Analytical Data Warehouse. The team is working closely with the business units and is using their business requirements to determine the proper content and structure of the Analytical Data Warehouse.

The CRV organization is now looking into the use of digital marketing analysis, online behavior analysis, and big data analytics.

How the CRV Organization Is Adding to E.SUN Bank

The CRV organization has been adding value to the organization since it was established. Some of the business benefits include:

• The analytical insight developed by the CRV team enabled the risk team to support the bank in growing its lending products to qualified customers by 60 percent. The CRV team was responsible for 25 percent of this growth.
• Reduced call center labor cost for campaign (e.g., from 130 to 25 call center employees).

E.SUN Bank groups the services offered by the CRV organization into three types. The bank uses these three project categories to measure the business ROI contributed by the CRV organization. The project categories are:

1. Sales revenue-driven project type: The CRV organization co-owns the P&L and sales quota with the business units. The main business with significant growth includes personal loan, mail loan, and cross-sell insurance products. Sales revenues doubled using only 30 percent of the call center resources compared to previous performance figures.
2. Consultative project type: These types of projects focus on the strategic business value generated for E.SUN Bank, and not on generating immediate revenue (for instance, focusing on customer segmentation versus customer treatment strategy). Other technical projects include the development of analytical data marts and segment-specific analytical risk models. These projects are sometimes initiated by business units. The bank uses CRV members' utilization KPIs to ensure projects are completed on time and are producing high quality outcome within the assigned budget.
3. Innovative project type: The CRV organization runs two to three innovative projects per year. The innovative project is the most comprehensive project for the CRV organization. These projects cover conceptual phases and continue to produce actionable results. They are business-oriented projects and don't necessarily focus on technical areas.

SUCCESS STORY TAKEAWAYS

These two organizations applied some of the most aggressive and pragmatic approaches to achieve their business objectives. The internal visibility, clout, and performance management approach were essential to help these organizations become effective quickly. Their implementations are significantly improving the organizations' ability to develop and use business insight to support their objectives and decision-making process. The internal influence of these CoE organizations is deliberate, well planned, and supported by the executive team. The progress of these CoE organizations would not have been possible without the continuous support and monitoring from the executive team.

It is important, too, to point out that the success of these CoE organizations is also due to the banks' clarifying how these CoE organizations will work with the business units and the IT team. This is a key success factor.

And, finally, the CoE organizations are agents of change, gradually changing the decision-making culture. After the Riyad Bank CoE organization (BICC) was established and improved the basic reporting and analysis capabilities in many business units, it started to shift its focus toward delivering business advisory services to business stakeholders. The CoE analytical consultants started to work closely with business stakeholders to figure out how to apply analytics to expand the business and grow revenue based on accurate insight derived from information. This represents a key organizational maturity milestone in moving toward fact-based and analytically driven decisions and strategies. This is clearly a cultural change toward a higher maturity level.

APPLYING THE LESSONS FROM E.SUN AND RIYAD

No two organizations are alike. Their successes can't be lifted and grafted to your organization; they developed plans that were specific to their strengths and weaknesses. What applies to any organization is the approach used to arrive at this structure. And that brings us to the next topic: How can an organization develop a business transformation strategy to work for its unique requirements, environment, and culture? Let's explore the answer to this question in the following sections.

THE MOST IMPORTANT CHARACTERISTICS OF SUCCESSFUL BUSINESS TRANSFORMATION STRATEGIES

Before discussing the key components of a business transformation strategy, let's review what a good business transformation strategy should cover. There will be many unique requirements for each organization. However, all organizations should be mindful of the following requirements when developing a strategy. A strategy should:

• Address more than just the technology. The tendency of many organizations is to think of the technology first. There is no doubt that appropriate technology to apply analytics to generate business insight is needed. Technology alone will not resolve internal organizational and business challenges, nor will it achieve the long-term objectives of any business transformation strategy.
• Create a repeatable process to generate business insight. The strategy has to build a long-term foundation of well-planned and agreed-on repeatable processes. All business units will use these processes to interact and collaborate to generate and use business insight.
• Evaluate current capabilities and interactions of the four organizational pillars. Chapters 3, 4, and 5 covered the pillars: people, processes, technology, and culture. Understanding where your organization stands in regard to each pillar is crucial.

A STEP-BY-STEP LOOK AT THE KEY COMPONENTS

There are five key components of effective business transformation strategies:

1. Clear strategy objectives
2. Current and desired competencies and capabilities
3. Approach to achieve strategy objectives
4. Initial set of organizational initiatives to achieve objectives
5. Clear performance management KPIs agreed to by stakeholders

Clear Strategy Objectives

Internal and external triggers drive organizations to think about the need for a business transformation. They may include market pressure from the competition that makes organizations take a closer look at their internal capabilities and operating model. It could be the vision of a new executive who was brought in by the board to take the organization's operation to a higher level, new market, or new products. Or it may be that the internal information and organizational challenges have reached an intolerable level and are hindering the organization's progress. Whatever the trigger, the organization—and specifically the executive sponsor—has to think very carefully about what the organization needs to do and can do in a realistic and pragmatic way. The answer may be a set of objectives and priorities. It may be that the organization needs to improve its marketing functions and try to know its customers better, or it may be that the risk or fraud area is a critical function that needs to be managed better. It may be that the executive team recognized that the organization is not making sound decisions based on facts and needs to improve its capabilities to generate business insight.

These triggers start a conversation among stakeholders. The key is to recognize the difference between making localized improvements (limited to a particular business function) versus applying a comprehensive business transformation approach to outdated systemic and widespread practices. The objectives should be clearly defined and, more important, prioritized, since they will serve as the general guidelines and targets for any business transformation strategy.

Current and Desired Competencies and Capabilities

The objectives will tell us a lot about the final destination. Do we want to be the number one bank (by deposits) in China? Are we trying to be the Brazilian telco with the most innovative product mix? These goals will inform how you map your information maturity journey. And as in any journey you will need to know where you are right now. Organizations might think it is easy to understand what their current capabilities are. That assumption is probably inaccurate. Executives may know the organization's current capabilities, strengths, and weaknesses at a high level. For instance, the CEO knows that innovative ideas are generated regularly but take too long to reach the market. Trying to figure out why, though, is problematic. There might be a focus on the enterprise resource planning system not providing enough support when the real issue might lie in skill sets, cultural interactions, and organizational politics.

A comprehensive evaluation of the current capabilities and interactions of the four organizational pillars is not only essential, but will save the organization time, effort, and money down the road. Establishing a capability baseline that shows the strengths and weaknesses of the people, processes, technical and information infrastructure, and culture is an essential component of a well-planned business transformation strategy. The Information Evolution Model, explained in Chapters 3, 4, and 5, provides a structured approach to evaluate current capabilities and establish a capability baseline.

The strategy objectives provide a second key input to this process. Objectives should be used to determine the desired capabilities. For instance, if the organization wants to introduce and promote the use of analytics to support decisions and validate strategies, then it should work on developing new capabilities in analytical skills, accurate and consistent information, and analytical information data marts to support analytics. Furthermore, the capabilities will also include developing an analytical team or an Analytics Center of Excellence with a well-defined set of processes to allow the business units to tap into this talent to help them make better decisions. And, finally, changes to the organizational culture may be needed to ensure that the adoption and use of analytics is encouraged and supported. The Information Evolution Model can help you determine the desired target capabilities and maturity level based on the strategy objectives.

Approach to Achieving Strategy Objectives

By establishing your capabilities baseline, you understand where you are today. You have also outlined the desired capabilities you need to develop. What organizations need to do next is think about how to improve the capabilities baseline to develop the desired capabilities. Again, these capabilities must include all four organizational pillars.

Organizations should ask themselves the following key questions:

• What is the scope of the required effort to develop desired capabilities?
• Who will lead this effort?
• What type of organization should own the key development steps?
• Would an enterprise Center of Excellence be the appropriate organizational approach?
• What changes in the current operating model and processes are required?
• Where should we start?

Initial Set of Organizational Initiatives to Achieve Objectives

Business transformation effort takes time and should include a well-planned set of activities or initiatives sequenced in an implementation roadmap. Each initiative should improve the current capability baseline and move it closer to the desired capabilities. These capabilities must address the four organizational pillars. The collective business impact of all identified initiatives should move the organization toward achieving its strategy objectives.

For instance, if the organization is trying to introduce and promote the use of analytics across business units, some of the initiatives may include:

• People and skills: Determine what skills are needed, what skills the organization currently has, and the organization's potential to attract, hire, and retain the necessary talent.
• Technical and information infrastructure: Evaluate the effectiveness of the current information environment, data quality, historical data, and availability of analytical data marts.
• Processes: Review the current engagement model and interactions between business units to determine how critical analytical resources are utilized.
• Culture: Assess the awareness and knowledge of analytics and how it is currently being used.

The result of the process is to identify and prioritize initiatives needed to meet strategy objectives. This provides the building blocks of the implementation roadmap. From there, organizations can gain stakeholder buy-in for sequencing and supporting these initiatives. Now all you need to do is launch this process and follow the roadmap.

Clear Performance Management KPIs Agreed to by Stakeholders

The final component of an effective business transformation strategy is the development of performance management KPIs for each initiative. Many organizations tend to skip this critical step and find out later that many stakeholders have different opinions of the business transformation process and its success. With something that involves such an extensive amount of time, effort, and money, organizations have to define what success looks like.

The executive sponsor team should expect all the business and IT stakeholders to work together to develop, discuss, and agree to a set of performance management and success KPIs for each initiative. The key requirement here is to get all stakeholders to participate in this critical process. They must be part of it, and they all must agree to these KPIs. This will establish a collective sense of ownership and camaraderie among all stakeholders that is so important to the success of these long-term business transformation efforts.

IDENTIFYING A STARTING POINT

Organizations often struggle with identifying a starting point for both exploring current capabilities and engaging their business transformation efforts. All strategic initiatives that introduce a new way of doing business and change the current operating model in an organization should be viewed as an internal selling job to promote new business practices. To sell anything, organizations need to demonstrate proof of value to buyers. Introducing analytics, new technology, or new business practices as part of a business transformation effort is no exception. Consequently, identifying the starting point is critical to develop proof of value.

These are key questions that organizations should answer for each possible starting area or function:

• Does this area represent a high business priority for the organization that is sponsored by an executive?
• Do we have integrated and consistent data available for the selected area?
• Do we have sufficient integrated and consistent historical data—if the objectives include using analytics?
• Can we predict the potential outcome and would the outcome produce business value?
• Do we have the business domain, technical, and analytical skills we need to produce the expected outcome?

If the answers to these questions are yes, then the organization can start with the business function.

SUMMING IT ALL UP

Any kind of business transformation can seem a little overwhelming. Even with the Information Evolution Model, case studies, and compelling evidence of why you need to do this, wrapping your arms around the issue isn't easy. Here are guiding principles that can help you push past the institutional inertia to get your effort started.

• Use a comprehensive organizational approach, no matter the pain. When Riyad Bank decided to launch its customer-centric initiative, they knew that it would take more than just technology. Their comprehensive approach to evaluating their current organizational capabilities in skills, processes, technology, and culture provided them with a clear view of the nature, scale, and specific tasks needed to help the bank achieve its customer-centric model while enhancing the overall maturity level of the organization.
• Use a phased approach that provides flexibility. Another key lesson learned from the Riyad Bank experience is that it is beneficial to take a phased approach to quickly show value by focusing on one business function first, and then applying all the lessons learned from the first phase to other business functions.
• Don't be tempted to employ the big bang approach. If you are thinking, “Forget the piecemeal approach. We're going to analyze every nook and cranny of this organization,” stop! It will take too long to show business value and the business requirements could change along the way. Adopting a phased approach allows organizations to make quick adjustments to their plans to deal with changing business requirements.
• Structure your organization's performance management and compensation to drive the desired behavior. Performance management principles are needed to guide the operation of any business function, as well as to guide employees' performance. This is required for two reasons. First, it is a responsibility and obligation for a well-run organization to provide enough guidance to the workforce to help it complete its work successfully. Second, setting up appropriate employee and business function KPIs and how well employees are compensated are very effective ways to promote the desired behavior for the organization.

IN THE END, IT'S ABOUT BEING A LEADER

The world is a very different place than it was 10 years ago, and it will be a very different place a decade from now. Chances are the leading organizations in banking, communication, technology, retail, entertainment, and manufacturing in 2024 won't all have the same names as those today. Surviving and thriving will increasingly be dependent on the ability to see where the market is going much more quickly than the competition. The good idea won't be enough – it's what you do with that idea that will make or break your organization.

Agility and innovation are critical. But time-to-market is just as important to take advantage of market opportunities. This means knowing your customer. Organizations can now analyze their customers' behaviors, identify the most valuable customer segments, and determine their propensity to buy or churn with remarkable accuracy. They can then use this information to put in place proactive campaigns to retain valuable customers and cross-sell more products and services. That becomes critical to innovating, even disrupting, established markets.

Data-driven decision making underpins this customer knowledge. But being able to make decisions using information is dependent on taming organizational and information challenges and working on them simultaneously. It requires the enterprise to think differently and address systematic, political, technical, legacy, and other challenges comprehensively and with executive support. Visionary executives and leaders recognize the need for internal change to continue to compete in the market, and launch business transformation initiatives to introduce change and align the organizational pillars. The approach outlined in this book provides a framework for grappling with these issues.

Although the journey may seem difficult and lengthy, it can be tremendously rewarding—both to the organization and the people tasked with driving that change. Many organizations may choose to delay the journey by finding excuses or false hopes in tactical and limited solutions only to find out that the sooner they embrace the journey, the easier it is for them to get back on track and be competitive in the market. The practical guidance, ideas, and examples in this book should persuade your organization to pack its bags, chart its itinerary, and get going. There are risks and costs associated with any plan of action, but they are far less than the risks and costs associated with comfortable inaction.