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How to…rebuild your bank, part 2

By Mark Gunning 2 Sep 2016

5 steps to transformation project success

The old adage 'fail to plan, plan to fail' is spot on for a banking system renewal project. Forrester's Hoppermann cites four key reasons why projects run into problems: "First, projects are often run entirely within the technology management team; second, there is a mismatch between a bank's corporate mentality and the sourcing model; third, the transformation team takes ill-designed shortcuts; and finally, there are continued increases in project scope."*

Strong leadership that advocates and supports a willingness to change across the bank are required to keep a project on the path towards continuous improvement. Focus on the following risk areas is the key to success.

1. Address the culture shift

Bring the wider organisation into a conversation about what is going to change and why. Do this early. Most people in the bank will be affected by a new CBS and you need their support.

  • Instigate a frank and open internal dialogue about trends impacting and threats faced by the bank. Deloitte lists the following: expanding securities markets, new market entrants, online comparison sites, technology driving new services, and tech firms muscling in on the sector.**
  • Encourage constructive discussion about how processes could be changed or streamlined. Make clear that innovative thinking is valued over adaptations that maintain the status quo.
  • The BBA contrasts the rise of mobile banking against a 30% fall in branch usage over the last three years. *** Exploit the ingenuity of your organisation to look for answers in the 'big data' available to your organisation.

2. Time it right

The best time to act on a CBS renewal is now.

Advancing a major technology project when parts of the organisation do not perceive an immediate problem can be a challenge. Often it requires a compelling event to raise the pressure for change: a failed systems merger, a legacy system that can no longer be supported, even a retiring programmer when no replacement skill set can be found. But all these reasons imply stressed decision making or an accelerated timeline, which is no recipe for success.

Best practice is to begin a CBS renewal project in a 'normal' period and to tackle head on the objections that occur. Set your bar high: examine the cost of not acting at the earliest opportunity. Remember, the impact is on more than business processes.

One Temenos client, a multinational European bank, made the decision to completely renew its CBS about ten years ago. The agility this has brought to the business made mergers and acquisitions significantly easier than with its previous CBS. The positive impact was seen not just in daily efficiencies, or even new services, but the ability of the bank to progress its growth strategy.

3. Adapt your bank, not the CBS

Historically CBSs were often built to order by internal teams or external software engineers. The resulting systems were unique to each bank and, in time, became the cause of the rigidity that is now the source of so much pain. Yet today's digital era demands responsive, flexible systems that talk not only to other internal systems but also with external platforms and apps.

Leading banking software vendors have spent years developing market-proven software that works successfully in many different banks. As standard, these systems will be able to perform virtually every existing function at your bank and, crucially, will be ready to support the enhancements that are demanded by your customers while still offering opportunities for differentiation.

It is true that in their primary "off-the-shelf" state they are unlikely to be a perfect fit for your bank. However, it is better to understand the capabilities of the latest technology and improve your processes to fit, and only consent to adaptations once you have the benefit of real system experience.

Put it another way: it's better to buy into a 'standard' solution that can already demonstrate success in the market, and join a collective of customers who drive and benefit from ongoing investment in the product, extending the life of the CBS and helping to resolve the need for expensive customisation.

Taking this approach means your CBS will stay flexible and remain readily compatible with future upgrades. Your implementation will be able to go live quicker and you'll avoid recreating your legacy systems in a new guise.

4. Manage the CBS rollout

Think carefully about how to manage the CBS rollout across the bank. The 'big bang' option of rolling it out to the entire bank in one, carefully planned shot is obviously the fastest, and it may suit some banks due to their culture or competitive position, but it comes with big risks.

The alternative is a staged rollout. Migrating systems region by region, product by product, or whatever breakdown can help contain risk and build experience as you progress.

Often, a simple, staged implementation using standard functionality achieves the best results in the shortest time. Staging limits the impact of change to smaller parts of the business, so if problem occurs it is easier to understand and contain. Using standard software helps bank staff to understand the new systems in their original form, making it easier for bank and supplier to collaborate on the implementation rather than making changes to the software.

Ideally your vendor will support a range of rollout strategies and have the flexibility in its product to adapt or change strategy 'in-flight' in the event of any problems.

5. Take control of implementation

Banks must be able to trust the experience of their software vendor and allow the details of the implementation to be shaped by them. If a vendor is good at delivery, you should be prepared to follow their advice.

Your chosen supplier should be able to demonstrate a success rate of at least 90%. When a vendor is able to present a good track record of successful implementations you win confidence on two fronts. First, you can trust that their platform is robust and stable. Second, you can believe in their knowledge about how to run successful project

Finally, ensure your vendor has an implementation methodology can flex to your needs and establish whether they use specialist or local partners to extend their skills.

The successful completion of a system renewal project is a bank's first step on the path towards a better future. The world will look different with the new system in place: technology will no longer be the biggest risk to the bank, but an enabler of innovation and business progress.

* Matthew Finnegan, Management to blame for core banking replacement failures - not tech, Computerworld UK, 20 August 2014

** Patrick Quigley, Five threats to retail banks, Deloitte blogs, 22 September 2014

*** Digital Disruption: UK Banking Report, BBA, March 2015


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