How banks are missing the Banking As a Service platform opportunity to unusual challengers

Oil & Gas companies are reinventing the customer journey at the service station and it is not focused anymore on enhancing the non-fuel business business at the retail store. What was a trend in terms of disinvestment in the downstream business is picking up as a new business opportunity to increase revenue and customer stickiness. On the other hand, some banks are loosing opportunities in terms expanding their value chain and services to a combination of joint ventures between Oil companies and Telecom’s.

We see Amazon going to brick and mortar grocery stores; we see Oil & Gas industries enter into renewable energy, we see Utilities companies entering in mobility business, we see Energy and Construction also entering in renewable energy. Hence, there is going to be fierce competition among the mature industries, between incumbents and new entrants and disruptors.

Digital transformation fades the value chain separation and starts an intersection, meaning that if Engineering and Construction companies enters into the mobility business by providing services related with electric car charging stations, soon will be working together in partnerships will gas station retailers, convenience stores retailers, banks, telecoms, mobile money providers and together, the ecosystem of companies working in the same space interacting with the consumer as one.

The case of the Smart Service Station

The book The Digital Transformation Playbook Rethink Your Business for the Digital Age [1] , provides a simple framework on how to access your position “vis-a-vis” challengers that by the power of technology start to intersect business models inside of competitors value chain. What I like about the framework is how easy it is to organize some ideas to spark digital transformation.

Telecom’s instead of banks see 3 different kind of customers:

  • The car driver;
  • The retail store;
  • The 3rd party provider – a company that does not operate at the station. It can be an insurance company, an online retailer, GPS technology provider, the car manufacturer;
  • The car manufacturer, if the car is connected, like some of the new generation models.

The Bank, only sees the car driver.

The Telecom wants to provide the following value proposition:

  • The car driver – pay on customer terms; product offerings and promotions that are related with the real customer needs and wants; access to extended valuable services, like journey management, integrated road assistance.

The Bank only offers cashless payment to the car driver.

In terms of value network, the Telecom offers to the car owner:

Proposition:

  • Integration, with the payment providers, retail stores;
  • Customization, the Telecom is able to tailor offerings based on any data coming from interactions with the partner ecosystem;
  • Simplicity, the car driver can pay using a mobile phone only.

Differentiation:

  • Customers, 4 customer categories instead of the car driver only;
  • Partners, endless partners connected with the platform, letting the car driver add or select the partners that we likes to engage with;
  • Complementary products or services, by the effect of partnership, beyond the typical cross-sell, up-sell;
  • Cost structure, lower. Customers are sensitive to fees and levies that banks charge using cards;
  • Data assets, a much higher precise of the customer profile that is not based on the transactions that occur at the station, but across all the connected partners.

The Bank only offers :

Proposition:

  • Simplicity. Customer do not need to use cash;

Differentiation:

  • Brand.

Banks could for example expanding value chain and services: connect the customers with other service providers – e.g. wellness providers, retail companies – becoming part of customers’ needs and lifestyles. The more the customer interacts with the customer ecosystem, the more the ecosystem benefits in terms of shared customer profile data and business transactions. However, as some banks are still focused on putting their customer’s to transact with the bank, they forgot that Telecoms and Oil & Gas companies, or even non-usual players are shifting customers to transact with banks at gas stations.

 

Sources:

[1] The Digital Transformation Playbook Rethink Your Business for the Digital Age –  David Rogers, ISBN – 978-0231175449

 

 

 

 

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Banking As a Service platform – similarity or competitive advantage

Banks that are embracing their digital transformation journey are becoming open and  designed to encourage new business models, using Open Socio-technical Systems during the transformation journey.

Three concepts emerge here:

  • Digital finance advisor: deliver tailored, personalized advice that meets the customer’s financial needs taking into consideration, the unique customer profile – the digital twin – based on customer life style, aspirations, appetite for risk, existing and upcoming transactions.
  • Banking disintermediation: developing special alliances and partnerships that enable them to provide offers that appeal to customers. Doing banking without the customer feels that is doing banking.
  • Expanded value chain and services: connect the customers with other service providers – e.g. wellness providers, retail companies – becoming part of customers’ needs and lifestyles. The more the customer interacts with the customer ecosystem, the more the ecosystem benefits in terms of shared customer profile data and business transactions.

 

the forces

The current status-quo of banking industry in competitive markets

 

The realization of these three concepts is via the bank as a platform with a connected ecosystem in which integration is the core component and where an API-enabled platform and marketplace is a key strategic consideration. However, the API capability, combined with strategic partnerships is not enough. With most of the new IT capabilities combined with new “micro-business models” being already available in the market, Banks are partnering, investing, going on tour to multiple venture forums for shopping new IT capabilities, or discover new ones by organizing hackathon events.

There are some important consequences of this shift:

  • IT reduced expenditure. IT departments will no longer need to develop applications. They already exist in the market. They will continue to be focused on core banking systems, the middle-ware and the classics banking channels (web/mobile/social/wearable).
  • The CIO will focus on building and evolving the banking platform, but he will need to become a business changer, otherwise, we will only be solely focused on supporting the business.
  • Solution providers will start to loose importance in the market unless they can offer an unique or distinguished capability.
  • Ultimately, the bank can implement the concept of the “bank of me”, which the customer chooses what kind of capabilities he wants to use, relevant to its needs, rather than play with the ones the bank offer via channels.

 

Bank ecosystem

The era of open socio-technical systems

 

Under this new paradigm, designing, implementing and make available a banking as a service platform – like a cloud computing provider – is becoming a mainstream trend in banks that are embracing digital transformation, offering complementary third party financial or non-financial services alongside with the bank’s core products. The bank becomes a catalyst of third party providers to provide a more appealing spectrum of services and offers as co-branded products.

There is however, a fundamental design flaw in this approach. Under the concept of the “bank of me”, customers do not want to be forced to consume what is made available by the banking platform, the reason for this, is by the same way a couple of years ago we entered in the era of the customer – by the collision of forces of mobile, social, cloud, data – that shift operations control to the hand of the customer, so does such principle apply when designing the banking platform.

As Damian Madray [1] expressed:

When we design, our designs generate behaviors that in turn shape our collective experiences through culture. The concept is fairly simple but the feedback loops are all — encompassing: essentially all of the things that we design and that surround us, from our language, to our dwellings, our cities, tools, aircrafts, bedrooms, kitchens, religions, sports, design us back. It all feeds back. And this feedback has been coined Ontological Design [2] by Anne-Marie Willis.

What this means is the customer wants to have the freedom to design interaction on his own terms. As I wrote some years ago:

People will be over connected naturally without the need to request for connection.

But such connection must be related with with whom I really am, not a profile or customer segment I belong to, or personas, as it is labeled user design or in change management methodologies.

Ontologies providing meaning to the data manipulated thus no one needs anymore to learn […] its meaning

Elizabeth Tunstall [3], provides another interesting perspective, as our universal individuality is cannot separated by the sacred, profane and spirituality. The flow of other people, nature, environment and ancestor influence that provided us the life principle guidelines we adopt or tend to ignore that is a consequence of what surround us and make us unique individuals. Investec, embedded this principle in one of the latest marketing campaign, more than data.

Investec

Investec’s – More than data – from the customer profile to who you really are as an individual

 

Despite the bank as a service platform brings advantage to consume or offer products or
services through the APIs ecosystem, most of the banks will ultimately adopt this strategy bringing all around similarly and the new digital bank will soon become the same old bank it used to be. Allowing the customer to design its own banking experience based on habits of mind, personality, selfish goals, personal interests leveraged on the platform capabilities will make the bridge between the customer and the bank as separated self-contained entities.

References:

[1] The Evolution of Design with Culture Thinking – Why we should think about culture before we design – Damian Madray, 2017

[2] Ontological Designing – Anne-Marie Willis

[3] Design Anthropology, Indigenous Knowledge, and the Decolonization of Design
Elizabeth Tunstall, Fabrica, 2011.

 

BPM Conference Portugal 2017 – an event in review

“Recursive enumeration is a process in which new things emerge from old fixed rules. There seem to be many surprises in such process […]. Recursively defined sequences […] possess some sort of inherently increasing complexity of behavior, so that the further out you go, the less predictable they get. This kind of thought carried a little further suggests that suitably complicated recursive systems might be strong enough to breakout of any predetermined patterns. And isn’t this one of the defining properties of intelligence? Instead of just considering programs composed of procedures which can recursively call themselves, why not get really sophisticated, and invent programs which can modify themselves, programs which can act on programs, extending them, improving them, generalizing them, fixing them, and so on? This kind of “tangled recursion” probably lies at the heart of intelligence.”

Douglas R. Hofstadter – Gödel, Escher, Bach: an eternal Golden Braid – a metaphorical fugue on minds and machines in the spirit of Lewis Carroll

Artificial Intelligence (AI) I is democratizing societal change, evolving human progress by helping people and enterprises innovate in ways not previously possible. Paul Harmon presented a historic – still important, perspective how long is the road of Artificial Intelligence materialization. Technologies like machine learning; vision and natural language processing technologies are blended together, and ultimately, platforms with intelligent technologies are integrated into interactive systems to enhance human cognition. His point of view was to bring awareness that most of these technologies exists since the 80’s, but for reasons related with low ROI, lack of investment on research and development that expanded existing rudimentary features took time to materialize. However, as Paul pointed the time to adopt AI is now. Making a profit and achieving success through innovation and process improvement. He gave the example that in banking industry, mobile app’s is no longer enough, applications that can talk to customers and announce decisions is the next logical step if a bank want to stay ahead of competition.

Ross Brow, brought the perspective on by using 3D environments, virtual reality and gamming, it is possible to augment human creativity, empathy, emotion, and judgment with the computational speed and ability to analyze business processes. I particularly liked the examples around passenger movement in airports or the other one, a case management back-office process on which using those technologies it is possible to process large amounts of data see and fell the business process moving, identifying bottlenecks and discover new improvement opportunities. Ross presentation was an eye opener how you can use virtual environments to support business transformation. In an era of a multitude of tools and techniques used to reinvent a business, virtual reality – still perceived as a domestic consumer technology used for entertainment – is definitively a groundbreaking disruption approach to innovate an enterprise.

Manuela Veloso talked about robots, not in the factory floor context, but in the personal digital assistant field. Digital assistants get to know the people they serve over time so they can provide a personal and helpful service. Manuela stressed the long road ahead in terms on what is needed to robots to learn. By the implementation of computer vision, robots gain sight so they can detect objects, create space awareness and by the combination or learning human instructions they can move and serve humans augmenting human tasks in the workplace. However, the day were robots will combine multiple AI technologies and be able to unleash a much wide possibilities in the business context is still not a reality – the example she provided on how a robot can open all the possible door handles existing in the world and move freely on a building is still something far from reality, as it is the application of our all dreams in terms of machine powered devices.

Bianca Furtuna, presented a comprehensive perspective on AI, by making applications and devices intelligent and giving them the capability to comprehend and interact with the world naturally, organizations can continue to improve human to machine interactions in powerful way. She described a compendium of technologies that can be used as the new capabilities to drive business transformation. Vision can be used from object detection to face recognition and emotions; natural language processing used to recognize intent including jargon and local culture references or even language blend as it occurs in multi-lingual language countries and search to help humans find specific information in knowledge repositories together with context awareness to provide more relevant information.

Paulo Cortez, went through a series of real examples where AI is being used already today. I particularly liked the mass personalization in banking industry, which financial institution collects and consolidates customer’s preferences, behaviors, likes and dislikes, and expectations, way beyond transactional banking and get personal recommendations about the kind of financial products that fits their truly needs and wants. As he pointed out, intelligence gets personal.

If there was shadow or sense of doubt over this event edition was definitively if machines could think and it would replace humanity. The effect of singularity or machine domination is still a conceptual fantasy mostly driven by science fiction movies and delusional predictions that keep being postponed year after year. I ultimately believe – and this was one of the major conclusions of the event which many attendees confirmed during some brief talks I have with them – that humans and powered AI machines will work together, not compete against each other. Humans will be much more empowered by the symbiotic combination of machine work, meaning that we will need to continuous to adapt to rather than become indispensables, we increase our own capabilities.

2016 edition summary can be found here.

 

BPM Conference Portugal 2017 – Agenda Synopsis

Artificial Intelligence (A.I.) is for the time being and important new domain to be discussed. As far I am concerned, perhaps the most productive debate we can have at the conference in the 2017 edition isn’t the one of good versus evil, the rise of the machines or singularity is near. The debate could be about the guidelines instilled in the people and organizations using A.I., something that cybernetics tried to push back in the 60’s.

Why the human element still matters?
While demand for efficient, transactional, prediction-driven workplace systems is on the rise, just look around you and you will realize that most of the interactions you have with companies or even to perform daily tasks – like find the better route to commute – have embedded intelligence and are context aware, taking into consideration your location, profile and transactional history. However, there are a set of skills we seemingly don’t want systems to perform. Despite new techniques like deep learning are denting our ability to prevent we will become dispensable, emotional intelligence is said to be among the fastest-growing job skills, and some experts say the ability to collaborate and listen thoughtfully can even protect your position and help advance your career over the next decade as automation progresses. This is probably the reason that contact centers were not totally replaced by robots. Yet.

Ultimately, humans and machines will work together, not against one another. This is already a reality. Imagine if human and machine work together to solve society’s greatest challenges like providing healthcare services, probably one of the areas on which we have seen the deepest progress, as well as, fighting insurgency and keep our cities safe. As machines become more intelligent, they become more capable and we can rely for daily or even knowledge intensive tasks. Businesses of all industry verticals will benefit from these new systems of intelligence machines that can better detect image patterns, process natural language and make informed decisions. This is the reason why you attend Paul Harmon session. Paul is a legend in Business Process Management, probably is one of the best domain knowledge experts I ever came across. His experience is legendary and he will focus about the looming of AI in a multitude of industry sectors, as well as what it means in terms of process design and execution.

For many business, the new spectrum of possibilities provides not just an opportunity to automate processes and become more efficient, but to fundamentally change business models under the new digital transformation moto. Many of today’s advances breakthroughs can be attributed to evolution in machine learning. Machine Learning, is being used across many industry sectors, like Financials and Healthcare.  This kind of supervised learning means that we can convert data into intelligence in the sense that these networks can look for patterns or features in the data they are given. Paulo Cortez is going to talk about how AI can be used to extend our life expectancy, by predicting human organ failure or real examples on prescription marking in Financials, also known as next best action, a technique that induces spending on financials products based on real customer needs and desires.

Now is the time for greater coordination and collaboration on A.I. New kinds of services such as personal digital assistants, chat bots and so on are also defining new ways of interacting with humans. However, we simply don’t want to chat to a smartphone. We need a sense of friendliness that can enhance customer’s perceptions of the company. Bianca Fortuna is going to talk about a convergence of several technologies to make some extraordinary advances in terms of operation management.

For businesses, the new possibilities provide not just an opportunity to automate processes and become more efficient, but to fundamentally change the way they operate. Ross Brown, is in my opinion, one of the most prominent researchers in terms of process simulation, optimization in virtual worlds. When everybody was still stick to simulation tools, Ross was leading the way using new concepts like 3D simulation and today he is applying mixed reality approaches to explore the next frontier in terms of process optimization.

A.I. must be designed to assist humanity. I firmly believe on it. As we build more autonomous machines, we need to respect human autonomy. Collaborative robots, or co-bots, should do dangerous work like operating in hazardous environments, creating a safety wall and safeguarding human life, combined with vital sign monitoring to prevent human life loss. We are now at the tipping point where we are seeing a convergence of several technologies, robots included that jumped from the factory floor to the office space. That is the reason of the relevance of Manuela Veloso talk and how we can co-work together with robots.

I am looking forward to see you at the conference.

The Digital Lab

lx-factory
Trainspotting was a movie that above everything but becoming a hipster. The characters where real like, embodied in some past memory we lived during our 20’s. Twenty years something after, version 2 of the movie is released. Together with the soundtrack of the latest incarnation, apart of Iggy Pop’s Lust for life, it was released an umpteenth version of Underworld’s Born Slippy, probably, the song that catapults the band to the mainstream.
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During this week I attended a digital transformation academy and the only component that caught my attention was the need to deploy a digital creative lab. A place on which companies will experiment, test, fail and learn the road ahead of digitise operations.
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On 2014, Underworld created a DJ set on the influences of the album dubnobasswithmyheadman for BBC’S Radio 6 program, the 6 mix. Karl Hyde mentioned across the broadcast – a tribute to the bands that influenced the production of the record – hey were meeting in SoHo with other important bands at the time like The Chemical brothers, Moby, Goldie the Orb and many others, and how they shared experiences and ideas for the records they were producing, in a way that some of the remixes that Underworld and their peers created for other bands – pay it forward – included the best of its work, feeling they were giving away instead of using it on their own records. The trade-off as they learned, is about the importance of being part of the animal collective creative process and how all the musicians learned how to produce much better music.
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When I was an entrepreneur, I used to work time to time, at LX Factory in Lisbon, a co-work space – hotels where a depressing place to be, like to in house arrest – on which I could meet other entrepreneurs, artists, fashion hairdressers and designers. Co-work facilities always have rooms for people to ideate, however, the best place on which I share, learn and watch passing by so many inspiring ideas, was at the cafeteria where people meet to grab a cup of coffee and a sandwich. There, we were in full bloom. I remember how no-one blocked other people ideas, values and pre-conceptions, everyone was learning and was adding always news ways of interpretation, translating to his owns words or better, to his own domain expertise. For example, in those days, the Adaptive Case Management (ACM) was taking off and looming in the corporate agendas, opposite to the workflow automation. When I was referring about that fact and how it was being used in a project I was leading for an healthcare clinic in Berlin, someone that was doing some work in literature, told me about William S. Burroughs’s Naked Lunch. A book that does not follows the natural law of a narrative – ultimately, drove me to Der Mann ohne Eigenschaften – and like ACM, which the process closure is defined by the human when the goal is achieved, opposite to workflow automation that reaches the same outcome over and over again by the art of infinite repetition. Understanding the way Naked Lunch writing technique was used – the cut-up technique is an aleatory literary technique in which a text is cut up and rearranged to create a new text [1], opened to myself a new perspective how to articulate the ACM driven solution instead of using the common references around system thinking theory.
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Digital transformation requires a new mind-set, creating a digital transformation lab that is not about being able to execute the toolbox, like creating rapid and agile idea prototype or storyboarding or apply design thinking techniques, it is how companies create an human interaction environment of highly creative people, that by the combination of multidisciplinary domain expertise they craft the next big idea. This is more a human resources challenge, upskilling your workforce rather than create the facility and the collaboration tools for people to ideate.
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References:
Image credit – LX Factory

BPM a year in review 2016

During 2016 we heard a lot about digital transformation, considered as the new Industrial Revolution 4.0, providing the catalyst for new business models, products, services and customer experiences that impact not only businesses but society overall. The societal impact will not reach the end of property or the end of financial flows or money but will increase the power of commons in a more open society.

Technology is playing an increasing role in everything we do, collectively with our customers shaping growth, disrupting industry landscapes and providing the catalyst for change. The ability to connect and manage all assets, products, employees and customers globally, like a network, has not really ever been possible or feasible, as well. Why is this important?  Because we are definitively in the era of the platform. We cannot optimize parts of the platform once we will sub-optimize the whole. We cannot be solely focused on social listening and incorporate it in customer and marketing management, we must listen and empower the commons to participate in the creation of changing business models and promote the efficiency of the ecosystem we belong. Recently, Tesla provided what is leading trough digital transformation. Sparked by a customer complain, that could not use the vehicle charging bays, in 6 days only, Tesla re-invented the service and induced efficiency and increased customer satisfaction as follows. As the Tesla example shows, digital transformation is about move beyond just thinking about our customers and start thinking like them, or if you prefer, put in your customer shoes.

6-days-for-a-new-idea

Business model change – time to market: 6 days

We designed the Supercharger network to enable a seamless, enjoyable road trip experience. […] we understand that it can be frustrating to arrive at a station only to discover fully charged Tesla cars occupying all the spots. To create a better experience […] we’re introducing a fleet-wide idle fee that aims to increase Supercharger availability. […] The Tesla app allows […] alerting them when their charge is nearly complete and again once fully charged. For every additional minute a car remains connected to the Supercharger, it will incur a $0.40 idle fee. If the car is moved within 5 minutes, the fee is waived.
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The era of the platform is contributing slowly to the end of asset ownership. But contrary of many views, similar of Ida Auken, member of the Danish parliament, this is not the beginning of the end of capitalism. The total cost of ownership will decrease, but will not be eliminated, money will continue to flow towards a consumption based economy and will be re-invested by companies to innovate and to create new products.
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Previously businesses models were designed to create a product, introduce in the market and, then customers bought it. That was the end of the era. Chemical companies are helping farmers to increase harvest regardless if the farmer relies on a IoT array of equipment or it communicate crop conditions using a mobile app, Healthcare providers changed their business model to extend life-expectancy by monitoring on real time vital signs, instead of reactive surgeries and post-surgery recovery. Today organizations are building in endless feedback loops – sensors in products, services, customer feedback from a variety of channels.
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Business model transformation requires the development of an open ecosystem that merges technology, people and business process that enable these feedback loops, and define an organization’s competitiveness and ability to change the entire landscape of the industries in which it participates.
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2015 entry and backward years can be found here.

BPM Blogs worth reading 2016

Here is the list of BPM blogs I think work reading for inspiration purposes. More than a hall of fame, make a reflection on how BPM is evolving by clicking in the last years list and backwards.

On BPM at large:

On Analytics:

On Social Business:

On Complexity:

On Enterprise Architecture:

  • Mastering ArchiMate – If you model architectures this is a great source to take a deep dive.

If you are interested in 2015 list click here.