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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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.

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 Conference Portugal 2016

This is the transcript of my opening act as Chair of the conference. In this edition, the event attracted on average 200 attendees, a breakthrough and important milestone.

This years edition theme is about Digital Transformation. I am not here to bring definitions about what Digital Transformation is. Definitions are, by definition, pretty useless, incomplete and valueless, hence, let me bring you real world examples what digital transformation is all about.

Let’s start by the banking industry

Some banks, there are some good examples just on the other side of the border, are leveraging on the power of Fintechs to expand the value chain. Fintechs are tech startups that are bridging the gaps, for example in trading operations and loan provisioning.

Today some banks are offering real end to end transactions, starting from the manufacturer that wants to collect the money as soon as possible, the transport companies and the manufacturer’s customer that wants to chase and track,
in order to prevent disruption in the supply chain. Today it is possible to share all the documents involved in transaction, that will determine if payment can be processed, broadcast merchandise tracking and predict delivery.

In loans the market is experiencing the loom of new business models like hybrid lending. Imagine your company needs equity and the bank does not to be exposed to risk. The bank can provide you, let’s say, 60% of the required equity and the company trough a network of venture capitalists, or equity firms can get the remaining 40%.

There is also Blockchain. Blockchain is changing the way we execute transactions in a way we do not need banks anymore. You can just wire money to other person. No one needs to have a bank account. Just Imagine the possibilities on how easy it is to process payments.

Let’s shift industry sector, like Oil and Gas or Utilities.

For reasons that I do not understand (I assume it is related with lack of industry knowledge) we constantly read articles in reference magazines about the power of digital business in retail leveraged on big data. Well, let me tell you are being deceived. The real power of big data is in manufacturing, utilities and oil and gas. Let me put you into perspective. People say Portugal have a population of 11 million. In Lagos, in Nigeria, live 25 million people, it fits twice the size of Portugal and some change. Now imagine in countries that produce oil, the thousands and thousands of kilometers of pipelines with thousands and thousands of pumps and other equipment and on each pump you can
control in real time the temperature, the pressure, the velocity, whatever. Now imagine you can predict based on operating conditions when the pump it is going to fail and you can prevent expensive repair cost (just think that most of this equipment is made to order and when it fails, it fails in the middle of nowhere) and the cost of non productive time.

This is what digital business is all about. This drives us to insurgency spot and asset  protection. Oil & Gas companies are very keen on militia do not blow up their pipelines.

Cyber-security

This leads to the development and implementation a new IT capability, context-awareness, by the realization of a Context Awareness System, a sophisticated surveillance technology solution that aggregates and analyses public safety data in real time, providing security investigators and analysts with a comprehensive view of potential threats and criminal activity.

To put you on perspective, I need to borrow this quote from Frances Stonor Saunders at a London Review of Books talk.

On the evening of 3rd of October of 2013 a boat carrying more than 500 Eritreans and Somalis founded out the tiny island of Lampedusa, in the darkness, locals mistook the desperate cries for help from the sounds of seagulls, the boat sunk within minutes, survivors were in the water for five hours, some of them close the bodies of the dead
companions at float. Many of 368 people who drowned never made off the capsizing boat and were drowned to the sea floor still on board. Among of the 108 people trapped inside the bow was an Eritrean woman thought to have 20 years old were, as she given birth as she drowned, her waters have been broken in the water, rescue drivers found the dead infant still attached by the umbilical cord

We are facing a dilemma on how cyber-security should be used for. On one hand these systems are used to fight and eliminate terror, protecting innocent lives to be taken, to protect company assets from being attacked and looted by contemporary pirates. We cannot make a so selfish decision about abandon and condemning thousands of refugees to death, because the same kind of Context Awareness System cannot be used in preventing people to die. The political discussion about where the refugees should be steered to Europe of send back to their failed state countries, it not an argument about the responsibility of protecting human life only in the case where terror is being perpetrated, except when people are escaping and running away from the same terror source.

Privacy

Once upon a time autonomy and anonymity were part of our self.

It is very interesting to analyze from a societal point of view, is how some people are deeply concerned with personal data access from 3rd parties, when such concern does not exist about how a bank account manager can understand our lifestyle just looking to the bank statement entries. Even so, many people are not particularly bothered by what faceless corporations or even governments can learn about them from our own data exhale. However, there is not a black or white resolution because today there are two kinds of people: the ones that have two selfs and the one that have three selfs. The first self is related with our personality, who we are, our outer self is our attitude that changes according to the behavior with whom we interact and our virtual self is a a wishful thinking what we want to be normally expressed in social networks which most of these faceless companies invest every bit of information we broadcast. Still, the lines start to blur when the virtual self blends with our attitude and we start to expose parts of our real behavior and thoughts. And still, you think you are protected, do you? By those smartphones with bio-metric authentication, like the San Bernardino phone John Macfee (from Mcafee anti virus) told he would break the phone for free and would last long. Well, you known how the story ended, the FBI handed over the device to an Israeli company that broke it.

This poses the challenge which is privacy by design. Is this new digital world how do you balance the trade off between learn from what your customers do and how do you protect their privacy. Do we own your data? Our we will give up our privacy and become transparent?

Machines are taking over me – I

In the past weekend, I watched one of the last screenings of the Steve Jobs movie picture. The picture starts with footage of Arthur C. Clark, at a (probably) 60’s datacenter explaining to the reporter that in a near future, humans will have in their hands a miniaturised computer which they will have access to information. By the effect of the minicomputer intrusion, Arthur also points that future society will become dependent and blended with technology. This kind of assumptions are the ones that mark the character of a futurist, that can predict and envision years ahead what we are becoming to be, not the other way around, as we, part of a jittery, mouth-full instant communication global community, started to assume that futurists are the ones that can predict what it is going to happen in the next 6 months, or next year.

During the last couple of months I been in contact with at least two hands full of financial institutions. In most of them, the business initiatives around social business, ranked on top of their transformation programs, once they realised that letting customers blow to the horn when they are angry, damages the reputation of institution, as well as, social media should be used to serve the customer. With this in mind, banks wish to have an upgrade of the brand new 360 degree view of the customer. Hence, in the CRM system, apart of the account statements, the financial products the customer subscribed, it will integrate his social media feed, with social listening and sentiment analysis features. There is nothing new on this, the novelty is the customer profile built around the what we know about him, taking into consideration the spending partners, the investments done, the risk profile, combined how he expresses in social media, builds who the customer is. Or not.

Technological advances have open the door in the emergence of services that perform financial advisory services. Despite there are some regulation barriers to comply, the financial personal assistance is here to stay. The financial assistant, leveraged among others by machine learning, high performance computing and natural language processing are able determine the best investment needs, your tolerance to risk and what are your goals to be achieved. However there is some room for improvement on adjusting to investment portfolio or your debt stack taking into consideration portfolio diversification or futures in economy growth or income fluctuations. One of the biggest barriers to break is the fact that customers operate with multiple banks and such kind of intelligent advisory services stumble in the lack of open interoperability. Last, there is an emotional factor, which is, the human lifecycle phase that dictates our inherent needs and wants. Someone that is heading retirement have very different needs from the ones that are starting their professional life. And some humans do not want to retire at all, despite there are in a certain age.

Luciano Fiordi, in his book called the fourth revolution, quickly points one of the foundational philosophical well-know distinction between who we are – let us call this our personal identities – and who we think we are – call this our self-conception. The two selves-our personal identities and our self-conceptions – flourish only if they support each other in a mutually healthy relationship. Things get more complicated because our self-conceptions, in turn, are sufficiently flexible to be shaped by whom we are told to be, and how we wish to be perceived. Hence, the dream that bankers have about understanding who are you and how they can serve you better, it is still far for reality. This should not only be a reflection point in the banking industry, as well as across the mass market verticals. For those industry sectors like retail that are in the forefront of understanding customer behaviour it could be interesting for banks to carry a join design experience on who the customer really is. There is still a very long road ahead how to better serve bank’s customers.

BPM a year in review 2015

When I look back to the year that it is coming to an end, this was the year which privacy played an important role when designing processes, interactions or customer experiences.

Many can tend to think that this was the year of the things – Internet of Things (IoT) – but I could not disagree more. IoT it is still on its infancy. There is an volume illusion due to the fact that the things are enabled by smart watches, fitness bands or smart phones, in order words, driven by the consumer and retail industry. The real value from IoT is going to grow from industries like, defense, oil and gas, utilities and manufacturing. These industries rely on assets full of sensors hat are spread across kilometers and kilometers around the world,  that were not yet connected or are connected in closed systems. Today, Oil and Gas companies are unveiling new possibilities on real time asset control and emergency response [1] that to become a reality it is necessary in some cases, to replace a myriad of outdated sensors and assure communication reliability. Other forthcoming enabling waves are related with the German government vision on Industry 4.0. In this approach, data is gathered from suppliers, customers and the manufacturing company and linked up in real time, where every part, every belt, every machine, every truck, every product is inherently connected. Hence, we are still at the beginning of reaching the full potential. Total connectivity by default takes time and money to implement.

In the beginning of this year, I wrote about my concerns of enforcing one of the key principles on privacy by design. In the social world we live in, does not requires explicit, informed user consent for any transaction using personal data. Well, it does, but works on the contrary, we are allowing by default that all personal data can be used by the companies we interact with to identify, track, correlate our activity, even the ones the user does not wanting, knowing or expecting it. In the referred post, I pointed the intention of the UK Government to:

Enforce a policy that blocks citizens access to encrypted software applications, in order the government can listen, read and extract what it considers to be relevant information to avoid security risks.

This proposition grew very quickly to an updated bill that will allow existing bulk-collection powers of the security and intelligence services. Such kind of new regulations made Apple to come to public assuming a position against such kind of overstepping by the watchdog.

We believe it would be wrong to weaken security for hundreds of millions of law-abiding customers so that it will also be weaker for the very few who pose a threat […] In this rapidly evolving cyber-threat environment, companies should remain free to implement strong encryption to protect customers.

On the other hand the European Parliament wants to enforce new regulation related with protection of individuals with regard to the processing of personal data and on the free movement of such data – which Google is so adverse to it. It can be read in the European Parliament document.

 The way in which consent is to be given by data subjects remains “unambiguous” for all processing of personal data, with the clarification that this requires a “clear affirmative action”, and that consent has to be “explicit” for sensitive data.

In this crossroads, I am not stating that we need to become dissidents or guerrilla fighters, but privacy lines are blurred and it is not a matter of having time to understand how to use technology wisely, when it enters and breaks our inner circle in a way we do not control it anymore a guiding principle that is eroding fast.

2014 entry and backward years can be found here.

[1] Disclaimer: At the time of this writing I am a Microsoft Employee and I was involved in the team that created this solution.