Faced with increasing disruption, public and financial service sectors must embrace greater customer-centricity and allow for customer-based insights to drive their transformation journeys.
The adoption by consumers of more ‘everyday’ and disruptive technology has been followed by a corresponding expectation that higher levels of service be replicated across a range of industries. Government and financial services are two sectors affected by this shift. Both traditionally known for high switching barriers and regulation, they face similar challenges in adjusting to the changing demands of consumers and to disruption from outside their respective sectors.
@gov recently caught up with Ron Gardoll and Phillip Barfield, Partners with our KPMG in Australia’s Sydney office, to discuss disruption from technology and the influence of the consumer on transformation strategy in government and financial services, and the lessons each can learn from the other.
@gov: KPMG’s recent Global Transformation Survey revealed that 100 per cent of companies worldwide are currently undergoing some form of transformation. How would you define the process of transformation?
RG: Transformation is a fundamental change in an organisation’s operating model. That change could be instigated to take advantage of a range of new services, for example, or due to a separation or merger with another organisation.
PB: I like to use a simple analogy. Take home improvement as an example. Painting a room: that's not transformation. Making structural changes, like building an extension or even knocking part of your house down, that, to me, is transformation. However the transformation journey is often not managed well – and strategies often fail to be delivered as a result.
@gov: KPMG’s 2016 Global CEO Outlook Survey also revealed at least one third of leaders are concerned about the effect of disruption from technology on their business. What effect is this type of disruption having on transformation efforts across government and the financial services sector?
PB: Customer perceptions have been totally rewritten by new and disruptive technologies – it’s now difficult to imagine a world without Amazon, Uber or Airbnb – which are driving consumer expectation that the public and financial services sectors should also offer highly customer-centric service offerings while helping to create an environment where innovation is expected. As a result, customer-centricity is now both the overarching trigger and principal driver of transformation in both sectors.
RG: In the banking space, while high entry barriers remain, disruptors are nevertheless making good progress on the fringes. The sector has been doing its utmost to evolve, prompted by this disruption. For example, recent advances in real-time payments solutions (PDF 2.15MB) can certainly be attributed to disruption coming from outside of traditional banking. The work we are currently undertaking in Australia will enable payments to occur in seconds, not days, and in doing so unlock a world of disruption and transformational opportunities.
@gov: What are the differing transformation challenges faced by leaders in these sectors?
RG: From my perspective, the challenges faced by these two sectors are subtly different. In the financial sector transformation triggers are often regulatory, or from new entrants looking to change the game on traditional organisations and driven by disruption across other aspects of the consumer experience.
PB: In the public sector, triggers tend to be policy-driven or political imperative. Government is a political machine and the race for the customer comes from a number of different sources. Politicians are intently aware of the need for a modernised government that combines leading-edge service delivery with the need to ensure ‘no one is left behind’. As a result, the need for transformation and disruption has penetrated election campaigns and political mandates, with a strong focus on reform and the need to deliver tangible customer benefits as well as financial benefits.
@gov: The public sector has traditionally been perceived as immune to much of the competitive pressure felt by the private sector. To what extent are governments really insulated from disruption?
PB: Though it’s true that the nominal lack of competition within government means customers can’t ‘leave’ per se, the old adage of immunity no longer holds true. Today’s customers are not afraid to express themselves when service levels do not meet their expectations, and the presence of social media and 24 hour news add pressure on suppliers to show that issues are being addressed. Customers will no longer accept a public sector that is behind the times. They want their tax dollars spent wisely and expect good service, meaning the sector must keep up with the pace of change set by the private sector.
In fact, today governments across jurisdictions are leading the charge, particularly in areas such as online services. Countries such as the UK with Verify online, Estonia, with its digital ID program, or the New South Wales government’s digital license program demonstrate that governments are not only trying to keep pace but also looking ahead to the future. In many respects, governments can unlock the online economy by driving innovation and transformation, for example, by eliminating constraints such as ‘in person identification’, and thus removing the requirement that banks and financial transactions have ‘in person’ proof. This would be a game changer with enormous ramifications.
@gov: So customer-centricity has emerged as a key consideration in transformation initiatives, across both sectors?
RG: In short – yes. While governments and financial services sector organisations must have all the right things in place (strong governance, decision-making frameworks and a transformation agenda overseen by change specialists that retains leadership buy-in), the importance of the customer has become paramount. Increasingly, companies and governments are looking to give their customers a central ‘virtual seat’ at the strategy table.
PB: Absolutely. Customer-centricity creates a common anchor for the rationale for transformation, and makes for a very powerful singular aim to focus drive effective changes across the enterprise. This can be enabled by the strategic leveraging of data-driven ‘voice of the customer’ insights on one hand, to simple, yet effective tactics such as the placing of a designated ‘Customer Chair’ in the boardroom to represent the customer, on the other. The latter has been shown to become a true test of an organisation’s customer-focused discussion, and a powerful ‘light house’ to test transformational initiatives to ensure that they are delivering a customer outcome, and not just satisfying a technology solution that needs a problem.
RG: What’s also interesting, when comparing the two sectors, is that private businesses must balance profit against customer desires, with transformation programs often behind the scenes and with very little external scrutiny. Governments, on the other hand, must balance service delivery ambitions against a continual ‘value for money’ lens and a need for external transparency to ensure that the greatest value to the public purse in the delivery of services.
@gov: To what extent should the transformation journey be driven by hard data and analytics?
PB: Many organisations now have internal improvement teams looking at data and using it to drive continual improvement. But that's not transformational change – it’s really only tweaking. Insight gained from qualitative (that is, ethnographic), and quantitative data & analytics research must combine to anchor the transformation journey in a holistic way.
@gov: Once the processes to capture the appropriate data are in place, how are those insights used most profitably?
RG: Insight formulated from transaction and interaction data should be leveraged – from board level down – to help ensure the customer remains a priority in both strategy development and tactical execution. These insights become especially effective when referenced during heated debates, and can help counter some of the passions or emotion that may infiltrate the decision-making process. In this way, data & analytics become both the process anchor and North Star as the company navigates the transformation journey.
As transformational change becomes the new norm and customer-centricity becomes a cornerstone of the forward-thinking organisation’s strategy, does your organisation have the required agility to respond?