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WEBINAR: INNOVATION IN THE TIME OF COVID-19THE NEW NORMAL
May 27th, 2020Please note that this session was held at a particular point in time (Wednesday May 27th, 2020, 4pm-5pm EDT), and in light of the rapidly evolving COVID-19 situation, it is possible these discussions are no longer accurate after that date.
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Similarly, our industry is very competitive. We view our approaches and insights as proprietary and therefore look to our clients to protect our interests in our proposals, presentations, methodologies, and analytical techniques. Under no circumstances should this material be shared with any third party without the prior written consent of Oliver Wyman.
© Oliver Wyman
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WEBINAR AGENDA
01 Fireside Chat: Digital innovations in response to COVID-19
02 Creating cost headroom to “Build Back Better”
03 Q&A
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OUR HOST
OUR PANELISTS
Til SchuermannPartner & Co-Head –Risk & Public Policy
Paul CantwellPartner, Finance & Risk and Public Policy
Rick ChavezPartner, Financial Services & Digital
Paul SaffoTechnology Forecaster & Professor at Stanford University
FIRESIDE CHAT:DIGITAL INNOVATIONS IN RESPONSE TO COVID-19
01 OUR PANELISTS
Paul SaffoTechnology Forecaster & Professor at Stanford University
Rick ChavezPartner, Financial Services & Digital
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TOPICS
01 Context-setting
02 Innovation, defined
03 Post-COVID: is there a silver-lining? New opportunities.
04 Post-COVID: what is fundamentally different, now? New risks.
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WEST MEETS EAST…
IN COMMON:
Challenge of managing and
leading through periods of deep
and rapid change
PAUL
• Fundamental innovation
• Deep perspectives on emergence of new tools and methods
RICK
• Applied innovation
• Deep perspectives on adoptingnew tools and methods
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INNOVATION: OUR DEFINITION
KEY BELIEF: …WHICH MEANS:
Critical, not discretionary
Must be aligned with ‘where the puck is heading, course and speed’
Has as much to do with market evolution and customer need, as it does with ‘cool tech’
Must matter – a discernible ROI, ‘return on innovation’ … with strategic patience
Three possibilities for an innovation bet to be placed:• de-risk uncertainty• position for breakout growth• get rewarded by investors – higher p/e multiple
30% framing the future, 70% living into it
Strategy-setting with in-market testing and learning
Active, not passive, learning and course-correcting
It’s a discipline
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SOCIETAL BEHAVIORALTECH AND DATA
WHERE THE PUCK IS HEADING, COURSE AND SPEEDCOLLISION OF MEGA-TRENDS
CloudSocial
MobileConversational UI
IdentityBig Data
Machine LearningSensors
AgingUrbanization
Life expectancyJob mobility
Income inequalityGlobal power shifts
NeedsJourneys
‘Click to brick’Work-to-life transitions
Sharing economyOnline shopping
Beyond social media?
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People – at work, at home, on-the-go – have problems to be solved…
While bus inesses are organized around product-selling, not problem-solving.
Peace of mind
Wellness
Time poverty,Task efficiency
Home, comfort & convenience
Confidence
Financial security
Future proofme & my kids
Learningand skilling
Fulfillment
Lifestyle
“Greaterthan me”
PurposeLocomotion
Getting from point A to B, stress free
WHERE THE PUCK IS HEADING, COURSE AND SPEEDDEMAND SCARCITY, SUPPLY GLUT
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POST-COVID, TECH EVOLUTION? RISKS?
‘One day, Amazon will fail’ …but our job is to delay it as long as possible– Jeff Bezos, all-hands meeting with employees
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POST-COVID IMPLICATIONS: INNOVATION AS A DE-RISKING VEHICLE
Rule of thumb Implication, post-COVID
1 Be clear about where the ‘puck is heading,’ course and speed
Re-examine collision of trends, unmet needs
Frame trajectories of market evolution
2 Start with problems, not products Ground your assumptions on demand (problems) not assets or products
3 Craft the right portfolio of bets
Neutralize, then differentiate … linked to market evolution, customer demand
Make ‘headroom’ to fund the future*
4 Create the right ‘apparatus,’ with startup principles
Loosely coupled from the mother ship – but with a clear mandate and governance
‘Time is your enemy, resource constraints are your friends’
5 Onboard a venture modelStage-gate investment
‘Every 90 days, call the play’ – learn fast & course-correct
CREATING COST HEADROOM TO “BUILD BACK BETTER”
02Paul CantwellPartner, Finance & Risk and Public Policy
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THE NEW MINIMUM
Many firms have effectively conducted an involuntary ”zero basing” exercise
Effectively they have defined their new “survival minimum”
Today’s session focusses on: how leaders are creating the headroom to ”Build Back Better”
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LEADING INSTITUTIONS ARE ACTIVELY WORKING TO AVOID RETURNING TO THEIR OLD OPERATING MODELLeaders are applying a zero-basing approach to re-establish the strategic minimum
Survival MinimumWhat is necessary to ensure required functionality?
Strategic MinimumWhat is critical to implementing strategic objectives?
DiscretionaryWhat is unnecessary internal demand/non-value add activities?
Has the crisis re-defined what our survival and strategic minimum really is? Is there now a larger discretionary pool of activities that could be eliminated? One that we could not even consider touching before?
“Discretionary”Strategicminimum
Survival minimum
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Reduce cost in the short-term(Focus so far has been here)
3 Reduce cost through structural opportunities
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A STRUCTURED APPROACH CREATES A MORE MANAGEABLE OUTCOME5 PILLAR APPROACH TO ADDRESSING COST DURING UNCERTAIN TIMES
Application of “the new minimum” mindset
Understand how the cost base changes2
Develop scenarios1
A
B
Understanding your costs through COVID scenarios
Removing CostPrioritize the project portfolio
5
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ESTABLISHING A MACRO UNDERSTANDING HOW THE COST BASE CHANGESSYSTEMATICALLY UNDERSTANDING HOW ACTIVITIES WILL SCALE AT EACH STAGE OF A COVID CRISIS
Banking activity scaling
Front-Office activities
Back-Office activities
Core processing activities
Payments
Clearing & Settlement
Reconciliations
Authorisations
Cash Logistics
Billing & statements
Collateral
Advisory activities
Custody Administration
Execution
Processing
Research / Strategy
HQ & Corporate functions
Data Sourcing & Reporting
Reporting Services
Market Data Services
Reference Data
Regulatory Reporting (Non Transactional)
Sales Client Support ServicesClient on-boarding CRM
and Analytics
Client & Sales Management
Marketing & Communication
Loyalty Programs
Marketing and Loyalty
OnlineBranchServices ATM Mobile3rd Party Sales
Channels
Channel Services
Call
Contact Centre
Collections
Outbound
Product end-to-end activities
Application Processing
Underwriting
Fulfilment
Administration / Servicing
Product development
KYC / AML
Infra-structure
Architect.
Business Apps
Desktop
IT change projects
Data Mgmt
Disaster recovery
Enterprise Apps
ITOther activities
Document Management
Complaint Management
Support activities
Compliance
SuitabilityBranch audits
Operations audits
AuditLegal
Finance
PlanningAdvise, MIS & Analytics
Financial Reporting & ControlAccounting Tax Mgmt
Treasury / ALM / BSM
Procurement
Corporate Insurance
CRE
OverheadRisk
Operational Risk
Credit Risk
Fraud
Risk oversight, procedures & controls
Market Risk Liquidity Risk
Cyber
Compliance
Ways of working / Change
Management
Payroll
Compensation
Training
Comms and employee
engagement
Expected scaling up in demand during crisis Expected scaling down in demand during crisis Limited impact on demand during crisis
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Enables organizations to identify and optimize discretionary consumption of non-labor
overhead expenses
Zero-Based Budget (“ZBB”)
Designs organizations from clean sheet, shifting talent from work that no longer contributes to the distinctive
capabilities required to win
Zero-Based Org (“ZBO”)
LEADERS ARE DEPLOYING STRATEGIC TOOL SETS TO ADDRESS COST MANAGEMENT
ZBXAddressing the full spectrum of operating expenses
Driver Based Cost Transparency Giving management the tools and accountability to manage
1 2
Align taxonomy cost data with drivers and usethese drivers to forecast costs in planning process
Driver Based Financial Planning
Provide execs and teams with Driver Based cost data (end to end), align and empower accountable execs
Transparency, Culture and Alignment
Identify, redundancy, pockets of high cost, over servicing and redefine Service Delivery to eliminate
Service Delivery Model
Use Driver based data as part of compensation and performance management, cost allocation etc.
Extend
Top down mandated cost targets, or one of interventions such as Spans and Layers, struggle to create sustainable cost disciplines
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WHAT ARE PEOPLE DOING NOW?A SPRINT TO DEFINE THE NEW NORMAL FOR YOUR BUSINESS
Develop scenarios
Establish your “Pandemic Scenarios” (Oliver Wyman “Pandemic Navigator” can help)– Establish your ”Client Scenarios” – Establish your “Competitor Scenarios”
Understand “how is our demand changing from “BBC” (Business Before Covid) to “BDC” (Business During Covid)”?
Understand “how are our volumes changing”?
Understand “how are our revenues going to change”
Understand “how can we be profitable at the new revenues”?
Understand how your cost base changes
Create your “bank on a page” to frame the analysis– List “new things that we need to do that we didn’t do before”– List “things that I can do now but I could not do before”– List “things that I can stop, delay, or de-scope based on what COVID-19 has proven”
Set out “what we learned through your BCP action, i.e., what did we prioritize when it really, really mattered"
Build your scaling heat-map
Pivot to action
“Plan beats no plan”
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2
3 4 5
Rapidly establish management alignmentCommunicate the new normal, recognizing that that your company is a community
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ANNOUNCED ACTIONS TO REDUCE COST IN THE SHORT TERMBREAKDOWN OF ACTIONS TAKEN BY COMPANIES TO DATE
20%of total FS actions
Enhanced digital support & self service actions
within financial services
1. Covering February 24 to May 15
27%
27%18%
11%
8%
10%People and Organization
Services and OperationsPlanning and Budgeting
Technology
Real Estate
Other
Financial Services Non- Financial Services
19%of total FS actions
35%of total non-FS actions
215 actions1
108 companies
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Paul [email protected]
Rick [email protected]
THANK YOU; POST-WEBINAR LOGISTICS
Contact us Next webinar
• Next webinar on COVID and FS Impacts on June 3 at 4pm
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READ OUR LATEST INSIGHTS ABOUT COVID-19 AND ITS GLOBAL IMPACT ONLINE
Oliver Wyman and our parent company Marsh & McLennan (MMC) have been monitoring the latest events and are putting forth our perspectives to support our clients and the industries they serve around the world. Our dedicated COVID-19 digital destination will be updated daily as the situation evolves
Visit our dedicated COVID-19 website:https://www.oliverwyman.com/coronavirus
QUALIFICATIONS, ASSUMPTIONS, AND LIMITING CONDITIONSThis report is for the exclusive use of the Oliver Wyman client named herein. This report is not intended for general circulation or publication, nor is it to be reproduced, quoted, or distributed for any purpose without the prior written permission of Oliver Wyman. There are no third-party beneficiaries with respect to this report, and Oliver Wyman does not accept any liability to any third party.
Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been independently verified, unless otherwise expressly indicated. Public information and industry and statistical data are from sources we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. Oliver Wyman accepts no responsibility for actual results or future events.
The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation is assumed to revise this report to reflect changes, events, or conditions, which occur subsequent to the date hereof.
All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole responsibility of the client. This report does not represent investment advice nor does it provide an opinion regarding the fairness of any transaction to any and all parties. In addition, this report does not represent legal, medical, accounting, safety, or other specialized advice. For any such advice, Oliver Wyman recommends seeking and obtaining advice from a qualified professional.
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