How Retail CEOs Can Drive Agile to Grow Their Business

K R O How Retail CEOs Can Drive Agile W to Grow Their Business T E A IL G A

Authors Pratik Pal President and Global Head, Retail, CPG, Travel, Transportation & Hospitality, Tata Consultancy Services Rajashree R. Global Head, Retail Solutions Group, Tata Consultancy Services Retail CEOs now have the memo. Yes, Amazon was the No. 1 online retailer in the United States in 2017, with $94.7 billion in online sales, almost 20% more than in 2016. Yes, Amazon acquired the Whole Foods high-end healthy foods supermarket chain, thus expanding its reach into brick-and- mortar retail. For retailers, confronting competition from digital-first enterprises is like the proverbial drinking from the fire hose: more than they can handle. Retail CEOs also know these challenges require digital transformations that make their companies faster at innovating, introducing new processes, products, services, and marketing campaigns. And they also realize it’s about optimizing their store and online operations, and being more adept at experimenting with new business models. Retail leaders also understand that their companies’ technology problems have become customer pain points. Consumers can see if a store’s online prices differ from those in-store. If a mobile payment option isn’t available or isn’t working, customers may go elsewhere. If a personalization algorithm offers mismatched products or services, customers will be disappointed. In this environment, it is critical to address problems as they occur. And that requires them to be agile and adaptive.

However, introducing agile approaches into their business—a proven means for speeding efforts to innovate and compete—is dicult. But it is no longer an option. Realizing this, several retailers worldwide are on an end-to-end value chain transformation to become agile, digital enterprises. The Reluctant Agilists While there is great enthusiasm across the retail industry for agile adoption, there is also great resistance— frequently from functional managers fearful of losing authority, and from leaders reluctant to flatten their organizations—exacerbated by an industry-wide unfamiliarity with agile fundamentals. We have seen some retailers attempting partial adoptions of the agile approach—what we call ‘proxy agile’. They do this by slicing existing projects into smaller projects, hoping to gain speed. The IT organization’s ways of working may change, but the business decision- makers do not. These projects retain the overall scale of traditional ‘waterfall’ software development projects and thus cannot respond quickly to (or even collect) customer feedback. Nor can they test and release products rapidly enough. As a result, they fail to help retailers make rapid innovations.

Breaking Through the Barriers Agile calls for sweeping changes in deep-rooted ways of working. It starts with leadership. Used to a command-and-control management structure and its associated behaviors, the C-suite has a propensity to attribute the barriers to agile to ‘somewhere down there’ within the organization. Instead top executives need to be ready to model the following behaviors: € Values-based leadership € People empowerment and distributed leadership € Test and learn leadership € Product leadership € Partnership and engagement among bus iness and technology experts Agile leadership also demands empowering change agents in agile teams, and providing support so they can drive transformation. This work is not easy. Here are seven ways retail organizations can overcome the most common barriers to agile adoption: 1. Espouse strong leadership commitment. Paying lip service to agile is not sucient; the CEO, and all top-level executives, must be committed and engaged. This commitment begins with education: engaging coaches and trainers who can teach business stakeholders the principles of agile, and conduct exercises to practice and inculcate its collaborative and inclusive methodology. All business leaders should understand and internalize both the need for change and the essence of the agile approach. They must assume product ownership, including responsibility for defining the product roadmap and instituting short feedback loops to learn from and act on end-user feedback.

2. Create a transformation blueprint. 101 The CEO must also recruit his or her executives to work 010 101 with technologists to identify how to serve customers 010 1000100 0X1X0X1 better, prioritizing initiatives that provide the most 1000100 0X1X0X1 value for all stakeholders. This group must create a 1000100 transformation blueprint to help leaders understand what the company will look like after agile adoption, how it will operate, and what their roles and duties will be. o 3. Establish communities of practice (CoPs). C The company should set up communities of practice to P drive agile adoption and motivate cultural change. s When the agile transformation is under way, the CoPs should provide governance for the effort, and metrics to produce evidence of benefits such as improved customer satisfaction scores or faster time to market for new products and processes—especially improvements in the software development lifecycle. 4. Replace traditional ways of scoping projects with value-driven scoping and budgeting. The old ways of organizing, stang, budgeting, and planning projects must be replaced with value stream- based funding. Retailers should launch high-value, low- cost initiatives first, and delegate scoping and budgeting to agile delivery teams. We recommend following a quarterly cycle for portfolio demand planning, discovery, prioritization, and funding to enable delivery based on business value.

5. Adopt intelligent automation. Agile approaches to delivering new services won’t work without embracing the automation of IT systems. This means adopting a machine-first delivery model, with DevOps automating the work of engineering and operations for software building, testing, and product introductions. Retailers also must invest in building capabilities for AI- driven automation of engineering processes to enable fast and frequent delivery of customer products and services, while reducing development overhead. One of the most interesting areas of AI is seeing how the technology can be used to improve estimates. AI is well placed to provide agile teams guidance on decisions in which there is a complex interplay between different variables and a lot of data available from previous projects. Waterfall 6. Manage organizational change. Project managers and application developers accustomed to the waterfall method are used to having months to plan, and a year to build a new product, while their bosses call the shots on features and scope. The agile approach flips that, with the team making those decisions and working on short projects in iterative bursts. This can Agile be disconcerting. Every team member should understand the organization’s current state of operations (as well as its competitive position), why the change is necessary, how it will happen, and what it will take to make it successful. This strategy helps ameliorate the all-too-human fear of change while addressing future uncertainties.

Ongoing communications and coaching is essential. A communications channel such as a mobile app can help answer any questions on the transformation journey and share information at appropriate milestones. Mechanisms must be set up for experience gathering and knowledge management. A learning academy can offer advice, instruction, and support. Such programs will enable agile team members to work closely with agile coaches, scrum masters, product owners, and the engineering and operations teams to design just-in-time interventions. These interventions can be designed as experiential learning through case studies, scenarios, and performance aids based on an analysis of the organization’s performance. 7. Measure the progress. Organizations must develop a framework to assess the impact of changes and choose the right communication strategy for measuring progress and delivering feedback. Establishing a change agent network for each business area by work function and by geographic location will support the ongoing effort to drive change management associated with adopting agile. Providing a dashboard view for the organization is crucial to frequently assess the progress of the agile transformation journey. Evangelize success stories and discuss lessons learned for quick adoption of needed adjustments.

Cruising Down the Agile Stream Agile approaches do not prescribe a standard operating model. Organizations must determine what specific capabilities are relevant in their customer context and experiment (people, process, technology, and operating model) by using pilot projects and fine-tuning their approach. The best way to introduce agile techniques is to eliminate large waterfall projects immediately, and replace them with work designed to be accomplished quickly. When that work is tested with customers and they react positively, project managers and developers begin to see the benefits of receiving immediate feedback. They will warm to their task—especially if their efforts are reinforced and rewarded by management. Although this may sound straightforward, in practice it requires time, patience, and persistence. An anecdote from our experience shows that leaders can make an important difference. We recall being at an executive meeting with a retailer’s functional heads, who were striving to become more agile. After a presentation and discussion on what an agile transformation required, the head of store operations stood up to volunteer that his group be the first to adopt agile. It turned out that company wanted to relaunch a new mobile application for store associates, and the executive wanted to provide his staff members with capabilities to do their jobs better. While stores are typically the most challenging environments in which to introduce agile, this executive saw the urgency of the need to change and seized the chance.

The Benefits of Agile Adoption When it comes to agile adoption, two major questions surface in boardrooms: How can agile really help? What difference does it make if our enterprise becomes “fast”? The experiences of several leading retailers that have transformed themselves into digital-first enterprises offer answers. A digital-first enterprise is product-centric. It is a technology-led organization that relies on automated systems. It invests in a modern architecture and takes advantage of cloud computing. Becoming digital-first has helped several retailers create a unique and differentiated customer proposition. It enables them to make intelligent decisions and quick adjustments empowered by customer feedback, thus increasing their organizations’ resilience in the rapidly evolving retail environment. In addition, agile development methods have helped them adopt new business capabilities quickly like expanding their product lines, offering new fulfilling methods, convenient payment options, and an interconnected customer experience. Agile methods also enable intelligent decision making. These retailers have harmonized their mobile apps, websites, and stores to provide a seamless, consistent experience for customers who switch between devices and modalities. Figure 7 provides snapshot examples of what leading retailers can achieve by becoming agile. Retailers are using different strategies for beefing up their digital portfolios.

Retailer Benefit Best Buy Target Walmart Categories New Payment Started try-before- Introduced Wallet, Walmart Pay, QR code- Offering you-buy rentals for payment function in based payment system 25 27 some products and Target smartphone app. unveiled in 2016, central introduced Apple Pay.26 to retailer’s digital wallet which also offers a retailer-branded credit card via smartphone app.28 Faster Delivery Best Buy online sales rise Target unveils same- Walmart expands Pickup of Products as a result of ship-from- day delivery service,31 Towers, self-service 29 store capability. In a test, acquired Grand Junction in-store stations that Best Buy offered faster to make faster deliveries,32 enable shoppers to get 30 delivery than Amazon. and Shipt to offer same- their online orders using day in-store delivery.33 a smartphone, to 700 34 stores. Introduce New The recently launched Target sets a goal of Walmart gained a Product Lines in-home advisor program introducing more than presence in more niche provides a Best Buy expert 12 new product brands product lines through to suggest products every 18 months.36 acquisitions of online and services to help retailers like Bonobos, customers accomplish ModCloth, Hayneedle,37 their goals.35 and Moosejaw.38 Websites and Best Buy sees its Updated Target.com Walmart adds in-app Mobile Faster improved digital allows Target to be more features like Store customer experience nimble while delivering Assistant, Mobile Express resulting in high online a consistent experience returns service, Scan & sales growth.39 across devices, leading to Go mobile checkout, to higher conversion rate on enhance the shopping 40 41 mobile devices. experience. Fulfillment— Best Buy embraces omni Target tests next-day Walmart rolling out Way to Get channel fulfillment; half of delivery service in in-store kiosks to pick up Goods online orders shipped or Minneapolis43 and offers goods ordered online to 42 44 45 picked up from stores. free two-day shipping. as many as 650 stores. Localization Best Buy price matches Target offering Walmart’s price matching and Pricing all local retail competitors increased localization policy extends to items 48 (including their online and personalization in sold on Walmart.com. prices) and products assortment in stores and 47 shipped from and sold online. by select major online retailers.46 Figure 7: The Benefits of Being Faster, Examples from Leading Retailers

Agile Retail: It All Starts at the Top Agility at the enterprise level is about applying the principles and values of agile to create an organization level ecosystem that embraces and supports agile. All the departments including support teams such as Marketing, Sales, Finance, and Administration start espousing a ‘by default agile’ mindset. Cultivating such a digital, agile environment requires strong commitment from the leadership team. They must make the transformation their top priority, and define, lead, and communicate the transformation. At the end of the transformation, organizations will have a blended team of business and technology managers who are highly productive in driving on demand capability releases on a resilient technology platform that responds to any system glitch. Agile retailers not only serve their customers better, they are better able to compete with emergent digital natives, with a chance to win. This makes the effort worth it.

25 Recode, Best Buy’s New Weapon Against Amazon: A Try-Before-You-Buy Option, June 12, 2017, accessed April 16, 2018, https://www.recode.net/2017/6/12/15771838/best-buy-drone-camera-rental-trial-try-before-buy-lumoid 26 Quartz, Some Best Buy stores are now accepting Apple Pay, September 18, 2015, accessed April 16, 2018, https://qz.com/505759/some-best-buy-stores-are-now-accepting-apple-pay/ 27 Target Press Release, Target Launches Wallet in the Target App, December 4, 2017, accessed April 16, 2018, https:// corporate.target.com/article/2017/12/wallet-in-target-app 28 Digital Trends, Walmart Pay is here to enhance your Walmart shopping experience, July 6, 2016, accessed April 16, 2018, https://www.digitaltrends.com/mobile/walmart-pay/ 29 RetailWire, Is ship-from-store a proven omnichannel benefit, December 23, 2014, accessed April 16, 2018, http:// www.retailwire.com/discussion/is-ship-from-store-a-proven-omnichannel-benefit/ 30 The Motley Fool, Best Buy Ships Faster Than Amazon? Really?!., February 17, 2014, accessed April 16, 2018, https:// www.fool.com/investing/general/2014/02/17/best-buy-ships-faster-than-amazon-really.aspx 31 Nasdaq Press Release, Target Sharpens Edge, Announces Same-day Delivery Service, January 29, 2018, accessed April 16, 2018, https://www.nasdaq.com/article/target-sharpens-edge-announces-same-day-delivery-service- cm912424 32 Target Press Release, This is How Acquiring Grand Junction Means Faster, More Ecient Home Delivery for Target Guests, August 14, 2017, accessed April 16, 2018, https://corporate.target.com/article/2017/08/grand-juntion-qa 33 Target Press Release, Here’s How Acquiring Shipt Will Bring Same-Day Delivery to About Half of Target Stores in Early 2018, December 13, 2017, accessed April 16, 2018, https://corporate.target.com/article/2017/12/target-acquires-shipt 34 Walmart Communications, Hundreds More High-Tech Pickup Towners Are Headed Your Way, April 5, 2018, accessed April 16, 2018, https://blog.walmart.com/innovation/20180405/hundreds-more-high-tech-pickup- towers-are-headed-your-way 35 Best Buy Press Release, In-Home Advisor Program Brings Best Buy Experts To You, December 11, 2017, accessed April 16, 2018, https://corporate.bestbuy.com/in-home-advisor-program-brings-best-buy-experts-to-you/ 36 Twin Cities Business, Target’s $7 Billion Bet, September 1, 2017, accessed April 16, 2018, http://tcbmag.com/news/ articles/2017/september/target-s-$7-billion-bet 37 Forbes Middle East, Amazon Or Walmart: Who Will Be The Big Winner In Retail?, April 12, 2018, accessed April 16, 2018, https://www.forbesmiddleeast.com/en/amazon-or-walmart-who-will-be-the-big-winner-in-retail/ 38 Reuters, Wal-Mart acquires online outdoor retailer Moosejaw for $51 million, February 16, 2017, accessed April 16, 2018, https://www.reuters.com/article/us-moosejaw-m-a-walmart/wal-mart-acquires-online-outdoor-retailer- moosejaw-for-51-million-idUSKBN15U2IK 39 Forbes, Amazon Is Less of a Threat to Best Buy, August 13, 2016, accessed April 16, 2018, https://www.forbes.com/ sites/greatspeculations/2016/08/31/amazon-is-less-of-a-threat-to-best-buy/ 40 Target Press Release, Target Puts Emphasis on Mobile with Updated Target.com Experience, June 2, 2016, accessed April 16, 2018, https://corporate.target.com/article/2016/06/updated-site-launch 41 Retail Dive, Walmart’s Store Assistant Brings In-Store Value to Mobile App”, Retail Dive, February 8, 2018, accessed April 16, 2018, https://www.retaildive.com/news/walmarts-store-assistant-brings-in-store-value-to-mobile- app/516730/ 42 Forbes, Best Buy and Retail’s Long Road Back, June 1, 2017, accessed April 16, 2018, https://www.forbes.com/ sites/kevinomarah/2017/06/01/best-buy-and-retails-long-road-back/ 43 Target Press Release, Target Plans to Test a Next-Day Essentials Delivery Service in Minneapolis Area, May 8, 2017, accessed April 16, 2018, https://corporate.target.com/article/2017/05/target-basics-announcement 44 Target Press Release, Target Order Pickup Information, accessed April 16, 2018, https://www.target.com/c/target- shipping/-/N-551st 45 Progressive Grocer, Walmart Expanding Pickup Towers, Progressive Grocer, March 22, 2018, accessed April 16, 2018, https://progressivegrocer.com/walmart-expanding-pickup-towers-click-and-collect-fedex-oces. 46 Best Buy, Best Buy Price Match Guarantee, accessed April 16, 2018, https://www.bestbuy.com/site/help-topics/ best-buy-price-match guarantee/pcmcat297300050000.c?id=pcmcat297300050000 47 Twin Cities Business, Target’s $7 Billion Bet, September 1, 2017, accessed April 16, 2018, http://tcbmag.com/news/ articles/2017/september/target-s-$7-billion-bet 48 Walmart, Walmart.com’s Price Matching Policy, updated February 21, 2018, accessed April 16, 2018, http://help. walmart.com/app/answers/detail/a_id/31/~/walmart.coms-price-matching-policy

K R O Fending Off the FinTechs: How T W Agile Financial Services Firms are E A Transforming Their Businesses Authors L RamanaMurthy Magapu I SVP Operations, BFSI Platforms, Tata Consultancy Services G Sathish Sankaranarayanan Principal Consultant, BFSI Technology Group, A Enterprise Intelligent Automation, Tata Consultancy Services Few stories better illustrate the challenge facing banks and financial services firms than the swift rise of Quicken Loans and its online Rocket Mortgage unit. Quicken Loans used Rocket Mortgage’s 2016 launch to increase its loan volume by more than 7% to $96 billion. Rocket alone closed $7 billion in loans in its first year, immediately placing it among the 49 top 30 U.S. mortgage lenders. Quicken Loans, meanwhile, increased its U.S. mortgage market share six-fold over the last 50 10 years, from less than 1% to 5.7% in 2017. 49 Housing Wire, Here’s How Much Rocket Mortgage Helped Quicken Loans in 2016, March 7, 2017, accessed March 13, 2018, https://www.housingwire.com/ articles/39505-heres-how-much-rocket-mortgage-helped-quicken-loans-in-2016 50 Bloomberg, Big Banks Have Ground to Recapture in Mortgage Lending, January 12, 2017, accessed March 13, 2018, https://www.bloombergquint.com/ gadfly/2017/01/12/big-banks-have-ground-to-recapture-in-mortgage-lending

How did Rocket propel Quicken Loans? The parent company’s CEO credits it to embracing agile approaches in which “the entire team works towards the common goal of making life radically simple for our clients through innovation and passion.”51 But the mortgage business is by no means the only financial services segment in which companies have adopted agile techniques to blow by competitors. FinTechs and startups, sometimes working with established financial services firms, have made real inroads in all banking products, services, and markets. Take the example of Vantiv. Now merged with Worldpay, the U.S. based payment processor has used agile processes to become a global payments-processing leader in 146 countries, handling $1.5 trillion in transactions per year.52 Agile adopters such as online-only U.S. banks like MovenBank and AllyBank boast about offering competitive financial products and a better customer experience than many of their brick-and-mortar brethren. Online wealth management firms like iQuantifi are using robo-advisers and algorithms to provide financial advice to clients. Digital mortgage lending platform provider Roostify has partnered with JPMorgan Chase to let home-buyers track loan applications online.53, 54 51 Quicken Loans Press Release, One for the Thumb: Detroit-Based Quicken Loans Named Computerworld’s #1 Best Place to Work in IT for Fifth Straight Year, June 12, 2017, accessed March 13, 2018, https://www.quickenloans.com/ press-room/2017/06/12/one-thumb-detroit-based-quicken-loans-named-computerworlds-1-best-place-work-fifth- straight-year/ 52 Cincinnati Enquirer, Vantiv Transforms into Worldpay, Likely Region’s Newest Fortune 500, January 17, 2018, accessed March 13, 2018, https://www.cincinnati.com/story/money/2018/01/17/vantiv-transforms-into-worldpay- likely-regions-newest-fortune-500/1041795001/ 53 Roostify Press Release, Chase to Launch Customer-Driven Digital Mortgage Experience, February 16, 2017, accessed March 13, 2018, https://www.roostify.com/press-release-archive/2017/2/16/chase-to-launch-customer- driven-digital-mortgage-experience 54 Housingwire, Roostify Focuses on the Consumer Experience with Education and Transparency, December 1, 2017, accessed March 13, 2018, https://www.housingwire.com/articles/41981-roostify-focuses-on-the-consumer- experience-with-education-and-transparency

Mobile payment platforms also represent a threat to the banking and financial services industry. AliPay, the digital wallet operated by Alibaba offshoot Ant Financial, boasts 520 million Chinese customers representing 51% of China’s $11 trillion internet payment market, and the company is expanding outside China.55 Its rival, WeChat Pay, linked to the WeChat message service offered by Tencent, accounted for 40% of that market 56 57 in 2016 and has moved into Malaysia. Both services’ mobile payment volumes dwarf totals logged in the U.S. Mobile payments also have driven growth at PayPal, whose latest quarterly profit rose 32% rise in its most recent quarterly report, powered in part by Venmo, the company’s social payment platform, and by partnerships with big banks like JPMorgan Chase, as well as tech titans like Google, Apple, and Facebook.58 Those digital-first giants provide their own challenges, as researchers expect Apple, Facebook, and Google to drive growth in payments through their customers’ smartphones.59 Mobile devices have given consumers powerful tools for conducting a universe of financial transactions, and they expect their banks (like their stores and governments) to work ‘anytime, anywhere,’ like their favorite apps. 55 Economist, China’s Digital-Payments Giant Keeps Bank Chiefs Up At Night, August 19, 2017, accessed March 13, 2018, https://www.economist.com/news/business/21726713-ant-financial-500m-customers-home-plans-expand- chinas-digital-payments-giant-keeps 56 Financial Times, China Moves to Impose Order on Mobile Payments Boom, December 28, 2017, accessed March 13, 2018, https://www.ft.com/content/b7866e7c-eb8e-11e7-bd17-521324c81e23 57 Business Insider, Tencent’s Expansion of WeChat Pay into Malaysia is Important for its Long-Term Success, November 22, 2017, accessed March 15, 2018, http://www.businessinsider.com/tencent-expands-wechat-pay-to- malaysia-2017-11 58 Reuters, PayPal Tops Profit Estimates, Lifts Target on Mobile Payments Growth, October 19, 2017, accessed March 13, 2018, https://www.reuters.com/article/us-paypal-hldg-results/paypal-tops-profit-estimates-lifts-target-on- mobile-payments-growth-idUSKBN1CO2ZW 59 Juniper Research, Why 2018 is the Year of Social Payments, January 2018, accessed March 13, 2018, https://www. juniperresearch.com/document-library/white-papers/why-2018-is-the-year-of-social-payments

While banking leaders understand the need to adopt agile approaches to counter such disruptive competition, their existing processes, systems, and organizational structures stand in the way of adoption. Even some with agile teams still take months to do what nimbler competitors do in days or weeks. Banks and financial institutions that wish to compete with truly agile organizations all face the same question: Can we become agile enough, fast enough? The Missing Link: Unprecedented Cross-Functional Collaboration Executives at large banks and financial But these structures and processes services companies run into familiar typically create distance between problems trying to deploy agile teams marketing, research, legal, and other and scaling agile across the enterprise. participants in agile teams. Instead of While each institution takes an approach collaboration, there are hand-offs: the best suited to its context, the lack of a marketing team hands off a decision common vision (‘Why agile?’) and what to the finance team, and the finance it means to adopt the agile ‘way of team adds information and hands the working’ leads to many failing to deliver decision off to the IT team to develop the business value they anticipated. a solution. This adds time and static to the development and launch of new These institutions run multiple lines of financial products. business, with organizational structures and processes to support each one.

The IT landscape at big banks is software. In this environment, agile another major barrier to agility. Over teams inevitably confront bottlenecks time, through mergers, acquisitions, and grow frustrated. and other changes, their systems have become complex and unwieldy. These problems share a common Implementing a simple feature in a theme: Business and IT managers customer engagement system, for must work continuously together to example, requires dicult integration bring new products from conception work, and iterative testing to make to market. If they don’t, agile sure the new feature works well with methodologies will never achieve the other features and doesn’t break them. speed for which they were created. In addition, there typically is little Agile won’t work without a unity of automation available to test and release purpose, a one-team approach. In short, becoming an agile organization calls for a transformation that engages people, systems, and processes at all levels. Agile is not just about creating software.

Coming Together Around Agile To overcome the impediments to becoming agile, financial services companies must take three paths: 1. Organizational assessment and planning. They need to define their vision, identify the internal impediments to agility, and create an enterprise transformation roadmap to overcome them. This is about having a change management strategy, adequately supported with resources. Any systemic change requires a feedback mechanism to collect and analyze stakeholder reactions. Addressing the feedback is what drives progress. 2. Implementation preparations. The goal of agile transformation is to create customer value quickly. Therefore, companies should establish teams organized around discrete pieces of the customer experience. Those teams will work best when managers demonstrate ‘servant leadership’—i.e., acting frequently to remove impediments that can slow the work of digital product teams, rather than operating in a traditional command-and-control mode. 3. Technology platform and engineering culture. To support the agile deployment of new products, financial services firms need to employ modern IT architectures and designs, like micro-services and application programming interfaces (APIs) that take advantage of the latest technology infrastructure designs, and cloud-based systems. What’s more, product engineers must adopt a culture of automated systems— converting manual technology work into automated work wherever possible.

Empowered Teams are at the Center of the Action Self-organizing teams staffed with adoption when they have business- people from all relevant functions are IT teams in which members share the heart of an agile organization. They, ownership of the work: the delivery of not their superiors, must be allowed new functions to customers. to decide what they can deliver—in weeks, not months—based on the A company’s technology foundation resources they have. also is critical to optimizing agile teams. Leading practitioners of These teams have the power to agile methodologies adopt DevOps make these decisions because they strategies that automatically release are backed by the business’s leaders. new features after the team develops That only happens when everyone them. DevOps empowers a company in the C-suite understands and to collect timely feedback from visibly demonstrates (through daily customers about new digital products. attendance at team meetings if need That feedback enables teams to quickly be) that agile adoption is necessary to improve the product, the customer the organization’s future. experience or both. Why do all CXOs need to be on board? Because only they can give teams the flexibility to define the scope of their work and prioritize goals based on the business value their products deliver to customers. Banks succeed with agile

Building the Team: How to Do it Right Agile teams must possess all the required skills for assessing customer needs and developing new products and product features. As such team members must include representatives from all functions that impact the customer experience— i.e., marketing, sales, finance, HR, IT, research, operations, and other groups. Four other principles are crucial to the success of these agile teams: 1. Organizing teams by features. Any team should focus on customer journeys, mapping, and improving a consumer’s experience at every step of his or her interaction with the bank. For example, a team could work to make the loan origination process more ecient. Team members would examine every step in the workflow, from routing documents to how consumers upload them online to ensure requirements (consumer credit histories, loan eligibility, bank account validation, employment, and property value check) are met as seamlessly and effortlessly as possible. We have seen agile teams cut days from this process by eliminating activities that don’t add value. For example, in the mortgage lending process, customers can provide electronic signatures for documents instead of coming into the bank, a move that saves time, and reduces mistakes. Electronic systems to check an applicant’s credit history and other changes have trimmed six or seven days from the loan approval process, meeting customers’ desires for a faster, easier-to-use process. 2. Develop team skills for analyzing and improving customer value streams. Team members must be able to dissect what information and expertise are necessary to improve key customer processes. That requires cross-functional teams that can ask questions such as: € What are the key elements and business processes central to the bank’s operations? € How many handoffs are happening between systems and functions? € What tasks add value—and don’t (and thus could be eliminated)?

Mapping a customer process such as ‘from inquiry to cash’ will shine a light on ways to improve workflows and eliminate waste. However, the team working on that process must be composed of members from all the functions that impact that process. 3. Scale those agile skills. Banks that want to adopt agile approaches are wise to start small— even with one team—before going big. However, once a bank makes one agile team successful, the goal should be to create many more agile teams across the organization. That will help it to build a culture of rapid, iterative, and customer-responsive change. When that happens, banks will have a flatter organization in which middle managers can move from a command- and-control mindset to servant leadership, assisting teams instead of running them. All this requires extensive training and coaching by agile experts. Team members must master agile approaches, as well as their roles on the team. Managers must be trained how to shift their style from supervising subordinates to empowering them. Work areas need more open spaces and flexible seating arrangements. They will foster greater collaboration and improve team productivity (while also appealing to millennial team members). Tools that help team members collaborate— especially chat applications, document repositories, and project management software—are also instrumental to boosting team productivity.

Functional Area Key Features / Capabilities Supported Sales Processes Across € Prospect campaign execution Product Lines € Prospect management € Customer offer € Commissions € Product matching € Product sales support Loan Origination € Know Your Customer (KYC) (Mortgage, Auto) € Employment verification € Validate bank details € Credit history check € Loan eligibility check € Asset valuation € Documentation management Retail Bank— € Account opening, account activation Accounts and Deposits € Transaction posting, balance checks € Service interest computation, tax computation, fees € Support functions—KYC, customer statements Common Reference Data € Client/party management Used Across the Bank € Product management € Market data management € External agency management Figure 8: Banking Features Ripe for Reuse 4. Build once, use many times. When a team develops a hit feature for customers, the organization should look for other parts of the business that could reuse it. This principle is especially relevant to banking and financial services. Figure 8 shows common examples that we’ve seen of banking features that agile teams are repurposing in their companies.

How Agile Can Pay Off Banks with agile cultures introduce new products and services much faster. They also are quicker at identifying and making cost reductions. Customer ratings also improve. The impact can be eye-opening: € A U.S.-based financial services company cut the time it took to introduce new features 55% and the time to test them 70%. The cost of product development fell 40%. € A leading U.S. mortgage banking services provider reduced the time it took to roll out new product features by as much as 75%, from an average 3-6 months to 6-8 weeks. What’s more, the percent of customers who used the new features jumped from 50% to 87%. Not surprisingly, the company’s JD Power customer survey ratings rose. € A large global bank deploying a digital channel for consumers who wanted a mobile-first experience cut the cost of customer research by 94% after adopting agile approaches. It also reduced the time it took to execute payments by 60%, and the average time it took customers to open a new brokerage account by 75%.

Success Takes Work: Making Agile Change Stick Even as financial services company executives recognize the need to adopt agile approaches, generating benefits like those described above won’t be easy. Three challenges routinely emerge: winning over key business stakeholders, organizing geographically dispersed teams, and embracing an agile culture across the enterprise. However, each challenge can be overcome. Collaboration with business stakeholders. While bringing business and IT people together in agile teams is vital to their success, at some banks decision-makers see both the company’s problems and solutions as belonging to IT. Even when technology is central to addressing an issue, however, agile efforts will fail without participation from business functions. Success with agile requires cross-functional collaboration and direct participation. Teams should include a role for a business-side participant who serves as team leader or product owner. Team meetings should be frequent, with regular presentations, and product demonstrations to business leaders. Teams must also convince business leaders they must devote time to the effort. Distributed teams. When a group of software developers created 60 the Agile Manifesto in 2001, they emphasized the value of face-to- face conversation.61 In today’s business environment—with teams often spread across the globe—that’s not always possible. Managing this challenge demands emphasizing the close communication required among all team members. Teams can still collaborate over long distances when they skillfully distribute work tasks. They can even hasten progress. This still requires regular meetings and leveraging collaboration tools. It also involves the extensive use of what’s referred to as ‘information radiators’: large charts, physical or digital, to track team member tasks and to communicate and sustain team momentum. This information must be available to all team members, whether or not they work in the same room. 60 Agile Manifesto, History: The Agile Manifesto, accessed March 13, 2018, http://agilemanifesto.org/history.html 61 Agile Manifesto, Principles Behind the Agile Manifesto, accessed March 13, 2018, http://agilemanifesto.org/ principles.html

Embracing an agile culture. Culture change is hard. Many managers loath ceding control. To get them to embrace agile, its value must be demonstrated to them. For example, a team can show metrics such as data on customer reactions to minimum viable products (MVPs) and subsequent customer feedback on the iterative improvements to those products. Skills development is another element of an agile culture. Banks should cross-train team members so they gain additional skills. That will reduce the number of handoffs to other teams, which will increase productivity. We have seen banks train business analysts to perform quality function tasks (such as working on test specifications in addition to product specifications), and developers pick up testing skills, and vice versa. By working together, team members can also gain ‘T-shaped’ skills. By this, we mean they bring knowledge and experience in a particular area (the vertical bar of the T) and leverage knowledge gained from working with experts in other areas (top of the T). Agile methodologies embrace ‘fast failures’—flaws in a product or service idea that a team discovers early and then fixes. This makes it possible to show how the early lessons learned from such failures can save time and money later as compared to traditional approaches.

There are likely to be some in the organization who resist the effort to move to agile. To bring detractors on board, leaders can implement a comprehensive change management strategy—building awareness, cultivating participants’ acceptance, and enabling them to understand the benefits (‘what’s in it for me’). Demonstrating quick results from the effort will help win over colleagues who are skeptical of agile. The message needs to be this: The company’s competitiveness depends on it. Once these barriers are overcome, it should become obvious that the adoption of agile is making the organization stronger. Agile should be breaking down barriers across the organization, and focusing it on what matters most to customers—and not on products or product features that aren’t generating value. And combined with DevOps practices that automate the release of new technology-enabled features, agile can bring more coherence to a bank’s effort to develop IT systems that were not integrated from past mergers and acquisitions. Leaders at banks and financial services companies know that innovative, fintechs are working hard to take their business, and they are agile for a reason. Agile approaches are critical to making established financial services firms grow faster, become more competitive, and serve customers better, especially online.