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The Intelligent Bank: The Power of Platform Thinking

This is the third article in a four part series on the steps needed to innovate and turn your financial services institution into an intelligent enterprise. Click to read Part 1 and Part 2.

As illustrated in Article 2, winning companies are not “enabling” existing business processes with technology. They are transforming their customer relationships, business lines, core capabilities and operations into software and data-driven organizations. That is the heart of their strategy - to grow exponentially, not incrementally.

Growth occurs by addressing new customers or earning more business from existing customers. This happens by better serving existing market segments, entering new market segments, or creating new market segments.

The heart of an effective growth strategy has not changed - winning companies do not focus on their “offerings”. They focus on customers’ “jobs to be done”, creating value for customers by solving their problems. In effective growth strategies, offerings can be customized in ways that solve individual customer problems, integrated with capabilities from other companies that holistically offer customers a more compelling solution.

While customer-centricity is at the core of this approach, it can only be executed at scale by adopting a new model of platform thinking. Why? The challenge that most financial institutions face is the cost and complexity of doing anything new. Platform thinking unlocks the solution.

What is Platform Thinking?

Platform thinking connects the technical foundation for agility with customer “jobs to be done”. The ThoughtWorks Digital Platform Strategy illustrates an effective blueprint of the technical foundation.



Intelligent banks build three core business capabilities to create an exponential growth engine on this digital platform.
 
  • Holistic customer insight, which is an understanding of the customer context on how they consume the services and products. For example, holistic customer understanding combines internal data like marketing, risk management and operational data with external data such as geography, device, channel & interaction. This offers a deeper understanding of what the customer’s needs may actually be, and what risks that customer may actually pose, leading to a clear risk-weighted customer value.
     
  • Pervasive flow of enterprise data, which enables a near real time flow of data across all business lines and functional areas of a bank, within legally defined boundaries. The intent is to find greater opportunities to enrich understand, find useful patterns and insights, and drive more automated decision making across all operational areas. For example, a retail lender may find value in leveraging a combination of risk, compliance and marketing data to isolate specific sub-markets for a mortgage origination marketing campaign.
     
  • Ecosystem readiness, which is a strategic focus on enriching customer solutions with data and services provided by external partners, and consumed as API’s. This approach differs from traditional partnerships in that the bank seeks to offer fully integrated, holistic solutions to customers that consist of both the bank’s own offerings (a loan product for example) and external offerings (housing market trends from Zillow for example).

How are highly innovative start-ups leveraging platform thinking to drive their growth?

Stripe has been able to continuously reinvent itself with a sharp focus on customer needs. Their core business is providing the technical and banking infrastructure for a digital business to accept secure internet payments. Stripe recognized that entrepreneurs experience friction in every aspect of setting up an ecommerce business. Its growing suite of features such as fraud protection, compliance & accounting have focused on simplifying that complexity for their customers. Their new offering Atlas extends this philosophy beyond e-commerce tools.  Everything required to set up a business such as incorporation, banking & hosting is included. Recognizing its “Customer jobs to be done”, Stripe has reinvented its business model from a digital payment infrastructure provider to an ecommerce platform provider.

Reorienting the organization around customer jobs to be done is clearly a non-trivial undertaking. Customers expect their banking partners to make complex operations simple for them to consume. For the organization, it requires reframing the entire problem space. It requires recognizing and solving for the points of friction and resource constraints that shape an industry.

Here is another example. Travel customers need a place to sleep when they are away from home. They may even be searching for new experiences or a sense of shared community. Marriott and Hilton solve that problem by working with investors who then buy land and build hotels. AirBnB solves that same problem by using platform thinking to turn every house or apartment into a potential hotel room. The friction of resource constraints (land) has given way to an abundance of capacity with the platform approach. Through its platform, AirBnB can further solve for experience and community through new offerings aptly called “Experiences”, where hosts can offer curated experiences like creating Tokyo street art, private concerts, truffle hunting and winery tours.  

Platform thinking is at the heart of all technology driven companies, allowing them to constantly reinvent themselves. A platform serves as the foundation for digital business capabilities that can be built, modified and rewired easily. Uber reuses its platform capabilities to provide food delivery service UberEATS. Similarly, Youtube has used its infrastructure to reinvent itself as a digital television service with DVR and streaming capabilities. Platforms reduce the friction and constraints involved in technology delivery through an infrastructure for rapidly deploying capabilities, customer analytics and omnichannel interactions.

A platform becomes increasingly valuable as it attracts more content and more consumers. Apple’s success with the iPhone can be attributed to the ecosystem of application developers and apps on iOS platforms.In order to create the network effects, platforms need to enable both creators and consumers to participate in a fair exchange and capture some of the value the platform generates.

How does that apply to financial services? Here are a few examples:

The primary reason platform companies can launch new products, services and customer experiences much faster than traditionally architected companies is the logic behind its technical foundation. These companies are essentially a library of services and business capabilities, exposed to each other as API’s. This is the secret to their ability to manage growth without wheel-grinding complexity. The cost of doing something new does not need to absorb the cost of changing what is already there. The new capability is a new Lego™ block on the tower, not another strand in a bowl full of spaghetti.

This ability to architect an organization as a set of autonomous, software-defined business capabilities is the key to unlocking the organizational complexity that kills speed, customer-centricity and innovation.

Platform thinking is the foundation of the Intelligent Bank. In the next article, we will explore how to layer intelligence into platform thinking to create a flywheel growth effect.

Learn more about the most effective approach to begin building the digital platform that underpins the Intelligent Bank.