My talk at RBS Bengaluru office on how organizations could become more agile, especially in the context of digital banking.

1. Leading the Digital Era @ Banking -
Agile Organization
Tathagat Varma
Country Head, Chinasoft

2. Disclaimer
• These are my personal views.

3. Topics
Why and how digital technologies are
transforming the banking industry?
How organizations can leverage
opportunities created by this disruption?
What is the role of leadership in
supporting, sustaining and scaling agility?

4. Who is at the highest risk of disruption?

5. Views about banking through years…
“Information about money has become almost as important as money itself.”
Walter Wriston, CEO Citibank, 1967-84
“Banking is just bits and bytes.” John Reed, CEO Citibank, 1984-98
“Banking is necessary, banks are not.” Bill Gates, 1994
“Banking is no longer somewhere you go, but something you do.” Brett King,
“Bank 3.0”, 2014
“Future of banking…is all about data.” Chris Skinner, “Digital Bank”, 2014
“BBVA will be a software company in the future.” Francisco González,
Chairman and CEO BBBVA, 2015
“We built the bank around Internet.” Ralph Hamers, CEO ING, 2017

6. Gartner Hype Cycle
for Digital Banking
Transformation, 2017

7. What might be the biggest disruption in
banking?
71%
Would
rather visit
dentist than
a bank!
73%
Would be
excited
about
financial
services
from
Google,
Amazon,
or Apple,
PayPal or
Square than
their own
bank!
33%
Open to
switching
to another
bank in next
90 days
53%
Their banks
don’t offer
anything
different
than other
banks
68% and 70%%
in five years, the way we
access our money and pay
for things respectively will
be completely different
33%
Won’t need
a bank at
all!
~50%
counting on
tech start-
ups to
overhaul
the way
banks
work. They
believe
innovation
will come
from outside
the industry!
Least loved
All 4 of the leading Banks are among the
ten least loved brands

8. Please welcome your new competition, the
“Challenger Banks”…
Challenger Banks: fintech companies that leverage digital
tech and software to deliver banking by offering superior
user experience typically on mobile devices, and scale
through platform and APIs.

9. …and not just from “fintech” alone…!

10. The entire bank is being unbundled…though not
by the banks themselves!

11. Challenges include…
• From being a support function, IT is now the primary driver of value. But,
most banks might not be ready for such drastic change!
• The number of regulatory changes a bank has to deal with every day has
increased from 10 in 2004 to 185 today. That’s a regulatory change that
has to be interpreted and implemented every 12 minutes. The cost of
compliance is so huge…1 in 3 staff are just checking compliance!
• Slowly but surely, the world is moving towards cashless. Tier 1 Chinese
cities will be cashless by 2020, Turkey by 2023.
• Open Banking (UK) / PSD2 (EU) is on! Will bring more challengers!
• Automation threatens jobs such as Loan Officer (98%) and Cashier (97%)

12. Falling cost of banking transactions is a key
business driver…
Rs. 75
Branch
Rs. 15
ATM
Rs. 2
Online
Rs. 1
Mobile

13. Priorities are loud and clear…!

15. Evolution of Digital Bank

16. How are incumbents responding?
Acquire
Fintech
startups
Wait and
Watch
Revamp
old IT
systems
Risk being
unprepared for
big game!
Challenges
include
integration;
just a “point
solution”
Legacy
systems,
obsolete
infrastructure,
old
mindsets…
Radically
transform
bank
Not at all easy,
but perhaps
the most
rewarding and
sustainable
thing to do in
the long run…

17. So, how are some of the banks/FI (re)inventing
themselves?
• Svenska Handelsbanken
• ING
• Paypal
• N26
• DBS
• What next?

18. • Was on the verge of bankruptcy!
• Jan Wallander adopted “Beyond Budgeting” in 1971, and turned it around
• No central planning or budget. No command and control. Focus on local
interactions. 70% decisions made at branch
• Church spire principle: “Every branch is a bank”
• Rely on word of mouth (publicity-shy!, no marketing dept or budget)
• Every product is bespoke!
• No bonus or sales target. (Profit-sharing “Oktogonen”
• No call center. Talk to branch manager!
• Posted 39% q/q jump in operating profits in 2008 Q4 - the worst quarter for financial
markets

19. Beyond Budgeting?
• Beyond Budgeting’ means beyond command-and-
control toward a management model that is more
empowered and adaptive.
• Beyond Budgeting is about rethinking how we
manage organizations in a post-industrial world
where innovative management models represent the
only sustainable competitive advantage. It is also
about releasing people from the burdens of stifling
bureaucracy and suffocating control systems,
trusting them with information and giving them
time to think, reflect, share, learn and improve.
http://bbrt.org/about/what-is-beyond-budgeting/

20. 12 PRINCIPLES OF BEYOND
BUDGETING
Governance and
Transparency
Values
Governance
Transparency
Accountable Teams
Teams
Trust
Accountability
Goals and Rewards
Goals
Rewards
Planning and Controls
Planning
Coordination
Resources
Controls
Radical
Decentralisation
Adaptive
Process

33. “We want to
portray ourselves as a
tech company with a
banking license. Even
further, I think we should be
the largest bank without a
balance sheet if you really
take it into the future” –
Ralph Hamers, CEO,
Aug 2017
• Used Spotify model to
incorporate agile way of
working
• Brought in DevOps and
continuous delivery to
release every 2 weeks
• Asked all employees in
HQ to “reapply” for
position in new (agile) org.

35. Paypal (1/3)
• Case for change: working hard but not getting results!
• 3500 people, 8 distributed product org across the globe; 4 dev centers, 40
different business offices and product management everywhere! no
common leadership, no products hierarchy, even the products were not
defined
• 85 different technology domains!
• very project focused
• hero culture; dev manager = project saviour
• projects were never actually done, lots of orphaned projects / half-way
done, lots of waste
• looking back 3.5 years, Paypal released on 3 products in ~18 months

36. Paypal (2/3)
• Structure the Change: focus on cultural and process change
• agile teams: 11 cross-functional teams; people volunteered and also “voluntold”
• 4 pillars:
• Customer Driven Innovation (CDI) or Design Thinking: move from tech
focused to customer focused; get outside-in perspective
• Product Hierarchy: defined 17 distinct product lines, 31 sub-product lines
and 86 delivery groups / clear product ownership (took 7 months)
• Move to Agile: over 300 teams working in Agile / Scrum and deliver product
functionality incrementally
• Key Performance Indicators: measure how value is being delivered to end-
customer

37. Paypal (3/3)
• Executing the Change: big bang!
• went against conventional thinking
• it took 15 teams to deliver a product, and if done in waves, some team would get left out! so it would be all
the pain and no benefits for 3-4 years
• Faced resistance from CTO
• Had to do lots and lots of planning
• Skills and capabilities: everyone got 1-day agile training, 1-day PO training, 1-day SM training, Dev
manager training, CDI training for POs, etc. Leaders and team members. No training on Rally but short
videos on-demand
• 376 in-flight projects mapped to newly formed delivery lines and teams too several months of iterations!
• Two laws: everyone operating on same 2-week sprint cadence and all work needs to be in Rally
• Migration: Each team had to decide: projects nearing release could either finish in waterfall or do a release
mid-project and then move to agile. Even teams that continued completing in waterfall had to have at least a
story in agile
• May 8, 2013 was cutover: every team in . Teams were responsible to test - lines between dev engr and test
engr were blurred, and teams had steady membership
• 6 months after, they had released 58 products or features. 29% productivity improvement with 8% smaller
teams
• Started with 305 teams. Have 400+ teams now.
• 21 agile coached worldwide. some teams have started with TDD
• Engr ops, prod ops, etc. were outside scrum teams on ticketing basis

38. “Why can’t we ‘Spotify’ banking?”

39. Partnerships to scale growth faster and better

40. DBS
• 2009: “Damn, Bloody, Slow”
• Realized that they had to digitize completely, instead of simply
applying “digital lipstick”. Go beyond a bunch of digital apps
(that’s the easy part!)
• Focused on:
• Tech architecture
• Customer Journey
• Culture - how do you create a 22,000-person startup?

41. DBS
• Transformation aligned to core P&L
• 100 flowers blooming everywhere in the core! Ran 5-day hackathons. In 2015,
everyone’s KPI included running an experiment, and ran over 1,000 with most of senior
leadership taking part
• Running a mobile-only bank with just 25% headcount (which should go down to 10% in
a year or so)
• Embraced Kaizen to bring improvements
• Realized that 95% of processes were waste (due to handoffs caused by org silos),
whereas previous efforts had focused on improving the 5%!
• No one had an end-to-end view of the entire process!
• Experimentation breaks through resistance to change.
• Reduced the turnaround time for opening a new account by post from 21 days to
five.
• Reduced customer waiting time by 250 million customer hours
• Open a Digibank account in 90s!

42. What next?
(In)famous disruptions
• Photography: Kodak / Instagram
• Hotels: Chains / Airbnb
• Transport: Taxis / Uber
• Home entertainment: Blockbuster / Netflix
• What next: Everything / Amazon?

43. Bundling lateral experiences…

44. Let a thousand flowers bloom…

45. Embrace experimentation, don’t sweat failures!

46. Critical success factors for digital transformation
• Organisation culture / leadership
• Why are we here?
• Frictionless processes / agility
• How do we serve our customers?
• Understanding consumers / empathy
• What do they need us for?

47. Understanding consumers
• Hyperconnected, always-on
• Plethora of options, well-informed
• Money is important, but time is even more important
• Want to always be in control
• Seek “lateral experiences”

48. What is agility?
The ability of a body, organism or a system to sustain and grow by being
able to:
• sense, analyse and comprehend expected and unexpected situations
as they unfold,
• respond and organise, self and collectively, quickly and gracefully to
planned and unplanned changes,
• anticipate potential issues and avoid or mitigate them as required or as
possible,
• exploit unexpected opportunities and maximise gains before they dry
up,
• initiate potential game-changing ideas well-ahead of the opportunity,
and
• learn and adapt from previous experiences, make sustainable
improvements and evolve on continuous basis.

49. External
Stimuli
Internal
Response
Agility is the
ability to
sustain
internal
changes with
respect to
external
changes.
Agility is not
the end goal.
Short-term
survival and
long-term
growth is!

50. Top 10 anti patterns
1. Fixed Mindsets
2. Pigeon-holed Talent
3. Component Teams
4. Cargo Cult Agile
5. Waterfall-era Methods
6. Inefficient Tools
7. Factory-style People Practices
8. Spider Organization
9. Culture of Compliance
10. Orphaned transformation project

51. Fixed Mindsets

52. Pigeon-holed Talent
“I-shaped” “T-shaped”

53. Component Teams
Component Team Feature Team

54. Cargo Cult Agile (a.k.a. “Doing Agile”)

55. Waterfall-era engineering

56. Ineffective tools

57. Factory-style People Practices…
• Narrow job descriptions
• Fixed role and responsibilities
• Individual goal setting
• Predictability-driven KRAs
• Annual performance reviews
• Bell curve / stack ranking
• Lack of team rewards
• Fixed career paths
• Role of first-line manager
• Command-and-control
• Top-down goal-setting
• Promotions driven by “symbols of power”
• …

58. Spider organization

59. Culture of Compliance
• Predictability and reliability are non-negotiable
• No “sandbox” to test new / bottom-up ideas
• Inspection trumps trust, authority trumps initiative
• Deviations are shunned and mistakes are punished
• When “means” becomes “ends”, agile ceases to be of
value
• Agile becomes the new waterfall!

60. Orphaned transformation project
• Failure to embed “agile transformation” results into the
mainstream business results diminishes its importance
• Agile is successful only when
• Customers are happier
• Business is better
• Employees are engaged
•

61. Role of Leadership
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69. How agile is your organization?
Bain Agility Quotient
Our company's leaders trust and empower people rather than commanding and controlling
them
Our company's leaders continually prioritize strategic initiatives, stopping low value activities
and refocusing resources on the most valuable opportunities
Our company's culture obsessively focuses on customers and adapts to their changing needs
Our culture embraces appropriate levels of risk-taking and ambiguity; people are innovative,
excited for change, and eager to challenge the status quo
Our company's agile teams are small (3-9 people), cross-functional, self-governing, close to
100% dedicated, and they collaborate continuously with real customers to build testable
prototypes
Our best and most innovative people are eager to work on agile teams and senior leaders
encourage them to do so
Our company is shifting its mix of activities and resources to focus more work on innovation
Our company deploys agile teams everywhere we should, and in enough places to significantly
influence overall company results
Our operating systems (e.g., IT architecture, production, and go-to-market systems) enable our
company to rapidly deploy solutions in a modular way
Our planning, budgeting, and resource allocation processes are frequent and flexible enough to
quickly shift resources to our company’s highest priorities
Even those parts of our company not operating in agile teams are embracing agile values and
accelerating change
Our company attracts, motivates, and retains sufficient talent to build an agile enterprise and to
unclog critical capacity bottlenecks
http://www.bain.com/bainweb/media/interactive/agile-diagnostic/index.html?

70. Recap
Digital banking isn’t just about tech alone! Orgs need to understand
customer needs (and also deliver the “wants”!)
Achieving agility is all about tuning internal change rate to external
change rate. However, mere adoption of “agile processes” alone
won’t address the issue of sustaining or scaling agility!
Agility is simply the means to accomplishing business objectives.
However, business goals must be in lockstep with customer value
and employee engagement for long-term sustenance.
Creating an agile org requires building the right culture and
supporting it with commensurate org structure and processes. Post-
transformation must be the new default to self-sustain after all
scaffolds are taken off.

71. References
• https://www.ing.com/Newsroom/All-news/We-want-to-be-a-tech-company-with-a-banking-license-Ralph-Hamers.htm
• https://www.theguardian.com/business/2012/sep/14/handelsbanken-sweden-customers-first
• https://www.economist.com/special-report/2009/05/14/back-at-the-branch
• https://www.strategy-business.com/article/How-Can-a-Fintech-Company-Win-20-Million-Customers?
• https://www.forbes.com/sites/zachconway/2017/04/19/why-more-millennials-would-rather-visit-the-dentist-than-listen-to-banks/#4cd7ed6e72b3
• https://www.financialexpress.com/industry/will-banks-get-amazoned/870600/
• https://thefinancialbrand.com/66287/banking-disruption-millennial-innovation-culture-solis/
• https://www.bbva.com/wp-content/uploads/2015/08/millenials.pdf
• https://gomedici.com/fintech-companies-that-have-ended-the-monopoly-on-bank-account/
• https://www.cbinsights.com/research/report/amazon-across-financial-services-fintech/
• https://thefinanser.com/2011/08/banks-need-to-radically-shake-up-and-wake-up.html/
• https://backbase.com/resources/banking-2025-whitepaper/
• https://banknxt.com/59316/technology-banking-davos/
• https://www.strategy-business.com/article/Meeting-the-Fintech-Challenge
• https://www.ft.com/content/85640c38-ad2a-11e4-a5c1-00144feab7de
• https://www.dbs.com/innovation/dbs-innovates/dbs-ceo-piyush-gupta-on-the-digital-reinvention-of-an-asian-bank.html
• https://www.capgemini.com/consulting/2016/07/banking-is-necessary-banks-are-not-how-banks-can-survive-in-the/
• https://obamawhitehouse.archives.gov/blog/2017/01/13/framework-fintech
• https://tech.economictimes.indiatimes.com/news/mobile/paytm-claims-to-have-reached-a-run-rate-of-5-billion-transactions-in-a-year/64912057
• http://www.forbesindia.com/article/weschool/digital-revolution-in-the-indian-banking-sector/47811/1
• https://www.mckinsey.com/business-functions/organization/our-insights/the-organization-blog/10-ways-to-become-flatter-faster-smarter-in-banking?
• https://banknxt.com/59436/bank-regulations-12-minutes/
• https://www.dbs.com/innovation/dbs-innovates/digital-innovations-in-a-singapore-bank-10-lessons-learnt-when-DBS-came-out-of-the-stone-age.html
• https://www.dbs.com/innovation/dbs-innovates/dbs-ceo-piyush-gupta-on-the-digital-reinvention-of-an-asian-bank.html
• https://www.mckinsey.com/industries/financial-services/our-insights/ings-agile-transformation
•