Data Transformation
Why Your Data Transformation Could Fail, Before You Even Start
Mark Weber
August 21, 2023
A financial customer data platform to enhance experiences, spark engagement and enrich people's lives.
When the first wave of the pandemic hit in March, it accelerated a massive shift in digital technologies, forcing organizations overnight to move millions of employees to work at home. Microsoft CEO Satya Nadella suggested recently that “Microsoft just saw two years of digital transformation in two months.” How will this sudden and rapid acceleration among consumers of adopting digital technologies impact your organization’s data analytics journey ahead?
The financial services industry, far above most industries, is literally swimming in a sea of rich data. It’s also funding business intelligence software purchases at a rate higher than all other industries. (According to Gartner Research, banking has the highest rate for investing in business intelligence software of all industries at 13.9%. BI software is rapidly becoming one of the fastest growing applications and is expected to reach almost $23 billion in 2020, and $28.4 billion by 2022. Yet, digital transformation initiatives within financial services promised massive advances in using data analytics, but have proved a failure for over half of all financial institutions that embarked on this journey to date. So, what’s gone wrong with so many failed data transformations?
One problem is that most community banks and credit unions pursuing digital transformation prioritized massive scale, internally-focused functional deliverables first: regulatory, compliance, channel, LOS, and portfolio issues. Many invested in enterprise-level Business Intelligence and CRM solutions, only to discover their first battle would be integrating from 30 to 50 complex and siloed core and unstructured data systems, often requiring an array of outsourced and costly integration consultants, just to get systems up and started. The result, depending on which survey you read: shows that between 50-70% of all digital transformations failed.
Many IT leaders were well-funded (often with budgets from $500K - $1.5M+), so funding alone was not the problem. Data and Business Intelligence teams were often staffed up to build complex Data Warehouse and CRM systems with digital leaders, database programmers, and data analysts - talent alone was not the only challenge. Promises of one to two-year high functioning Data Warehouses often turned into three- and four-year journeys. Along the road, budgets often doubled or tripled, data teams expanded, data implementations stalled, and many FI’s even today find themselves far from implementation-ready analytics rollouts.
Too often, BI teams are not prioritizing the high value and importance of the critical “Last Mile” of the customer journey first to drive incremental wins; and this has led to limited measurable business results or ROI. That last mile may seem like a final short step in the journey, but it is where your customer’s needs, lifestyles, preferences, pain points, profitability and enhanced data are identified; and then used to build highly personalized, relevant, timely, tailored solutions with simplified experiences. And it may be the single biggest challenge of digital transformation journeys to deliver substantial performance results.
McKinsey recently identified nine key drivers of company data analytics project success that rolled into three main buckets:
Perhaps most importantly, McKinsey found that 90% of organizations that are successful in their analytics journey focus over half their funding and resources into bridging the “Last Mile.”
For an industry focused on putting customers first, consumer’s needs, motivations and experiences often got tackled late or even last. Customers were far from the #1 priority for measuring success in the digital transformation process.
The right teams (i.e. sales, marketing, call center leaders) were not always engaged early to help organizations realize the profound cultural shifts and new digital skills that would be required to pivot towards analytics-led decision-making, customer experience design thinking, and building out last mile personalized, frictionless journeys. Financial institutions failed to maximize their customer relationship data first to improve experiences, increase leads and accelerate relationship building; instead pushing those priorities to the end of the road map.
In an industry where a new customer averages between $200 and $1,000 each, and the average annual churn rate is 15%, churn is a massive blow to earnings and profit. It also results in increased expenses from unengaged, single-service relationships that keep walking out the back door – or sometimes worse, stay and drain profits. The opportunity cost of not managing every step of the customer journey from automated onboarding; segmentation modeling to meet lifestyle needs; and developing effective automated reboarding journeys is staggering.
Despite the cost to acquire a new customer being 5X more expensive than keeping an existing one, only 18% of companies focus on retention above acquisition. Not blocking the back door to lost relationships with enhanced user experiences and product targeting is wasting resources, increasing marketing and servicing costs, and stifling customer satisfaction - which result in lower NPS scores and bad ratings.
Consumers were willing to pay an average of 55% more for simpler experiences and were 64% more likely to recommend a brand if the experience was easier.
But leaders who did get the Last Mile right are now helping their customers make smarter, timely, simpler financial decisions across multiple digital and traditional channels, and reaping the results in revenue, leads and relationship growth with measurably higher engagement. And then leveraging those insights back into machine learning insights with algorithms to identify predictive triggers that continuously improve to create more intuitive user journeys. A virtuous cycle.
A national study by Seigel + Gale of high performing brands who simplified relationship building, found that consumers were willing to pay an average of 55% more for simpler experiences, and were 64% more likely to recommend a brand if the experience was easier. The 2020 pandemic and resulting work at home reality is likely to accelerate this digital trend as consumers shift towards easier, intuitive experiences built on AI insights that look a lot more like Amazon than JCPenney.
So, what can C-Suite leaders and marketers do today to prioritize and deepen their understanding of their customers’ needs, lifestyle, financial challenges and burning priorities? How can you design, automate and optimize smarter, more personalized solutions, win increased engagement and enhance revenue opportunities from analytics?
Successful digital transformation will come down to a choice between improving people’s journey to financial health with advanced analytics, machine learning tools, triggers and automation, and measurable ROI – or remaining stuck in slow, manual workflow processes that are virtually unmeasurable and unable to move the bar of retention and growth. The systematic legacy problems of unlinked data systems, rate-focused emails, and traditional low-rate product marketing campaigns, will continue to result in high churn rates and expensive marketing budgets that can’t be tracked for ROI, let alone deliver digital metrics and conversions of new relationships across channels.
With mounting pressure from consumers in 2020 to simplify and personalize their online experiences, a crossroads has been reached where traditional “product pushing” as a stand-alone business strategy is giving way to addressing each individuals’ unique life needs, financial challenges and preferences through leveraging data and automation into rich, hyper-personalized journeys. These are the real time experiences consumers have come to treasure and expect from Amazon, Netflix, Digit and others improving their journey and winning their brand loyalty and trust.
Financial leaders will have to work hard to build an analytics mindset and establish enterprise-wide priorities for innovation to succeed. It will require determining the best use of people, data, processes, technology - and even trusted partners to adapt and improve business performance and advance their customer experiences.
Re-aligning dated traditional operational work flows that result in high churn rates is critical. The shift towards using the wealth of data at hand to pinpoint each customers’ unique situation, needs and challenges and providing value-based guidance and advice is an important shift.
Using intelligent data analytics, savvy lifestyle segmentation and Persona models, propensity triggers and BI insights, leaders can build customer insights from the data to help personalize and deliver exactly the right contextual solution, at exactly the right time, and in the right channel. While that sounds challenging, it’s really getting back to the fundamentals of building relationships with people who trust your guidance.
A recent McKinsey study on digitizing the consumer decision journey notes that leveraging data analytics to make smarter marketing decisions can increase marketing productivity by 15-20%. If your annual marketing budget is $500,000 to $1 million, it’s not hard to calculate how $100,000 to $200,000 of increased marketing and digital spending value can generate huge increased results in new relationships and profitable product revenues.
Happy customers seeing their financial lives improving turn into deeper relationships, valued referrals and ratings, increasing trust and brand esteem.
The return on investment of customer-first, cloud-based Business Intelligence analytics journeys, linked to smart marketing automation tools and omni-channel content will drive significant return to an organization’s bottom-line performance and growth. But most importantly it will allow financial brands to compete and win at exceeding their customers expectations for simpler, more personalized experiences.
Happy customers seeing their financial lives improving turn into deeper relationships, valued referrals and ratings, increasing trust and brand esteem. In the battle to build competitive relevance, increasingly being fought in a digital context, prioritizing your customers lives over operations should always win.
Amidst the turmoil and uncertainty of a pandemic-driven recessionary marketplace, few financial leaders can afford to not focus resources right now on improving relationships and increasing retention rates with their own customers first. Reducing time-to-market from years to months for applying intelligent analytics will be a game changer. And exploring the next generation of integrated marketing technology and BI platforms is the first step to ensuring the odds of success in your data transformation journey ahead.
Originally published on CUInsight
