Managing Innovation in Digital Disruption...

Reform Leadership Training 2018Managing Innovation in Digital Disruption Era

Jakarta, 06 October 2018

By Indra UtoyoManaging Director of Information Technology & Operation Bank BRI

Direktur TI & OperasiBank Rakyat Indonesia

Direktur Digital & Strategic Portfolio (2012-2017)Direktur IT Solution & Supply (2007-2012)

Telkom Group

OrganisasiMasyarakat Industri Kreatif TIK (MIKTI)Dewan Pengawas

Tokoh Inovasi BUMN Kementrian BUMN (2017)

Awards

CIO’s ‘Executive Dream Team’ Fortune Magazine (2011)

Asosiasi Bulutangkis Seluruh IndonesiaStaf Ahli

Wantiknas (Dewan TIK Nasional)Anggota

The 1st Best CIO SWA Magazine (2010)

Indra Utoyo

Bank Rakyat Indonesia (BBRI)State owned bank, publicly listed in IDX

Market Cap As of July 2018

$ 25.48 Billion#No 4 in Southeast Asia

Assets As of Dec 2017

$ 83.01 BillionNet Profit As of Dec 2017

$ 2.14 Billion

Financial Highlight :

Total Number of Customers: 75.7 Mio

1. Digital ‘Disruption’ Phenomenon

2. Digital Transformation Broad Trend

3. Visioning & Transformation in BRI

4. Managing Change

Table of Contents

We are now living in 21st Century…..The “Creative and Conceptual” Age

5

Change in Digital Era :Change no longer Linear…but Exponential…

Source : Roland Berger Strategy Consultant, 2014 6

Media Services Education Finance Health Energy Government

Information Intensity High High High High High High High

Gatekeeper Cost High High High High High High High

Fragmentation High High High High High Medium Low

Information Asymmetry High High High High High Medium Medium

Spare Capacity High High High Medium Medium Medium Low

Regulation Low Medium Medium High High High High

Failure Costs Low Medium Medium High High High High

Asset Intensity Low Low Medium Medium High High Medium

Disruption Potential High High High Medium Medium Low Low

Disruption Prediction By Industry

Source: Geoffrey G. Parker, MIT Sloan, 2016

Digitization, Mobilization, Augmentation,Cognification, Disintermediation, Automation

Source : adopted PWC

Megashifts in the Industry Revolution 4.0

Digital Technology Transformation Key Drivers

Source: Ambit software, 2016

Table of Contents

1. Digital ‘Disruption’ Phenomenon

2. Digital Transformation Broad Trend

3. Visioning & Transformation in BRI

4. Managing Change

Why Digital Transformation?

“The digital revolution is far more significant than the invention of writing or even of printing”

(Douglas Engelbart – early mouse computer inventor)

11

“The digital transformation is not about technology is about redefining your value proposition”

(Jeanne Ross - MIT)

5 Domain dalam Transformasi Digital

Source: David Rogers, The Digital Transformation Playbook

CUSTOMERS

From Passive Target... …to Customer Network

COMPETITION

VALUE

From Defending… …to Adapting

From Top Down Planning … …to Experimentation

INNOVATION

DATA

From Silos … …to Strategic Asset

From Product … …to Platform

Customers: From Passive Target…To Customer Network

Mass Market Model Customer Network Model

13

Brand Valuation

> Rp. 30T

> Rp. 20T

Rp. 12,3T

Rp. 9,8T

Source : Yahoo Finance, reports

Competition: From Product…to Platform

14

Hospitality Brand Valuation

Hilton $27.84 billion

Marriott $22.98 billion

Airbnb $20 billion

Starwood $13.79 billion

Wyndham $11.03 billion

Accor $10.82 billion

InterContinental $10.54 billion

Hyatt $8.98 billion

Choice Hotels $3.65 billion

HomeAway $2.93 billion

Be a Platform

• Platforms help users create products, business, communities, and networks of their own. It help others build value

• If it is open and collaborative, those users may in turn add value to the platform

“In the economy we’re in now, if you’re not a platform, you’ll be commoditized”- Fred Wilson (Venture Capitalist)

Jeff Jarvis “What would Google do ?”

Platform for payment service

Platform for contractors

Platform for book tours

Innovation: From Top-Down Planning to Experimentation

Big Bets Decision

Fail Fast, and cheap

Big tough call leadership

The Questioner-in-Chief

Data: From Silos…to Strategic Assets

Source: Gartner

Value: From Defending …to Adapting, From Industry ...to Arena

“…Competitive advantage is transient, not sustainable… Sustainable competitive is not just ineffective, it’s actually counter productive…”

Professor McGrath

Transient advantages : “Continuous Reconfiguration”, • Being alert to what is going on around you• Having an external focus• Being prepare to move early, before the warning sign is obvious, before it’s too late

Provide Urban Mobility Solutions

Develop Builders ofTomorrow

Create a HealthierFuture

Source: Telkom

Digital Transformation Requires:

New capabilities

• Software

• Gather and manage big

data

• Data analytics: learning

• Real time

decision-making

• Start-up culture

• Fail fast and learn

• From one-sided business

model to multi-sided

business model

• Moving towards

outcome-based pricing

New culture for incumbents

New business models

19

Table of Contents

1. Digital ‘Disruption’ Phenomenon

2. Digital Transformation Broad Trend

3. Visioning & Transformation in BRI

4. Managing Change

“The Most Valuable Bank in SEA & Home to The Best Talent”

BRI 2022 Aspiration

Redefining Our Value Proposition

Soon to be pushed-out by BRI’s Digital Banking?

“Bring Reliable Financial Services to

Everyone”

Everything we do start with WHY before How & What

Source : Bloomberg, 2013

Case Start with WHY - Learn From Apple

The Most Innovative Company with efficient R&D

DIGITAL TRANSFORMATION in BRI

25

Customer Experience

27

Financial Services with “Mobile First” channel

28

Hybrid Mode Company Model

29

THE STARTUP WAY

PEOPLEExperts – Optimizers – ConsistentManagers - Specialists

CULTURE“Failure is not an option” – Risk mitigationInnovation as a noun – CompliancePredictability

PROCESSFunctional hard-offs – Huge programs Quality through reduction of variabilityEconomies of scale – statistical process control

ACCOUNTABILITYROI – Cost reduction – Market shareMargins – incremental growthEntitlement funding

PEOPLECross-functional teams – Two-pizza teams

Entrepreneurs – Founder’s mindset

CULTURE“I eat failure for breakfast” – Productive failures

“Black swam” farming – Innovation as a verb

PROCESSHighly iterative, Scientificprocess

Build, measure, learn – Economies of speedPortfolio of rapid experiments

ACCOUNTABILITYInnovation Accounting – Lead Indicators

Future Absolute cash flow – Metered Funding

Vision – Purpose – Investment in People – Long-Term ThinkingFOUNDATION FOUNDATION

RESULTS RESULTS

Sustainable Growth - Team Morale

Continuous Innovation - Continuous Transformation

SHARED VALUES

Commitment to Truth

Discipline

Excellence

Continuous Improvement

GEN

ERA

L M

AN

AG

EMEN

TEN

TREP

REN

EUR

IAL M

AN

AG

EMEN

TThe Startup Way

Source : The Startup Way, Eric Ries

EXPLORATION

● Innovation :Breakthrough/Adjacent

● Business Strategy :○ Cooperative○ Business Incubation○ Develop Ecosystem○ Experiment/Prototyping

● Market Development● Value Leader● Factory Acquisition : IME

EXPLOITATION

● Innovation :Core/Incremental

● Business Strategy :○ Cost Leadership○ Speed

● Better Experience● Market Expansion● Revenue Leader● Classical Acquisition : T

Portfolio Balanced

Total Basket → Revenue, EBITDA = ∑ Exploitation + ∑ Exploration

Growing Balance PortfolioManaging Changes through Innovation is a ‘must’ in order to exist within the TIMES industry

Horizon 1-2 (sustaining & scaling) Horizon 2- 3 (scoping)

A New Approach in Designing Work

32Source: Nelson, P. et al, MITSloan Magazine Review, Winter Issue 2018 32

EXPLOITATION

EXPLORATION

33

NEW Corporate Culture BRI 2018

Digital Culture: Customer Centricity - Nurturing Growth Mindset

Creating an Innovation Culture

Practicing ‘Innovation Parenting’ (innovation is everyone’s Job)

Bust Hierarchy (let ideas flow)

Encourage the unreasonable (tolerance toward failure and risk taking)

Don’t die of indigestion (commitment to allocate resources)

Cultivate external relationship (everything we do we can’t do it alone, focus on our strength)

Source: Dr. Waguih Ishak, McKinsey Quarterly, Sept 2017

New ‘Digital’ Leadershift and New Ways of Working!

Source: Adapted from Michael Kingsman, MIT CISR 37

The New Ways of Working

Agile (Scrum)

The New Ways of Working

Agile (Scrum)

Digital Ecosystem Innovation for Industry

Table of Contents

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1. Digital ‘Disruption’ Phenomenon

2. Digital Transformation Broad Trend

3. Visioning & Transformation in BRI

4. Managing Change

Start -up

Pro

fitLo

ss

growth

Maturity

Decline

CorporateTurnaround

Transformational Change.(transforms the business)

time

Corporate Lifecycle

Strategic Reorientation(altering/adopting new strategy)

StrategicAdjustments(tactical changes)

We are here!

❷

❸

❹

❶

What is Transformation And When We Need It? To keep stay ahead in the game, BRI needs to have a transformational change …

42

Strategic Framework BRI

5 Pillars of BRI Corporate Transformation

C’s level Commitment

Clear & Right KPI Champion Team

3C Key Success of Transformation

5C BRI Transformation Pillars

44

Clear Vision & Objective

The industry landscape requires us (financial) to be adaptive in order to succeed in the competition, where top leader commitment is one of the key success factor

CASA Leadership

Customer Focus

Credit Excellence

Capabilities on Digital

Culture - Performance driven

Thank You