How structural collaboration leads to value propositions in the financial sector

Part 1 : Introduction

In the (post-)crisis ear, challenging the status quo through innovation will be critical to restore profitability in the financial sector. The commoditisation of products within the industry is making it very difficult to compete on price. Moreover, a whole array of non-banking entities is entering the market to close the gap between the offerings of banks and the needs of customers. Suddenly, banks face competition from telcos, supermarkets, tech firms and innovative start-ups, all experienced in building online relationships and developing and marketing transparent products.

In this paper we explain how financial institutions can install structural collaboration trajectories with key stakeholders (consumers, employees, management) in order to develop true value propositions consumers are willing to pay for.

leads to value propositionHow structural collaboration

What to expect?

Time to innovate is NOW!

“Customers judge across their entire set of experiences rather than just comparing your organization to others like it. We want our technology to be as intuitive and user-friendly as Apple products, the service we receive to be as thoughtful as we might get from Nordstrom, and personalization and ease of payment as good as Amazon’s” (Forbes, Rita McGrath, Five Big Trends in Business Innovation in 2012).

So from a bank’s point of view the competitive frame of reference has expanded considerably and at a frightening pace.

As a result, only financial institutions which invest in service innovations taking advantage of a profound understanding of consumer needs and demands will be able to outperform competition. (IBM Institute for Business Value 2010)

However……impediments to innovate are probably more persistent in the financial sector than in any other industry. Strict regulations, low margins, legacy, long time to market, focus on short-term financial success, commoditisation of services & products, IT-driven NPD, lack of organisational structures & funds fostering innovation… most often result in banks embracing the opposite of an open-innovation-minded culture. (Accenture Research, 2010)


With the rise of web 2.0 and social media, new tools are available for organisations to facilitate open innovation and structural collaboration

processes. In the next chapters, we explain why and how to install structural collaboration trajectories with internal and external stakeholders (consumers, employees, management), what the keys to success are and the implications for the organization. We end with concrete cases in the telco, aviation and financial sector.

Here’s the solution!


Part 2 : Structural Collaboration

Power to the people

When we talk about open innovation or structural

collaboration, we refer to the integration of the voice of the customer in all decision-making flows of your company. In most companies, customers are only allowed to give their feedback at the very end of a decision-making flow through traditional market research. This paper

gives insights on how to involve the customer in every single phase of the decision-making flow on an on-going basis. Currently, only 3% of all companies have experience with developing new products and services with their consumers.

In most cases, this

collaboration starts with a pilot project. If the test is successful, the collaboration can gradually be built up in a more structural manner. Less than one out of ten companies which co-create with their customers also uses this collaboration for launching new products or services. We could say that the focus of co-creation is mainly on the initiation of new ideas. But even if consumers are more or less continually involved in the process of dreaming up new ideas, this is still not enough to allow us to speak of ‘structural collaboration’.


How to install structural collaboration

Structural collaboration means that the customer is involved in all aspects of your company’s life. This includes:

1. Getting new insights: Exploration of the target group. Listen directly to how they perceive the product and service quality in order to optimize the commercial portfolio. This also implies discovering new market trends and unmet needs from your most relevant customers.

2. The development of new ideas and fine-tuning of existing ideas: Create new commercial value together with the customer.

3. Key role during implementation: Include customers during the implementation phase to make sure that your interpretation of their ideas is correct.

4. Continuous evaluation and optimization: Use the customer’s voice as a continuous flow of information to improve loads of smaller, tactical issues and to re-shape the future of your company, your customer being your primary consultant.


Overview of structural collaboration and business issues

And it pays off: a recent article in the ‘Harvard Business Review’ claimed

that companies are more able to solve all their main business issues if they collaborate closely with their consumers. The good news is that consumers are also willing to help companies out with this: more than half of them want to collaborate with one of their favourite brands on one or more of these issues. The goal of this paper

is to look into the necessary ingredients for a company to structurally get the consumer on board.


The objectives of structural collaboration

Based on 17 interviews with senior executives of (global) brands from different industries, we came to the conclusion that companies that are working on structural collaboration with their customers have four clear objectives in mind with this approach:

1. Create better products, improve the customer service and communicate in a more impactful way. This is by far the most important objective for large brands in order to collaborate with consumers. By succeeding in this objective, the overall performance of the organization will increase.

2. Become more agile. By involving customers in every phase of a decision-making chain, things move faster. Companies can make better decisions more rapidly and have a better feeling of what will be needed to be equally successful in the future. A big plus in today’s fast-moving world.

3. Add consumer feeling to the gut feeling. A lot of managers rely on their gut feeling, which is wonderful. Structural collaboration should add ‘consumer feeling’ to it. By collaborating so often, managers create the ability to put on the consumers’ hat during a meeting and think as the consumer. Which helps them to make more consumer-relevant choices.

4. Marketing & PR. Companies that are listening and that involve consumers in decision-making are popular nowadays. Tell all your customers that you take decisions based on consulting other customers, and they will like you more. Leveraging the internal collaboration platforms towards the external communication has an impact on the overall perception. This is not the main goal, but a very welcomed indirect effect.


An evolution, not a revolution

It’s clear that structural collaboration with consumers is not about having the right technology to make it

happen. It is about a mentality shift for most organisations. A shift from a ‘we know best’ attitude

towards an open mentality. The most beautiful result of collaborating companies is the creation of what we

just called the ‘consumer feeling’. Adding the consumer feeling to the gut feeling of companies is the biggest change one can achieve through structural collaboration.

To reach this situation, a number of steps need to be taken. Based on our research, we learned that all companies started small and evolved towards bigger and bigger collaboration projects. In the end, collaboration was really embedded in their organization.

It was a process of change, not a revolution.


The evolution towards structural collaboration happens in three steps:

1. Collaboration always starts with a first-time try out. Companies organize a co-creation project in which they allow the customer to participate in one specific project. Most frequently occurring examples are co-creation of a new product, a new package or new marketing communication.

2. If this try-out is experienced as a success, the second step is to apply collaboration on a project-based level in the organization. In this stage, companies have the habit to involve customers in every important new project they work on.

3. After a while, it becomes hard for them to take decisions without the voice of the customer during the

process and they decide to collaborate structurally.


Three pillars for structural collaboration with your customers


1 Select the right participantsIn our opinion there are two types of - meaningful - structural customer collaboration : an open online platform where everyone can participate and a closed online community where you select the people to join in. In the large open communities you have little direct control over who joins and

who doesn’t. The members come together in a very spontaneous way to discuss particular subjects of their interest. Your role with regards to these people is simply to listen. This will allow you to discover a series of unfulfilled market needs, which may eventually lead to new products and services. Of course, you are also free to ask them questions, but you should always remember that these are open communities - anyone else might be listening to their answers!

Companies that want to involve the customer in more strategic decisions and that have a need for in-depth feedback, tend to work with a closed online community with a limited number of relevant customers. If you want to solve a specific management problem, it is better to discuss possible solutions with a smaller, closed group of between 50 and 150 of people with a keen interest for your category. It could also be a group of your most ardent fans, fans you have carefully vetted and selected yourself. The major advantage of this approach is that you have everything in your own hands - and this is advisable if you don’t want the whole world to know what decisions are being taken.


Having said that, it is important to acknowledge that not every customer will be able - or is suitable - to help you solve management problems. To give your company access to the right advice on a daily basis, you need to

listen to the right (and relevant) people. For

your communities you should seek to attract people who can offer added value. The minimum condition

is that they have a clear commitment to the company and what it stands for. They may be experts in the sector, knowledgeable and enthusiastic amateurs in the sector or just big fans of your brand.

Research has shown that without this kind of emotional commitment people seldom are interested enough to contribute effectively to an

online community. In other words, you need to talk to people who are interesting and interested. If they don’t have an opinion or if the natural motivation to take part is missing, your community will not achieve what you want it to achieve. But natural engagement is not sufficient, in order to make your community a real success you need to manage it well. Several things are important: be open and transparent about the goals of each project, listen actively (allow participants to put their issues on your agenda too), make it a fun experience (after all people are doing this in their spare time) and give enough feedback on what you did with their answers.


1 Select the right participants

2 Internal communication is not enough Internal = External

Managers show more interest in a project or approach which gets external credits than in a project with a sole internal focus. In other

words: make sure your structural collaboration is not completely taking place behind the scenes of your organization.

Sharing your collaboration work with the whole organisation and the rest of the world has several advantages. Next to an increase in motivation of your management, it will also increase the motivation of your communities’ participants. Further, research has shown that consumers have a higher trust level towards and a better perception of co-creating brands. So, there is also a commercial benefit to leveraging your efforts externally.


Meet-up with participants:Collaboration occurs on a digital platform but it is an interaction between people. To increase the interaction and the emotional bonding, make sure your employees meet up with these people in the real world as well. Show them around in your company, tell them your challenges and treat them like part-time employees.

There are a few communication tactics you can apply to increase the internal and external impact of your collaboration process:

Go for tangible results: If you work together with your consumers on a structural level, make sure you have concrete deliverables. These results (e.g. new products, insights, advertising, packaging…) should be shared with the world in order to make the collaboration aspirational for the market and for the manager involved.

Bite-size & creative reporting: Share the results of your collaboration in a short, compelling and creative way with your employees. Make sure it is easy to digest and to share.

Apply content marketing techniques: Don’t communicate once or twice about your collaboration, but talk about it more frequently. Use three levels of content: big content campaigns (e.g. when you have BIG news: launch of an initiative or showing the end result), content projects (e.g. a theme you talk about for a few days/weeks) and content updates (small, daily updates with relevant information).


2 Internal communication is not enough Internal = External

3 Measure impact

To keep the collaboration flow going, there is need for evidence that the approach works. Therefore

we advise to use a number of clear success indicators that you can measure during the implementation of structural collaboration in your organization. There is no standard list of KPIs to use; they differ from company to company, as they are closely linked to the company culture and the company’s (long-term) objectives. There are a few KPIs that apply to all companies to follow up on the impact of structural collaboration.


Success of innovation, impact of communication and improvement of customer service: by involving customers early in the process, your company will take better decisions. Product launches, new advertising campaigns and so on should have a higher success rate than before the collaboration was implemented.

Cost reduction: by integrating the voice of the customer in the entire decision-making flow, the cost of ad hoc market research should be reduced. Next to that, by creating better products and services based on the input of the market, the impact of word-of-mouth will increase, which may lead to lower media budgets.

Consumer feeling of the organization: you can measure to what extent your management has a better feeling of the attitude and behaviour of your target market. The goal is that managers think as consumers and improve their performance through this newly acquired skill.

Brand perception: listening actively will humanise your brand and make it more popular.

Define your KPIs, measure them and celebrate success!


3 Measure impact

Need for changes in internal implementation processes

Collaboration should lead to decisions that are taken through a between the market and your company. The proof of structural collaboration is in the implementation of the ideas. In order to succeed in this crucial step, there is a need to change the internal decision streams. The

challenge is to integrate consumer feedback and input into every phase of the decision cycle. Remember that structural collaboration does not come overnight. It starts with a try-out that fits within the existing culture. Make sure that as from the start you know what your next step will be.

In other words: it is important to start with a try-out, but it is equally important to start with a long-term view. Make sure you know where you're going. After

the try-out, it is a matter of including collaboration into projects where the fit feels right. People (internally and externally) get bored rapidly. Make sure you have a flow ready in your collaboration process to keep the conversations going. Plan with room for flexibility. Once you have completed a number of successful collaboration projects, the possibility to move forward to structural collaboration will arise.


Make sure that, along the way, you take into account these last tactical tips to make collaboration work:


Have clear objectives for each collaboration project

Involve all stakeholders early in the process

Manage expectations

Have a community manager

Create internal and external credibility

1. Have clear objectives for each collaboration project. Make sure not to collaborate just for the sake of it. To get the feedback of consumers in the decision flow, the objectives have to be very clear, and in line with the business goals.

2. Involve all stakeholders early in the process. The higher the number of departments involved at the beginning of the process, the better. In order to integrate the collaboration flow in the decision flow, it is crucial to have a buy-in from the relevant teams.

3. Manage expectations. Collaboration won’t lead to the next big idea for your company. Customers are great sparring partners, but don’t set your expectations too high. Make sure that during the integration of their feedback in the decision flows, everybody is aware of what to expect from the collaboration.

4. Have a community manager. Make sure to have assigned somebody to manage the community. This person is responsible for managing the conversation with participants in the collaboration process and for sharing the insights internally. He or she brings the consumer’s voice to life within the company.

5. Create internal and external credibility. By delivering results and integrating the voice of the customer in your decision flows, you will gain credibility among the participants in the collaboration platform. Credibility among employees will also grow as they will see that the collaboration adds value. Marketing your collaboration efforts is not a bad thing, but it should not be the only thing.


Part 3 : CasesIn this last chapter, we demonstrate how we applied the above framework for important players in the (financial) services sector. We report on 2 successful co-creation pilots in the telecom and aviation sector that -eventually- resulted in a long-term connection between all parties involved. We also show how the financial sector is gradually opening up and starting to implementing their first true co-creation trajectories surfing the waves of social media and web 2.0.

The Telenet case: The Launch of Yelo


Telenet is the largest provider of broadband cable services in Belgium. Its business comprises the provision of analogue and digital cable television, high speed Internet and fixed & mobile telephony services. By launching a new service in Beta and integrating the voice of the user in the further development, Telenet co-created unique value with customers.

With the purpose of securing (1) market leadership and (2) first mover advantage, Telenet’s mission statement comprises “generate impact through happy clients spreading positive word-of-mouth”, turning the ground swell phenomenon to their advantage. Therefore, they launched a new service in Beta and different internal teams (R&D, marketing, communication, management, even de CEO, Duco himself) collaborated with a user group in an online pre-launch community on the further development of this application.


During the official (press) launch of

Yelo, an application bringing digital TV to mobile devices like the iPhone, iPad and (portable) computer, users were invited to provide feedback on social media. 100 participants were recruited from the open community to join a 3-week closed pre-launch community to allow in-depth discussion of the uncovered themes, collaboration on improvements and to structure the development roadmap. After the community, feedback was shared on social media again, offering all users a chance to join the dialogue.

By integrating the voice of the customer in the development of this new service, consumers were not only collaborating on improvements,

they actually co-defined the development roadmap and the go-to-market strategy for the following years.This roadmap is structured around a model generated by consumer feedback, differentiating between basic expectations, satisfying improvements and addictive new features. 30 out of 45 user-generated and prioritized improvements have already been added to the roadmap, ranging from bugs and interface changes to content features. More than 50% of the last update were user-generated changes.

This co-creation approach resulted in highly satisfied users,

with 83% being satisfied to very satisfied, turning users into real brand ambassadors. About 1 out of 7 iPhone and iPad users in the Belgian market installed Yelo.

Recently, similar co-creation initiatives have been set up for a large Belgian Bank and a worldwide issuer of credit cards.


ING Student House Leveraging on the next generation


ING, a global financial institution of Dutch origin, has the ambition to become THE bank for students and

wants to have full understanding of the life of students and their banking needs.In the 'ING Student House' community the different marketing teams gained

insights into the daily life of 150 students by discussing, among others, themes such as income, expenditure, financial administration, banking and insurances, during 3

months. The focus was on how ING can add relevance to student clients. In that perspective marketing ideas were evaluated and co-created with the students.

Barbera Van der Wal, Senior Research Manager, ING retail: “Our marketing challenge was to gain experience with an online community as a tool for structural collaboration with key target groups. The goal was to generate relevant customer insights in the fuzzy front end of the innovation funnel, to test marketing ideas and to co-create with the target group”. Eventually, the community provided

ING with a rich and detailed view of the life of students nowadays. In a closing workshop with the ING Marketing-students team, over 100 (smaller and bigger) ideas were generated to better match ING to the needs and wishes of their student clients. The NPD department now has a clear view on the directions for the development of the new student positioning, and the community provided them with a rich source of customer quotes, brand reflections and unsolicited feedback.

Susanne Streng, Segment Marketer, ING retail: “For me the added value of the collaboration project was not only the concrete outcome, but also

installing a real dialogue with the target and ACTING upon true customer centricity. Engaging customers in structural collaboration is the ultimate brand touch-point turning them into true brand ambassadors”.


It’s not only about technology and youngsters…


To further improve the experience of travellers, Air France-KLM, the French-Dutch airline holding

company, wanted to connect with their customers on an emotional level. Transfer flights in particular are complex situations, evoking a lot of emotions, mostly negative. To approach this situation as an opportunity and to demystify the innovation process, InSites Consulting and Air France-KLM

collaborated on a complete and staged co-creation project, centralised around the emotional service perception. By connecting with Air France and KLM frequent flyers in an insightment community, 10 insight platforms were defined, emphasizing their needs, emotions and expectations.

In a second phase, another group of frequent travellers placed the insights into perspective with their stories and came up with ideas on the “My Transfer Idea” community, a 3-week creative journey. Analysis of the ideas resulted in 32 concept boards; the 4 most feasible were integrated in a quantitative and emotional concept screener.

This “My Transfer Idea” project does not only use the emotional experience of travellers as a starting point for innovation in service

design, the emotional layer is present in the complete innovation approach and connection with the frequent flyers.


Also in the financial sector, a wide range of target groups and business challenges have been tackled by long-term customer connections using online platforms:

- In the aftermath of the financial crisis, a 1-year intensive collaboration process (via an online community) was set up between different internal teams (active involvement

of the CEO) and customers of 2 large banks facing a merger. The goal was to keep the finger on the pulse and generate customer insights on the integration, so that the teams could act upon them and control damage or loss due to the fusion.

- With the purpose of better servicing their

autonomous investors, a large Belgian retail bank installed a dedicated community among autonomous investor customers and account managers (with a sub-community per profile).

Both groups were followed for 3 months, with a meet & greet between the second and third months. The results revealed different types of autonomous investors embodying different needs and insights on the dynamics between the investors and account managers. In the end, quick wins, short-term actions and strategic projects towards the target group were defined.

- Also in a more sensitive context, true customer-centricity is key - nothing makes a basher bash more than not being able to tell it to your face - whether it is about how to handle a compensation trajectory towards investment customers or giving meaning to your brand after re-branding.


Tom De Ruyck

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@tomderuyck

http://www.linkedin.com/in/tomderuyck

+32 9 269 14 07

Delphine Vantomme

[email protected]

+32 9 269 15 20

Research team

http://www.linkedin.com/in/delphinevantomme

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Delphine VantommeBusiness Director Financial Services