January 13, 2003

A handful of companies in diverse markets have overcome the fear and inertia of an uncertain economy to invest in IT with an eye toward streamlining operations and quickly adapting to change

Excerpt from "Outsmarting Complexity," by Michael Wujciak and Steve Patton. Optimize, January 2003.

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The financial-services industry is in the public eye for all the wrong reasons. Many of the strategic notions that drove massive consolidation over the last two years -- cross-selling and up-selling, spreading risk, and creating a universal bank -- now spell potential disaster. CEOs face a tough time in all major markets.

Against this backdrop, senior managers focus on cost cutting and efficiencies, especially the promise of outsourcing. Yet the two most innovative financial-services companies in our research -- Citigroup and Capital One -- take a different approach. While others scaled back their IT investments, Citigroup has continually revamped its basic systems, developing a comprehensive One Customer view across credit-card, insurance, mortgage, and private-bank product lines. Last year, the budget shifted from 78% spent on operations, maintenance, and administration, and 22% on new initiatives and enhancements, to 68% on operations, maintenance, and administration, and 33% on new initiatives.

More important, however, Citigroup has developed a common customer database, based on open standards, that lets the bank's data gathering and analysis work across functional and regional barriers. Employees sell an impressive range of services and products to the right customer at the right time. The data refreshes in real time, and employees can be confident that they approach the customer when the customer wants to be approached. Now employees make decisions in half the time it ordinarily takes a competitor. Customers access their data with a single password while internal users can access the same information to understand what might sell. At the same time, the system automatically analyzes events and spots trends that provide insights. Eventually, the systems will model the probability of customer action, ensuring that the bank offers profitable customers the kind of end-to-end services that will maximize the potential for both the customer and Citigroup.

The excellence achieved by Capital One has less to do with offering credit cards to high-risk customers (which it does), and more to do with the way the $7.2 billion company has developed a new type of financial-services culture. The company sees itself as a data-mining business, in which employees are constantly exploring new possibilities for products and services; senior-level managers become venture capitalists investing in areas that seem most promising.

Capital One's management realized it couldn't mandate success, but that the company culture had to foster the spirit of success. The employee-incentive program stimulates innovation without penalizing failure, and rewards performance. The customer-feedback and data-analysis systems place information in the hands of any employee who wishes to try something new. Entrepreneurship and self-motivation are the key values.

In other industries -- notably health-care and insurance -- consumer confidence remains shaky. As with financial services, the systems in this sector are antiquated and fragmented. Cigna's management realized the depth of difficulty and wanted to do something different to solve the twin problems of cost and customer satisfaction. It decided to pare down the number of proprietary systems and encourage communication among systems. One change was an Integrated Care Management System (ICMS), a single-care management platform that replaced 12 systems. The company also consolidated and enhanced its claims systems from 15 systems to two. PowerMHS supports managed-care claims, and Proclaim supports PPO/indemnity claims.

A custom-developed Siebel-based customer-contact and-tracking tool provides easy access to member information. Member-service associates also have Web access to policies and procedures for faster issue resolution. Voice-response, intelligent call-routing, and call-load balancing technologies for telephone self-service were enhanced, and members also have access to Web-based self-service capabilities 24 hours a day, seven days a week.

Cigna was also a founding member of MedUnite Inc., a service company founded by some of the nation's leading health-care insurers to develop real-time, Internet-based connectivity. It connects physicians, insurers, and other health-care constituents for administrative transactions.The changes let Cigna develop a suite of products for members and give consumers a higher level of health-care involvement.

All of these examples show that complexity can be managed and tamed. By recognizing where it exists, and overcoming the fear of failure, executives can pick winning strategies.

Michael Wujciak, a VP at Cap Gemini Ernst & Young, leads the consulting practice for the Global Automotive Sector. Steve Patton is a CGE&Y VP and part of the Automotive Consulting group.

The full article can be found at: http://optimizemag.com/issue/015/culture.htm