www.infosys.com/finacle

Universal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing

Transformation: The bridge to an enterprise’s future

Thought Paper

Thought Paper02 Thought Paper 03

Transformation: The bridge to an enterprise’s futureDefinitions of business transformation can differ from company to company; however, transformation generally refers to strategic, enterprise-wide change programs that have a significant impact on an organization/company. Transformation programs tend to focus on: addressing market change; reducing cost due to new economies of scale at a domestic or international level; achieving growth by seizing (speed to market) each and every opportunity offered by the existing and changing markets.

Whether the intention is to expand capabilities, boost efficiency or to improve profitability, business transformation has become a way of corporate life. There is no doubt the forces of globalization will continue to drive high levels of business transformational activity for the next several years.

There are two major forms of transformation:

• Fundamental change that generates a strong impact on business results, such as mergers and acquisitions, outsourcing, or strategic initiatives. These programs usually involve external players and generate major transformation across significant portions of the organization

• Transformation Programs that generate incremental improvement, such as cross-functional performance improvement or technology re-platform – but require new or updated skills, technology and/or organizational approached to implement and sustain.

In summary, transformation as defined in the organizational context is a profound and radical change that drives new direction in an organization and takes it to an entirely different level of effectiveness (from all aspects – cost, processes, revenue, etc.). Transformation implies a makeover that when complete will have little or no resemblance with the past configuration or structure (technology, people and process).

As previously stated, business transformation is a term used to refer to strategic, enterprise-wide change programs that have a profound impact on the organization’s end-to-end capabilities, technology, environment, processes and performance. If correctly planned and implemented, business transformation has significant impact across the entire organization with implications and benefits that deliver results to the bottom line. The most common drivers for business transformation initiatives are:

• Corporate transactions - mergers, acquisitions and/or divestitures; Global and/or domestic competition - changing market conditions;

• Changes in the global business environment;

• Strategic people, process and/or technology efficiency changes - changing business model, outsourcing/ off shoring, cost reduction, consolidation, etc.;

• Emerging trends and new technologies – digital, pervasive computing, new commerce;

• Support for new and emerging markets;

• Enterprise-wide technology changes;

• Enterprise-wide restructuring/reorganizations;

• Value-chain improvement initiatives (supply chain programs); and

• Regulatory changes and/or government policy change.

Continual change is driven by the above mentioned factors, and serves as a constant reminder that there is no such thing as a static business environment. There is continual and significant pressure exerted on and from boardrooms, forcing executives to rethink, reinvent and change the operating model and / or structure of the business. In today’s business climate, change and transformation are almost as common as “business as usual”.

Thought Paper02 Thought Paper 03

The bridge to an enterprise’s future: ‘The Journey’Overview ‘The Journey’

The journey starts with a vision of an enterprise-wide change program, driven by internal (e.g. cross functional changes, or a merger) or external (e.g. changing market conditions, or

regulatory) factors that spark the requirement to embark on the transformation journey.

Refining the vision and the commencement of constructing the business case is where the journey begins to take shape, and also become

Any change is difficult, and it is well understood that business transformation programs are inherently complex. The fear of change can have a paralyzing effect across the enterprise from executives delaying critical decisions to mistrust and denial from those affected by the transformation.

Though business transformation has become the “norm” for how companies run their respective business, executing change is not a natural capability for the individuals who are tasked with driving the programs that are part of a transformation initiative.

In any business transformation there must be key tenets embedded in the organization to make the successful transformation journey which are:

• Accepting business transformation and change as a central and common “way of working” for an enterprise;

• Realizing that there is a direct causality between business value generated and improvement in business process;

• Setting objectives is not enough— there must be a clear vision and a target operating model underpinning it, that has enterprise-wide buy-in and the full supported of the executives;

• Strong executive commitment and involvement throughout the transformation;

• Continuous business transformation readiness assessment to evaluate and measure the enterprise’s readiness to undergo change. Critical readiness areas to assess are:

•Vision (target end-state operating model) is clearly defined and related to the change that is to be achieved;

• Business Case and value realization isunderstood and supported;

• Robust Governance Model with clearlyidentified stakeholders and a direct relationship between the transformation and the impact to each stakeholder’s organization. The Governance Model fullyaligns accountability, responsibility and authority, ensuring the benefits of success or consequences of failure of the endeavor bear an impact to the stakeholder or executive;

• Workable Approach and Execution Modelthat has seasoned team with similar experience so that the methodology, processes, discipline, expertise, and governance defined in the execution model will be easily understood. The has clear and distinct roles relative to business delivery, transformation management, governance and technology solution delivery;

• Technology Capabilities and Capacity toperform all the technology solution delivery tasks required by the transformation, including but not limited to skills, tools, processes, and management capability;

• Enterprise Business Capabilities and Capacity to design, support, implement and operate the transformation elements and their related business aspects for the transformation

The remainder of this paper focuses on the transformation readiness and delivery model for the transformation program. The emphasis is on the program structure, execution model and methodology are required to successfully drive a transformation program.

Thought Paper04 Thought Paper 05

complex. Yes, visions and ideas do create euphoria and excitement! That said; navigating to the “end-state” (implementation/outcome) of the transformation is complex and full of challenges. Bringing order and shape to atransformation program, requires a framework. The framework must embrace the key building block of the transformation: vision; business case; governance model; workable approach and execution model; technology capabilities and capacity; along with both the business capability and capacity. The framework is essential. Organizations shouldn’t fall into the trap of just conforming to the framework (i.e. assume the framework is the answer), in contrast the framework should be embraced and in turn influence, guide as well as direct them down the transformation journey.

Vision

The vision is driven by the executive and senior management team, supported by various levels and key stakeholders across the organization. The vision should tightly align with the corporate vision; in some cases transformation will “rewrite” the corporate vision while being synergistic with corporate values.

The initial level of the vision should cascade into increasing detail, directly mapping the key process metrics between the vision and the subsequent levels. The most detailed level should clearly align with the key business processes that will drive measurable improvement. Each of those processes should be mapped to the business cases linking business value to meaningful, well-defined metrics.

Businesscase

Unfortunately, many business transformation programs either don’t make it out of the starting gate or are grossly underfunded... Success, therefore, depends heavily on getting “the numbers are right” which in turn demands that the business case be constructed to connect the dots from vision to target operating model to meaningful business measurements.

The end goal for a business case is not simply getting Executive or Board approval. While thatis the essential first step, the business case also establishes the case for change and influences the odds of a successful transformation.

This broader view of the business case embraces robust processes for developing, managing and continuously measuring the business case – adapting as appropriate - throughout the initiative. The following are some key tenets for constructing a business case:

• Understand the “Current State”

Understanding the key drivers in the current business environment that influence performance is foundational to the business case. By focusing on known metrics,improvements and. and performance indicators are mapped to processes and organizational effectiveness correlating the transformation activities to tangible, measurable, real world results.

• Get the basics right - set the foundation, implement and measure

A business case for transformation must include measureable benefits, costs and a clear line of accountability and ownership of both the benefits and costs. A business case must have data and accurate numbers backed by a compelling story that can be understood and agreed to by the business executives.

To ensure the business case delivers, it is essential to build the metrics (both qualitative and quantitative) into the transformation delivery plan. The business executives can then actively monitor business benefits throughout the transformation

BUSINESS CAPABILITY AND CAPACITY

WORKABLE APPROACH AND

EXECUTION MODEL

TRANSFORMATION GOVERNANCE

MODEL

BU

SIN

ES

S C

AS

E

VIS

ION

TECHNICAL CAPABILITY AND CAPACITY

Exhibit – Framework for execution of Business Transformation Program

Thought Paper04 Thought Paper 05

program. As the program evolves change is inevitable. Changes to scope, plan or time must be continuously factored into the business case, with decision matrices that reflect the impact on the key drivers and metrics.

• Defining the “Future State”

Odd as it sounds, the future comes first. Set goals that foster change through innovation and paradigm shifts while aligning to the vision. Define “good” as it relates to the business. What are the key process and metrics? How does the process and metrics support the business case? Do the processes align with the strategy and drive organizational effectiveness (operating model)? Are the enablers aligned to the processes, and in turn aligned to the metrics? What is the impact on technology requirements and organization? What roles, technology and processes are most impacted? Does the delivery and implementation align with delivering the benefits in a prioritized fashion?

• Leverage your people

Involving business people early on ensures the roll-out is about delivering business benefits, rather than doing things to the business. Stakeholder support - business and technology - at each step of creating the business case will both shape and fully reflect the perception of current performance of the business, as well as the business priorities and expectations.

As you progress with your business case, engage various levels of the enterprise in designing the future operating model enabling them to clearly understand the changes at an individual role level. The transformation leader cannot mandate behavioral changes within the business, so having some key people at various levels within the business builds the support and extended leadership to successfully drive the changes required by the transformation.

Workable approach and execution modelAt the heart of every transformation are a workable approach (i.e. minimal overhead, defined ways of working), and a delivery focused

execution. At the nucleus of the execution model is the methodology which at its best seamlessly integrates the business change with the technical delivery. The hallmarks of an effective methodology are being modular and customizable to the type of transformation. Modularity supports the decomposition ofthe desired outcome into more logical and manageable threads while recognizing and managing the interconnections. The threads represent the major focus areas of the transformation.

Key areas of the methodology are: process optimization; application analysis and optimization; change (adoption and accountability); global delivery framework (align and orchestrate capabilities); infrastructure and operations analysis and design; partner delivery and decision framework; delivery management (manage and deliver transformation); and value model (linking business benefits to delivery (outcomes). The methodology drives and maintains the integrated view of business and delivery that results in real value.

Workable Approach and Execution Model isbest implemented by an experienced team bringing different perspectives but a common understanding of the roles and responsibilities associated with the methodology, processes, disciplines, expertise, and governance are required for success in high impact, high risk initiatives. The model should have clear and distinct roles relative to: business delivery, transformation management, governance as well as technology solution delivery. The Execution Model provides a single, consistent approach formanaging multi-program/project, multi-vendor (consultant and software), and multi-organization transformational program.

To execute any transformation, there are always dire needs for high end architects (e.g. data, infrastructure, and integration), testing management requirements management and business change across the delivery of the business outcome. These aforementioned when grouped together form the Solution Delivery. The business delivery (outcome) is across the Solution Delivery.

The end to end and integration management integrates the individual business outcomes and solution delivery across the transformation. To summarize the Execution Model integratesthe solution, delivery and integration across the transformation, while providing both horizontal and vertical management to ensure consistency and quality.

The Execution Model must ensure that thesolution is cohesive across the various business outcomes within a transformation. To support a cohesive solution, the Execution Model musthave a consistent structure for the delivery. The structure is a consistent delivery model which is a matrix structure where the business outcomes are organized and driven vertically across the Solution Delivery. Solution Delivery for most any transformation, systems integration or even a project has significant scope in requirements/process design, integration architecture, data architecture, infrastructure architecture, testing management, and business change/organizational readiness. These have always been and will continue to be the foundation of any transformation program.

Finally, end-to-end delivery management leads both the Solution Delivery and Release/BusinessOutcome delivery. The diagram below is a logical depictionofExecutionModel.

Transformation governance model

The governance model is the nucleus of a transformation program. The pressure for rapid action and critical decisions is paramount. Designing the optimum transformation approach requires balancing: costs; scope; capabilities; benefits; and timing. The operating characteristics for the governance model should be integrated

with the business outcomes, thereby maintaining a focus on the desired business results as opposed to the day-to-day program tasks. One key aspect of the model is to create a controlled baseline from which to measure success and make changes in response to emerging business priorities. Another is to build full stakeholder support, clarify roles and support effective, timely decision making.

The transformation governance model accelerates business transformation and organizational change through the effective use of business resources, technology organization, and executive management. The governing body should be empowered to:

• Create focused linked forums that foster greater

• Communication;

• Collaboration;

• Standardization;and

• Collaboration across the programs in thetransformation.

• Provide the basic infrastructure and communication tools to allow stakeholders to collaborate and be effectively integrated with organizational decision making

Transformations should consider at least 4 different leadership roles, each focused on the interests of a distinct group of stakeholders

• Executive In-Charge (EIC) is accountable for the overall success of the transformation. The EIC provides the overall leadership and direction; owns the business outcomes; owns and is accountable for the business case; and owns the organizational consequences.

• Business Sponsor – owns the businesssolution, resources, alignment and integration with technology. The Business Sponsorensures initiatives are business driven. The Business Sponsor leads the Business Council accountable for:

• Thetargetoperatingmodels;

• Identifying and establishing the necessaryconditions for transformational success;

• Managingoperationalanddeliveryrisk;

End to End and Integration Delivery Management

Requirements / Process Design (Business Design)

Integration Architecture

Data Architecture

Infrastructure Architecture

Testing Management

Business Change/Organizational Readiness/Training & Development

Solution Delivery

Release (B

usin

ess Ou

tcom

e) Delivery

Exhibit – Execution Model

Thought Paper06 Thought Paper 07

• Aligning change actions with targetoutcomes; and

• Embeddingbehavioralchange.

• Technology Sponsor – Ensure interoperation between all intra-enterprise, external

service providers, supplier and technology environments, including technology shared services across the transformation program.

Exhibit – Transformation Governance Model

Executive In-Charge

Transformational Governance

End to End Delivery Management

• Executive Accountability• Technology and

Business Sponsorship• Manage corporate and

transformation risk• Executive Reporting

• Cross Program IntegrationManagement

• Escalated and cross programrisks and issues

• Plan management across allprograms and projects

• Spending Requests• Recommendations for• Changes in Strategic Direction• Intra and inter business issues• Scope and Budget resolution

• Operational - Day toDay leadership andManagement

• Manage all Programs• Budget and financial

management

Well defined reporting and processes

End to End and Integration Delivery Management

Requirements / Process Design (Business Design)

Integration Architecture

Data Architecture

Infrastructure Architecture

Testing Management

Business Change/Organizational Readiness/Training & Development

Solution DeliveryR

elease (Bu

siness O

utco

me) D

elivery

The below depicts an example structure and the respective accountabilities.

Technology capabilities and capacity The readiness of the technology organization is another critical success factor in transformation. Most transformations require significanttechnology changes, which create the need for new technologies, upgraded skill-sets, change in operational processes, and organizational changes along with modifications to the existing business as usual processes. This requires an in-depth review and gap analysis – during the initial phase of the transformation. The output of the gap analysis is a set of initiatives that will be owned by the Technology Sponsor, and managed and delivered by the operational teams as part of the over as part of the overall

program. Typical areas of impact requiring initiatives to support the transformation are:

• Capability to support end-to-end environments that are integrated with current (legacy) environments;

• Tools – the right tools and processes to support a large transformation;

• Skills and capabilities of the internal technology organization; and

• Partners (suppliers) and third-parties – right partners and third parties (products) to support the transformation

Thought Paper06 Thought Paper 07

Enterprise business capabilities and capacity

Conclusion

To succeed in any transformation, businesses must be ready to lead through increased complexity and volatility, drive operational excellence and enable collaboration across enterprise functions, develop higher quality leadership and talent, and manage amidst constant change throughout the journey. Knowledge of the business is a given, it is the change-related capabilities that are most

The successful delivery of a business transformation must be underpinned by a solid framework. Transformation is large scale, enterprise-wide change that will significantly impact an organization/company. In addition, the methods, execution approach, and capabilities to support the framework are essential.

important. It is essential not to “carry baggage” from business as usual into a transformation as that is a critical risk, as the organizations have the tendency to recreate what is in place today. In addition, Partners (suppliers) should be assessed to ensure they can supplement the capabilities as well as the methods and tools to deliver the transformation.

The framework for a transformation should provide a common understanding of how the people, process and technology will be structured so as to align with and achieve the objectives set out by its vision to meet the business plan to ensure achieving the desired business outcome.

Michael A. LeyvaHead of Finacle-CSI, Infosys

Finacle 08 Finacle 09

Finacle from Infosys partners with banks to transform process, product and customer experience, arming them with ‘accelerated innovation’ that is key to building tomorrow’s bank.

About Finacle

© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.

www.infosys.com/finacleFor more information, contact Finacleweb@infosys.com