Operational Excellence as a Banking Business Strategy

Banks can employ the best people, but if their internal operations are supported by complex and broken technology, it will affect the smooth running of their operations. In turn, this will impact the bottom line, and importantly, affect how customers interact with the financial service organisation. 

So, how can banks improve their internal operations for better efficiency and ensure that they achieve their business goals? 

Enter operational excellence as a key differentiation approach. This focuses on a consistent way of working, which delivers on goals. It has a balanced focus across customers, data driven decision making, continuous improvement, effective collaboration and use of technology to automate and improve efficiency. Operational excellence is made up of the entire organisation, working in harmony to meet their purpose. In this way, it is creating a set of behaviours, mindsets and a working culture which is specifically tied to the values of that organisation.

Exploring the benefits of operational excellence for banks

Operational excellence has a number of benefits for financial service institutions. Firstly, unifying business purposes through strategy and behaviours. If the banks’ overall business strategy is misaligned, it will cause a breakdown in communications and increase siloed operations. This will lead to unnecessary work and introduce inefficiencies. It is also key for employees from the front line to any supporting operations to understand what the business objectives are and how they can work towards them every day, especially when speaking to customers.

Financial services is a highly data driven industry. As banks collect and analyse customer data, they have a deep understanding of who they are on an individual basis and the ability to use this data to personalise sales and service. Operational excellence enables banks to improve how they function through creating a business-wide framework on how to manage existing customer enquiries and how best to attract new customers. This drives better customer service practices, and ensures that banks are retaining their customers through investing in more personalised products and services which meet their needs. 

Process mining for operational excellence  

It is no surprise that improving processes is at the heart of operational excellence. Specifically looking at banks, their backend operations are notoriously fragmented, with legacy systems and a number of different interfaces which employees must contend with – there is no end-to-end network which connects all banking operations.

To overcome this, investing in digitalisation and linking processes end-to-end to streamline operations is key. Recent research from the European Central Bank’s 2023 Banking Supervision report, shows that the majority (61 percent) of banks have reported having a digital transformation budget, which is said to be 22 percent of their overall IT budget. However, it is essential for these investments to be focused on the largest areas of revenue, cost or service efficiency opportunities. 

One of the best ways to go about ensuring operational excellence as a business strategy for banks is through process mining. This visualises and then analyses business processes to expose how an organisation actually runs and if there are any bottlenecks, service level issues, duplicated or unnecessary steps. It allows banks to see these breaks between processes, understand why they are happening and the steps which are needed to fill the gaps and improve operational functions. The best process mining tools will have root cause analysis and make recommendations for adjustments to processes.

Process mining gives banks the opportunity to better optimise their operations to improve critical customer service levels and create efficiency reducing the cost base. It can get operations to a stage of effectively constantly optimising and improving processes. From this it is a short step to self-optimising where changes are automatically applied. For example, intelligent automated routing of work based on service levels, input volumes and team capacity. 

All banks have a focus on operational excellence in some way shape or form as it is a critical area of being able to improve and differentiate on customer service. Clearly it also contributes to being able to improve efficiencies, streamline workflows and minimise if not eradicate siloed operations. Compared to only a few years ago, there are far more capable workflow automation, AI and process tools available to really take operational excellence to the next level and move organisations further along in their journey to a more autonomous enterprise.