Retail Banking Industry Business Reference Architecture

Business Capability Maps, Value Streams, and Strategy Maps for the Retail Banking Industry

Analyst Perspective

In the age of disruption, IT must end misalignment and enable value realization.

An industry business reference architecture helps accelerate your strategy design process and enhances IT’s ability to align people, process, and technology with key business priorities.

The retail banking industry is being driven by increasing levels of competition. Often, the competition is being enabled by new technologies that are creating new product and service offerings. To remain competitive, modern banks need to transform many of their core products and services along with how they are delivered.

The end result is that technology is getting closer to the customers. Often specialized technologies are at the center of the industry’s changes. IT departments are dealing with more vendors, new delivery models, and growing complexity. The reference architecture is a powerful stakeholder alignment and communication tool.

David Tomljenovic, MBA LLM CIM Head of Financial Service Industry Research Info-Tech Research Group

Executive Summary

Info-Tech Insight

Using an industry-specific reference architecture is central, and has many benefits, to organizational priorities. It’s critical not only to understanding, modeling, and communicating the operating environment and the direction of the organization but also, more significantly, to enabling measurable top-line organizational outcomes and the unlocking of direct value.

Reference Architecture Framework

Overarching Insight

Using an industry-specific reference architecture is central and has many benefits to organizational priorities. It's critical to understanding, modeling, and communicating the operating environment and the direction of the enterprise, and more significantly, to enabling measurable top-line business outcomes and the unlocking of direct value.

Determine your organizational priority.

Many organizational priorities are dependent on an understanding of how the organization creates value and the organization's capabilities and processes.

Examine organizational opportunities through the lens of business, information/data, applications & technology.

Your understanding of your organization's business capabilities, processes (rules & logic), information/data, and architecture will identify organizational opportunities to create value through reduced costs or increased revenues and services.

Follow Info-Tech's methodology to enable organizational outcomes and unlock direct value.

Your approach indicates the scope of your modernization initiatives.

Build your organization's capability map by defining the organization's value stream and validating the industry reference architecture.

Use business capabilities to define strategic focus by defining the organization's key capabilities and developing a prioritized strategy map.

Assess key capabilities for planning priorities through a review of business processes, information, applications, and technology support of key capabilities.

Sustain capability-based strategy planning through ongoing identification and roadmapping of capability gaps.

Industry Context

Industry Overview: Retail Banking

The Retail Banking industry is rapidly evolving. It is being influenced and reshaped by many factors. Customer bases are aging, and younger, tech-savvy customers are becoming more important to the business. Non-traditional competitors and fintech competitors are using highly mature, digitally native products and delivery channels to compete with incumbents.

As a result, Retail Banking is changing rapidly, as is the technology required to compete effectively. IT has become an integral part of survival and success, and IT needs to align with the business to assure it can support business needs.

Figure above: Value Chain for the Retail Banking

Business Value Realization

Business value defines the success criteria of an organization as manifested through organizational goals and outcomes, and it is interpreted from four perspectives:

• Profit generation: The revenue generated from a business capability with a product that is enabled with modern technologies.
• Cost reduction: The cost reduction when performing business capabilities with a product that is enabled with modern technologies.
• Service enablement: The productivity and efficiency gains of internal business operations from products and capabilities enhanced with modern technologies.
• Customer and market reach: The improved reach and insights of the business in existing or new markets.

Business Value Matrix

Value, goals, and outcomes cannot be achieved without business capabilities

Break down your business goals into strategic and achievable initiatives focused on specific value streams and business capabilities.

Retail Banking business capability map

Business capability map defined…

In business architecture, the primary view of an organization is known as a business capability map.

A business capability defines what a business does to enable value creation, rather than how. Business capabilities:

• Represent stable business functions.
• Are unique and independent of each other.
• Typically will have a defined business outcome.

A business capability map provides details that help the business architecture practitioner direct attention to a specific area of the business for further assessment.

Glossary of Key Concepts

A business reference architecture consists of a set of models to provide clarity and actionable insight and value. Typical techniques and terms used in developing these models are:

Tools and templates to compile and communicate your reference architecture work

The Retail Banking Industry Business Reference Architecture Template is a place for you to collect all of the activity outputs and outcomes you’ve completed for use in next steps. Download the Retail Banking Industry Reference Architecture Template

Info-Tech’s methodology for Reference Architecture

Info-Tech offers various levels of support to best suit your needs

Diagnostics and consistent frameworks used throughout all four options

Guided Implementation

A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization.

A typical GI is between 6 to 9 calls over the course of 1 to 4 months.

What does a typical GI on this topic look like?

Phase 1

Build Your Organization’s Capability Map

This phase will walk you through the following activities:

• Identify and assemble key stakeholders
• Determine how the organization creates value
• Define and validate value streams
• Determine which business capabilities support value streams
• Accelerate the process with an industry reference architecture
• Validate the business capability map
• Establish Level 2 capability decomposition priorities
• Decompose Level 2 capabilities

This phase involves the following participants:

• Enterprise/Business Architect
• Business Analysts
• Business Unit Leads
• CIO
• Department Executive and Senior Managers

Step 1.1

Define the Organization’s Value Stream

Activities

• 1.1.1 Identify and assemble key stakeholders
• 1.1.2 Determine how the organization creates value
• 1.1.3 Define and validate value streams

This step involves the following participants:

• Enterprise/Business Architect
• Business Analysts
• Business Unit Leads
• CIO
• Department Executive and Senior Managers

Outcomes of this step

• Defined and validated value streams specific to your organization

1.1.1 Identify and assemble key stakeholders

Input: List of who is accountable for key business areas and decisions, Organizational chart, List of who has decision-making authority

Output: A list of the key stakeholders, Prioritized list of decision-making support needs, Reference Architecture Template

Materials: Whiteboard/Flip Charts, Reference Architecture Template

Participants: Enterprise/Business Architect, Business Analysts, Business Unit Leads, CIO, Department Executive and Senior Managers

Build an accurate depiction of the business.

1. It is important to make sure the right stakeholders participate in this exercise. The exercise of identifying capabilities for an organization is very introspective and requires deep analysis.
2. Consider:
   1. Who are the decision makers and key influencers?
   2. Who will impact the business capability work? Who has a vested interest in the success or failure of the outcome?
   3. Who has the skills and competencies necessary to help you be successful?
3. Avoid:
   1. Don’t focus on the organizational structure and hierarchy. Often stakeholder groups don’t fit the traditional structure.
   2. Don’t ignore subject-matter experts on either the business or IT side. You will need to consider both.

Download the Reference Architecture Template

Define the organization’s value streams

• Value streams connect business goals to the organization’s value realization activities. They enable an organization to create and capture value in the market place by engaging in a set of interconnected activities. Those activities are dependent on the specific industry segment an organization operates within. Value streams can extend beyond the organization into the supporting ecosystem, whereas business processes are contained within and the organization has complete control over them.
• There are two types of value streams: core value streams and support value streams. Core value streams are mostly externally facing: they deliver value to either an external or internal customer and they tie to the customer perspective of the strategy map. Support value streams are internally facing and provide the foundational support for an organization to operate.
• An effective method for ensuring all value streams have been considered is to understand that there can be different end-value receivers. Info-Tech recommends identifying and organizing the value streams with customers and partners as end-value receivers.

Value stream descriptions for Retail Banking

Determine how the organization creates value

Begin the process by identifying and locating the business mission and vision statements.

What is Business Context?

“The business context encompasses an understanding of the factors impacting the business from various perspectives, including how decisions are made and what the business is ultimately trying to achieve. The business context is used by IT to identify key implications for the execution of its strategic initiatives.” (Source: Business Wire, 2018)

1.1.2 Determine how the organization creates value

1-3 hours

The first step of delivering value is defining how it will happen.

1. Use the organization’s industry segment to start a discussion on how value is created for customers. Working back from the moment value is realized by the customer, consider the sequential steps required to deliver value in your industry segment.
2. Consider:
   1. Who are your customers?
   2. What tasks are your customers looking to accomplish?
   3. How does your organization’s set of products and services help customers accomplish that?
   4. What are the benefits the organization delivers to customers?
3. Don't boil the ocean. Focus on your industry segment and how you deliver value to your partners and customers specifically.

Download the Reference Architecture Template