Unlocking value in times of digital transformation

0:12Welcome to the latest episode of Margin Notes with me, Simni Kiriakou, editor of FT Advisor. Now, we've all heard various mantras about service and the importance of succession planning. And by now, well, you might be forgiven for thinking that everyone knows the right thing to do. However, this is clearly not always the case, which is why so many companies rely on help from consultancies and external agencies to get the service proposition right. Without good service, you're not going to have clients for very much longer, so it's very important to get it right. One such consultancy is Tata Consultancy Services, and we're lucky to be joined here today by Shankar Narayanan.

0:52He's the business head for banking, financial services and insurance for UK, EMEA and APAC regions. That's a long business title you have there. Shankar, apart from having an impressive job title, he's specialised in helping companies understand the importance of getting their service spot on. Shankar, thank you so much for joining us today. Thank you for having me here. No, thank you very much. Let's get straight into it. So, you're an expert in understanding the services industry. What aren't financial services companies doing without all-important service aspect? What are they not getting right?

1:27And what do you think they are getting right? Let me first focus on what they're getting right. I think the organizations are navigating the digital transformation and they've done it exceptionally well. They've been continuously trying to modernize their technology investments. They've been continuing to unlock value and try to provide exceptional customer experience. despite the fact that they're operating under a very competitive environment in a highly regulated industry. So they've been able to navigate all of these complexities very well. There is definitely a lot of opportunities that they have to get out of the technology debt a lot sooner.

2:19So there is quite a lot of value that can be unlocked by getting there sooner. But otherwise, I would not be able to call out anything that they are not necessarily doing well. But most of them have been able to navigate the complexities effectively and make sure that they're able to stay relevant to the end consumers in this tough climate. Yeah, you mentioned technology there obviously as being a huge driver and impetus. It does feel though that in recent years, technology is almost dominating the conversation, particularly AI is dominating the conversation. And we know many companies still operate on legacy systems.

3:06How difficult is it to make that transformation without assuming that you have to spend millions of pounds getting it right? it is going to take time it is going to take a lot of persistent efforts but if you look back over the last four to five years majority of the organizations have made the right levels of investments they have moved out of the technology debt to some extent they've been able to migrate their workloads to cloud they've been able to leverage the cloud first you know architectures, they've been able to move a lot faster to deal with some of the customer expectations. We've seen organizations pivoting very, very fast around the e-commerce and online mobile banking channels a lot more effectively.

3:57So a lot of new products and services have been launched. But having said that, there is still quite a lot of technology debt that most organizations are sitting on. And even the definition of legacy will change because the rate at which the technologies are moving what you might have built two years ago might become legacy in two years right so so it's going to be relative you know from that perspective but the foundations have been laid by most of the leading organizations and I don't I don't see any any material challenges except you know putting in the right level of you know time and effort behind you know transforming and we do see AI you know is going to unlock you know has the potential to unlock you know much greater value and we are very actively partnering with many leading financial institutions to help these organizations navigate these challenges so I'm quite optimistic that you know with time a lot of this this modernization will happen and embracing adopting AI by both the companies as well as you know their own users as well as the end consumers you know will take place at a rapid piece.

5:05Yes, I mean, we're all seeing that happen in just in front of our eyes. And every time you log on to social media, there's something new happening with AI, either a new service or some terrible videos. So we're sort of seeing it happen in real time. But I thought one of the things you said there was really interesting. And it was about companies don't want to be implementing a big strategy right now, if they have to change it in two years time. Is that a genuine fear among financial services companies? I mean, could that hold them back from making important decisions? There's that fear that, oh, we're going to have to do it all again in two years.

5:42Or is that just the way the world is now? We just have to expect that every two to three years, we're going to have to do something new. Yeah, it's a good question. What we are helping our organizations do is to understand the potential of what the technology can do to their investments, to their business, how they can reimagine, for example, a claims processing, how the underwriting process, a risk underwriting process can be unlocked using AI, right? So we can create a long-term plan, but however, the efforts that we put behind it and the roadmap that we put behind it will be in small rocks.

6:26So you always want to go ahead and look at what is the no regrets architecture or no regrets investment that we would want to do that you would not have to roll back substantially. You cannot get it perfect. But at least if you're going to be able to reuse 80 % of your investments and continuously build on something, then you're in it. And you're not going to be left behind when some of these potential becomes very obvious going forward. and we have a much better adoption. Yeah. You talked about the no regrets investments. I like that terminology. I think that's something that we can all think about because while we're spending money on tech or spending money on developing, you've also got to get the actual face-to-face customer interaction right.

7:15And that also involves no regrets spend on training, no regrets spend on counseling for your staff so that they can cope with vulnerable consumers. Let's talk a little bit about those other aspects of service that should be no regrets investments for companies right now across the financial services spectrum. Absolutely, absolutely. I think whatever be the technological advances, we should never forget about the workforce that we have as an organization and the customer empathy that is used to service the industry. So both are going to be extremely important and both are never going to be taken over by technology.

8:09So I would look at it from two perspectives and I would relate to what we are doing internally within TCS. we have a very large workforce of 600 ,000 people and we do believe that technology will disrupt our industry as much as any other industries as well. So what we can do today is to make sure that all of our 600 ,000 staff become AI literate, have the right tools and enablers to access and adopt AI and be ready to transform themselves. in the AI era. And that is something that we are doing as an investment. And we are basically putting all of these people forward in phasing off to our customers and helping them understand how we can reimagine some of the services that we provide to them as well as some of the services that they provide to their end consumers.

9:10So that is one aspect. So what we believe is that there is always going to be a latent demand that will remain in the industry and you will need to redefine some of the roles that we have right in order to service that latent demand. Equally you know if you look at the end consumers who are being serviced by financial institutions and many other institutions while they have the power of technology in their hands and they will be able to do a lot of self-research in understanding the products and services a lot better, what it's going to do is to help elevate the quality of conversations that financial institutions are going to have, you know, with these end consumers, right?

9:59And financial institutions need to be ready for it. So they need to be training their employees who are the frontline staff, right, to be able to deal with a more informed customer and be able to offer relevant products and services. And these technologies are going to enable, you know, these frontline service staff, information, you know, at fingertips to be able to, you know, offer products and services, you know, to these customers. Yes, you know, there will be, you know, a less effort that is required, you know, for the backend technology or people, right, to be able to produce, you know, the information.

10:39And therefore, there could be some, you know, disruption. But equally, what this is going to do is to expand the overall addressable market. Even today, you know, we are, even in most mature markets, you know, we do see the financial services not reaching the full potential, right, of the market, the people and so on, due to various reasons, access, affordability, and so on and so forth, right? So now the technology is going to, you know, help you know make their access and affordability a lot uh easier that's the hypothesis with which you know we are navigating our organization and working with our customers as well so i was reading one of your articles online i think you wrote it a few um few weeks ago looking at sort of almost the democratization of technology and how people are using it like individual consumers are using it more and how financial services companies need to kind of get that sort of meet the customer where they are.

11:37And, you know, over the past two or three decades, it's changed. The way that we do financial transactions has changed. We don't go into a bank and sit down with a bank manager or a bank advisor and do our ISA transactions there. We do it online on a platform. And we don't necessarily go and have a lunch with a fund manager and shake hands and do a business deal with them and say, oh, I'll invest in your fund. You know, thank you very much. You know, my word is my bond, dear boy. We don't have that kind of mentality anymore. A lot of it is done, the transaction is done sort of remotely arm's length through a computer screen.

12:12But we still need that talented workforce. We still need those intelligent people to be able to upsell or to, you know, when they answer the phone, to say to this engaged and informed client, well, actually, yes. Okay, you know this, but have you thought about that? Have you thought about this? These are other services, the value adds. I think that's probably where we're sort of at in financial services. We're still sort of navigating that, aren't we? Absolutely. I think essentially as you rightly pointed out, the aspects that are very easily accessible through technology, you don't necessarily need to go and have a conversation with somebody else.

12:51You will end up doing that online or through convenient channels that you have. but the moment you know you get into some of the more difficult financial decisions important financial decisions life-changing decisions you would want to have the ability to interact with people get your options and then make the appropriate decisions and even when you want to get your options you would have done enough research you know on your side and you will be able to ask the right questions. And the person on the other side, you know, should be able to offer the right advice, right, based on a more informed customer, right?

13:34So that personal, the human, you know, touch and the empathy, right, will never be replaced. So there is an opportunity for, you know, A, you know, the quality of those conversations to become a lot richer. The second is, you know, the people, you know, within the financial institutions who have been doing some of the low-end work, report generation and so on, the type of paraplanners and so on, they have the ability to move up the value chain. Now, a lot of that can be done by technology and they can upskill themselves and do the advice themselves on some of the more medium complex situations.

14:18If they want to. Absolutely. It's entirely, obviously, you cannot force them, but it's important as an organization, as leaders within every organization to help them understand that if they don't want to, then there is potential risk. There is potential disruption to their roles. As leaders, it's important for us to be able to educate in our workforce that, yes, there is going to be disruption because of this technology. There is always going to be any technology is always going to have an hockey stick effect. If we are able to use this period of disruption to be able to reskill and reimagine ourselves, there is an opportunity for us to be able to reimagine, redefine the industry, the value proposition, the products and services, expansion to newer markets, expanding the addressable segment, and so on and so forth.

15:07So I do believe that the successful organizations will lay the foundation of their own organization's workforce being able to transform and adapt the technological changes. Transform and adapt are very positive words to use. I think a less positive word is change because it has almost negative or fearful connotations about it. And a lot of us don't like change because it involves us either learning something new ourselves or having to do something differently to how we've always done it. And that old adage, if it ain't broke, don't fix it. Unfortunately, things are changing around us. And if we don't change, if we don't metamorphosize, it is going to, you know, eventually, you know, comply or die almost.

15:57But you've been through, I was talking to you about this before we came into the podcast studio here, but you've been through so many changes. You've got a very entrepreneurial sort of start. You're working in a big organization. Can you talk a bit about why you have always embraced change personally in your career and what you've learned from being prepared to change, to transform, to adapt? it is not unique to me in tcs most of our our leaders and our team right we continue to emphasize on adapting to changes regularly in order to learn something new in order to progress and create value both for oneself you know and the organization as well as our customers and And I've been fortunate that I've been given different opportunities and I've had personal circumstances and a very cooperative family who've helped support me with these changes effectively.

17:05but I've always asked the question, look, you know, if I make this change, you know, yes, there is a, you know, clear, clearly new, new path, new opportunity. What are the compromises that I need to make? And can I afford to make those compromises? Right. So, you know, so you just need to weigh, you know, these, these options and it's never perfect. Right. So, you know, there's always some things that you always leave behind. The whole mindset of, you know, leaving something behind in order to, you know, create new value is going to be extremely important. And I think it's important, right, for all of us to look at that.

17:40I mean, everybody has their own self, you know, and they need to weigh the opportunities. But the most important thing is if we don't change, you know, if we change, what are the advantages? If we don't change, what are the risks, right? It's also something that we always need to ask ourselves because, you know, you might, you know, see something which is a lot more comforting in the six months, one year, two years. But beyond that, could it create more challenges? It's something that we need to look at. So, I mean, any change that we have to go through, we have to look at it from that perspective.

18:17But equally, we need to figure out, right? Sometimes it's a physical location. Sometimes it's a role progression. But anything that we want to do, that we want to do newly, it's always going to be unnerving, right? So any role that I've taken, you know, it's difficult, right? I always wondered, right, will I be able to step into that role or will I be able to succeed in that role? But I've just, you know, not let the fear consume me and then, you know, took the first step and then take the next step and so on and so forth. Yeah, of course. I mean, if we don't leave anything behind, then we'd always stay as caterpillars and never become butterflies, I guess.

18:53and that is as true of a large company like TCS with 600 ,000 employees as a small firm of six, right? These are questions and attributes that a small firm needs to think of as well as a large firm. Do you think it's easier for small companies to change? Are they actually more nimble? I would believe that the smaller company, I mean, we cannot generalize based on the size of the companies. Even as large companies, you know, it's a question of, you know, taking the size and scale itself, you know, is the complexity, the geographical reach is a complexity. Those complexities may not remain, right, within a smaller firm.

19:35But the smaller firm, you know, has the challenge of market access and so on and so forth. But I do believe that, you know, the smaller firms have shown a lot of nimbleness, right? So it's entirely the mindset and the openness to look forward to the opportunities and make sure that your people, your employees adapt to the challenges, ask the right questions, and look forward to the opportunities. There is always going to be a period of uncertainty. And how we manage that period of uncertainty with the level of optimism, the grit, that determines the pivot that the organization will have, regardless of the size and scale.

20:19Yes, of course. I think, you know, being prepared to make that change, being prepared to sort of get on board with the AI transformation, getting your technology right, all of these are really important to underpin that delivery of service to your clients, whether you're a mortgage broker or an insurance company. These are really important things. But then you also touched on, when you mentioned small firms, you talked about a smaller workforce and perhaps a more family-owned firm then we're starting to get into the roles of what are you doing in your firm how are you transitioning your staff for you know the next 10 20 30 years and I was at a conference three weeks ago and they did a show of hands very old-fashioned show of hands how many of you have thought about succession planning and about 60 % of the room put their hands up and said, how many of you have actually done succession planning?

21:14And there are about 30 hands left remaining out of 100. So I know that's just a small pinpoint of advisors in a particular room, but only 30 % of firms then had actually done anything about succession planning. Again, if you don't plan for change and change is thrust upon you, that can be really difficult. So what sort of things should small firms all be thinking about? If I were a small business owner, what should I be thinking about right now in terms of thinking about succession planning? How should I just get a piece of paper, start writing on it? What would be your advice? Yeah. No, I think every role, there is no person, you know, technically who is indispensable.

21:56Right. Apart from you and I, of course, obviously. so once we get into that mindset right we need to think about and if i'm not here tomorrow who's going to be doing my role so i need to have that you know perspective within the organization either i do it or you know uh my boss does it right so so that you know succession planning is uh is a key uh tenet of most organizations you are if you're prepared for it um then you know it's uh it's a lot quicker if you're not prepared for it then there is going to be a period of restlessness, right? Uncertainty, you know, within the organization. So, even the smaller organizations, I wouldn't generalize whether it's the size or scale of family-owned organizations.

22:43They all have, you know, may not be written down on paper, but broadly they would have an idea, right? Of if, you know, I need to move this person into a different role, you know, who would step in, right? Sometimes opportunities will present itself and, you know, you would have one of those six people who would be best suited. In which case, right, you need to immediately, you know, fill that person, you know, somebody else, you know, within that organization, you know, can take into the role or somebody coming in from outside will take into the role. So our approach, you know, has been to, you know, give the first right of refusal to any roles that is available within the organization to somebody within the organization.

23:24only if you know we don't believe that you know there is absolutely nobody who can scale up then we look outside that's the way we have approached it you know within tcs and uh and we want to look at you know not the current capabilities you know of these people but the potential that's right so because many of us right when we got into our roles it is not that we were naturally suited for those roles. You know, we all had the willingness to train ourselves and look at what those role requires and, you know, get to that place in some time, right? So we need to look at that attitude, you know, of people and make sure that we are able to promote people based on the potential.

24:07Yeah. And I've seen that play out in real time. I've seen people who have been, well, I'm going to talk about it from a journalistic point of view, people have been editors and they've trained up their deputy to be just like them, but the deputy hasn't got the role. And, you know, I looked at that and, you know, when I was a lot younger, I thought, oh, that's such a shame because so-and-so would have been ideal for that position. But now I've become a lot older, a lot older, and I'm looking at it thinking, well, if that person, that editor trained up the other person to be just like them, that's not what the company needs or that's not what the title needs.

24:41The company needs someone who can do things a bit differently. so you know if I'm looking at my succession I've got five people that I'm sort of training up for doing different things not all of them might want to become an editor but all of them can step into my shoes if I'm away or sick you know touch wood that doesn't happen but who would be taking FT advisor to that next level it's got to be someone who's almost different from me right but that potential that's a really really key thing here I think that's probably we're too focused on who can do the job that I'm doing now is not the right question is it absolutely absolutely you can do the job in 10 years time in 10 years in five years time 10 years time a lot better yes right because the challenges that that person you know will need to face would be very different to the challenges that the current person is facing right so so you need to have the right person you know who'd be able to take the organization further in the newer set of challenges some known today some may not be known today.

25:37What do you think is going to be the challenge with agentic AI if that can start making decisions for people? Is that something that business owners are concerned about when you go and talk to them? Are they concerned about that? So I think, you know, from how we see it, I do not yet believe that the agentic AI making autonomous decisions without human the loop, is going to be contributing to a lot of change. There will always be a human in the loop. Industries like financial services industry, healthcare industry are not, you know, the industries where, you know, you would let, you know, decisions through agent AI without human in the loop.

26:27It could be devastating. It could be devastating. So we do believe that it is going to be combination of digital and physical workers that will navigate the organization's needs and offer products and services. So, we need to make sure that we as leaders are prepared for a world in a few years time where they coexist and we need to find the right balance between both of them. We'll have to wait and see. I don't know the answer to it clearly but the potential exists and at this point of time we are making baby steps in understanding preparing our organizations for it and implementing small experiments proof of concepts both within our organization and our customers organization so we have some learnings we have some you know as i said no regrets bedrocks that that are there and as time comes as we become a embracing this technology as you reduce the opportunities for hallucinations and so on and so forth you know you're able to adopt the next level of agentic architecture but you know we are piloting some of these but we are not we're nowhere close to letting any of these agents make decisions on their own yeah as long as there's an off switch That's the optional off switch.

28:02In your experience, you know, talking to so many different companies and so many different business bosses, what would you say are the top three sort of best practice principles that you've seen people employ or that you would encourage people to employ? What are the top three best practice principles you could share with our listeners? No, I think the key, we covered, you know, quite a lot of them in different aspects. The most important thing is, you know, to be able to lead the change. There will always be a lot of changes that will happen around us. And how are we, you know, preparing ourselves for it?

28:44How are we going to lead the change? Having the courage and conviction that, you know, we may not have all the answers today. but if we put the right focus and effort behind it, we will be able to find the answers going forward and be able to get the organization in the right place. So these are a couple of things that I can think of from the top of my mind. Thank you very much, Shankar. It's been really interesting talking to you and thank you so much for some of those shared hints and tips about not being scared of change but going forward. Thank you, Simone. And thank you all for listening.

29:22Until next time, take care.

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