Capability-led transformation in banking

A robust approach for today's banking challenges

The forces affecting the banking industry are compelling bank leaders to make critical strategic, financial, and operational decisions—choices that require a structured approach to capture the breadth of considerations involved. In some cases, taking the traditional people/process/technology view of strategic planning and change simply may not be enough. This paper offers a more robust alternative: a capability-led approach to transformation that considers six interrelated elements in assessing current conditions, developing target states, and charting courses of action. It's an approach that offers a different perspective on how to explore and address the pressures that banks and their leaders face today.

A look at the capability-led value chain

Built on a holistic view of the banking enterprise, this approach buckets capabilities into six customer lifecycle phases:

  • Develop: Researching, designing, and launching new products
  • Market: Planning and executing promotional and marketing campaigns to build awareness of new products and offerings
  • Sell: Connecting with specific customers to sell specific products and offerings, working across channels
  • Account setup: After the sale, executing the multiple steps to onboard customers and set up accounts and products
  • Service: Servicing the products for specific customers, managing relationships and potentially expanding services over time
  • Portfolio management: Working across product families and customer types, overall bank management of assets, liabilities, and working capital

Different customer-facing channels and lines of business will have their respective versions underneath these six capability groups, emphasizing the need to tailor the framework to an individual bank’s line of business structure, products, and priorities.

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Capability elements

Six interrelated elements define each of the capabilities under the value chain at this level or the next level down with specific line of business or product group capabilities:

  • Mission: The purpose of a capability, how it will operate, and what value it can deliver. The mission is derived directly from and supports the company's strategy
  • Technology: The technologies (software and hardware) and tools required to enable the capability
  • Insights: The decision flow, information, and analytics that drive more informed and timely decision making
  • Talent: The competencies, skills, talent infrastructure, and workforce planning that enable an optimal talent base to execute the capability
  • Process: An integrated and efficient set of processes and activities designed to achieve a desired outcome
  • Integration: Clear roles, decision rights, and policies that facilitate integration within and across other capabilities, functions and partnerships



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Capability assessment

Understanding the six-element definition of a capability, bank executives can take a first step toward adopting a capability-led approach to transformation: Assessing the current state of the organization’s own capabilities. While such an assessment can be approached in several ways, applying a competitive lens as part of the analysis can help achieve an outcome that factors in the organization’s capabilities relative to peer performance. Incorporating this competitive information, capabilities can be categorized in one of three groups:

  • Foundational: The organization needs to have mastered the basics for this group of capabilities to meet industry bare minimums—table-stakes required for the organization to participate in the industry. Expectations of the organization’s foundational capabilities may change over time, as customers or regulators increase their expectations
  • Competitive: These are capabilities mature enough to help the bank maintain competitive parity with peers and thus retain customers. These capabilities are those that customers may compare across banks when selecting banks or specific products
  • Distinctive: This set of capabilities presents an opportunity to deliver superior value in the market. These strategically differentiating capabilities can help a bank compete and win in the marketplace, tipping the scale in a competitive situation with customers. They create a source of advantage over peers in terms of cost control, revenue generation opportunities, customer attraction and loyalty, or risk mitigation and management

After categorizing the organization’s capabilities into one of the three groups, bank leaders can decide which capabilities should evolve and whether new capabilities may be required to meet strategic imperatives. In responding to external forces such as market developments, management may focus on enhancing capabilities considered to be competitive, or in more dire circumstances, developing foundational capabilities in areas where the bank currently falls short.

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Approach options: Outside in or inside out

The capability-led framework requires commitment, and it may seem overwhelming at first. But everything doesn't need to be done at once. The process of adopting this approach can progress through a few other easy steps.

An "outside-in" assessment is a good way to respond to and build on market conditions and opportunities to drive actions. An "inside-out" approach may be more appropriate if there is a particular capability or group of capabilities within the bank that are high priority. In either case, the approach should be manageable for the organization and address a timely issue.


Deron Weston, principal, Deloitte Consulting LLP


James M. Baker, principal, Deloitte Consulting LLP


Michael S. Schaffer, manager, Deloitte Consulting LLP


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