Alan Grogan is Chief Analytics Officer in the Royal Bank of Scotland’s Corporate Banking Division; the UK’s biggest SME and Corporate Bank*. He spoke at the recent IQPC Customer Insight & Analytics Exchange event in the UK, and afterwards I talked to him about the use of analytics and insight at the bank, the importance of analytics in the banking sector and the emerging role of Chief Analytics Officer.
Grogan: Analytics has always been the preserve of our risk function, so credit analytics and risk analytics. As banks we have always had big data, but banks have been notoriously slow to move when it comes to data due to security, cost and complexity of systems. So when fundamental shifts occurred in the industry, such as analytics (using market and customer data in a different way to understand customer wants and needs) banking was not at the cutting edge. However, around four years ago we had some very good leadership hires who were willing to listen and actively place analytics into an important role to help rebuild the organisation from the inside out.
One of the big issues is how you ensure your data is clean so you can analyse it. There are typically two types of data; internal and external. Internally it’s your sales and service teams who typically generate this data, the people who open up and manage those accounts. Externally, the world is full of data, which all organisations source, review, treat and load into their systems. So I will work with the individuals across the bank to treat the data appropriately or, at least, know what the issues are with the data. But I have a responsibility to tell those individuals the caveats around what the analytics is saying. I can use new and interesting forms and types of data, internally and externally, to close any data gaps, but if the data is flawed, or they want to use it or treat it in a certain way, then we need to be open and upfront about it. So part of the cultural challenge, like all industries, has been empowering our staff, whose job it is to provide the best possible level of service to customers on a day-to-day basis, to make sure their client information is up-to-date.
CMO.com: How do you see the role of analytics and insight at RBS?
Grogan: Our customers tell us they are uncertain about many things across their business, one current example is investment in analytics or Big Data. They also don’t know what the bank could offer in this space, how we engage, where the market is moving. So lots of organisations are looking to the bank to discuss options and paths forward. Can a business really say that a good, fact-based granular view of their products, customers, market and organisation would not help them succeed in a more sustainable and quicker way? For me, those organisations who empower data-driven decision making to sit at their heart will be more successful, showing how they, as an organisation, sit versus their peer group, versus their segment, versus UK PLC, versus Europe PLC, versus the world.
There’s too much data out there for any man or woman to digest, so that’s where analytics steps in. Analytics will focus on what we understand about our customer, building that out against what they have told us is important to them today and how they want it provided to them. That is really, for them, an internal view. We’ve now got to build that out with them so they can have a more strategic view of their underlying wants and needs.
I see banking and banking analytics almost like a Formula One team. You’ve got engineers, you’ve statisticians, you’ve mathematicians, you’ve got a marketing department, you’ve got your branding team, you’ve got your logistics team, you’ve got the individuals who support the driver throughout the race on their radio. All this teamwork is simply to help the driver get the most from their car. Banking needs the same approach, so my divisional chief executive - Susan Allen - is the driver. She is the customer custodian, she is the bank’s custodian. I see analytics as the voice on the end of that radio, so we aim to monitor, digest, assimilate and then communicate clearly all the surrounding points of information to the driver, giving her the options on how to get there and what are the key things they need to be looking for, working with the divisional Managing Directors, working with our engineers, to say what they need to fine tune the car.
Banking is very complicated when you look at the infrastructures we have in place. That is because of where we’ve come from, but as our customers’ wants and needs change, we need to be fleet of foot. We need to be putting forward those strategic recommendations to customers, whether they are sole trading retailers right through to being the most advanced multinational in the world.
CMO.com: There seems to be a switch around in the relationship of analytics and marketing. It used to be that analytics was the horse that marketing rode and now it seems that position is being reversed.
Grogan: Chief Marketing Officers have always been challenged to produce a Return On Investment figure, and marketing seems like a very natural place for a type of analytics to sit, purely because you can say okay, it costs us to segment and then to do a channel strategy on these communication lines. Now, analytics would work out how much was made, and the value put into it, so you can quickly work out ROI.
Then you’ve got analytics feeding back from your customers that they haven’t chosen you because of your pricing, or because your proposition isn’t strong, or because they didn’t know you offered that particular service. It gets reinterpreted and then the channel gets re-evaluated. Right now I think marketing offices will continue to be an area through which analytics is deployed and a better view of ROI sought, but CMO functions should be using analytics not only on the benefits realisation and targeting, but also upon development of detailed offerings.
CMO.com: How does that function organisationally? Where do you then sit in relation to the marketing department?
Grogan: There are numerous schools of thought on where analytics sits. Today I feel that it sits with whoever has the budget to pay for it. So if marketing has money, they will allocate money to it. If the product management teams need to do better product analysis, it will sit in product. Ultimately, analytics can sit in any functional unit where there’s a level of responsibility, but really it’s where cost centres are drawn. Analytics can be as expensive as you want it to be, unlike say your Finance team. The question is how important is it for you and what your available budget is for people, external data and core infrastructure.
Where it’s evolving, and the United States has taken the lead on this, is with the idea of a Chief Analytics Officer. The challenge is to be managing to the penny when it comes to budgeting. Where analytics comes in is working as a Chief Analytics Office, working from a financial perspective top-down and bottom-up. Working with product managers top-down and bottom-up. Working with our sales and service functions, again, top-down and bottom-up. Ultimately, analytics should be coming to the CMO proactively intra-day, end-of-day, end-of-week, end-of-month, to tell them what is happening to the business; where money is being earned, where money is not being earned, where the opportunity is today. It’s effectively a SWOT analysis, end-to-end, across the customer touchpoints, so the CMO has their finger on the pulse of both their business and the market.
For every organisation, I foresee big data as just an initial communications channel to start getting people excited because we couldn’t do this ten years ago. The infrastructure was too expensive. The internet wasn’t as advanced. We lacked clear, real-time customer feeds. Now we have mobile. There are other things in the pipeline that banks and industry are looking at that will be used. CMOs will be increasingly asked how far they want to push it, knowing branding, knowing budgets, knowing customer needs and wants, knowing the culture of the organisation, knowing the operational limits of the organisation. Knowing the shareholder needs and values of that organisation. Ultimately, the customer value. You will aim, through analytics, to succeed by helping your customers meet their goals and aspirations.
*By primary bank market share. UK registered businesses. Source: Experian. Dated as at September 2013.