Superannuation funds will struggle to innovate in member services if they don’t first have a firm grip on member data and a sound technology strategy, which includes a clear understanding of what can be handled in-house and what can more productively be outsourced to specialist service providers.
Novigi chief executive officer Ash Priest says innovation in a super fund starts at the top – with the board. The trustees of a super fund must create an environment where innovation is encouraged, but where there is also a clear focus on achieving the best possible outcomes for members.
But technology is a fast-changing world, and Priest says often must assume a role as an of “orchestrator” of services provided by external vendors and partners, even if they are not in-the-weeds experts on the technology itself. It’s a top-down issue, Priest says, and “a cultural thing that needs to be developed, and it really is incumbent on the board to help facilitate innovation and develop the frameworks that enable innovation”.
Priest says digital transformation is “a massive tailwind” for the superannuation industry, and no fund can afford to not be investing heavily in technology and systems to underpin better services for members.
To satisfy themselves that their fund is on-track and will be neither left behind or, sometimes worse, invest in inappropriate technology or partnerships, there are six questions a board can ask, and which executives should be equipped to answer:
- Are we testing new technologies in low-risk environments (for example, proofs of concept)?
- How do we balance innovation with empathy in sensitive areas?
- How does our digital member experience compare with leaders in banking or big tech?
- Are we taking a data-led approach to understanding what members want and need?
- Do we have the right technology partnerships?
- Is our tech stack ready to support seamless member experiences across different channels?
The executives and heads of IT and member services inside funds should be prepared and able to fully answer these questions. But Priest warns that even though innovation mastery of technology will be central to success or failure in member acquisition and retention, the superannuation industry generally is starting from a lower tech baseline than other financial services sectors.
Priest says that years ago when Novigi started working with super funds it believed its main focus would be “lots of proof of concepts, working with machine learning algorithms, and doing highly inventive, creative work that will drive member experience and engagement”.
Instead, Priest says, it uncovered “a big systemic problem with the utility applications and the core utility functionality in the sector”.
“A very large majority of our work is working with what we call ‘utility systems’, the registries, integrating those well and creating the data models…and the interoperability trend, getting that right, helping funds get that right, helping the administrators get that right,” he says.
“That is a big difference between our sector – the way the registry works, the complexity of the product set inside a registry, and the way that is then exposed and opened up, the cost to change the registry versus the cost to create the integration architecture – and others. They have an advantage in the sort of core functionality layer.”
Super is catching up
Even so, Priest says the super sector is catching up rapidly.
“There is good movement there,” he says. “And you’re going to see a pretty rapid acceleration in roll-out of more innovative sort of use cases and tech for the member.”
Priest says data-driven data operating models are at the centre of successful innovation.
“Every single fund that we work with…is really going through a very significant transformation of the way that they manage their data, and they use their data to develop and orchestrate services,” he says.
“It’s leading to, and it is also partly driven by, a big trend in more open, interoperable technology architectures, sector-wide interoperability.
“A lot more of the providers in the space are bringing technology propositions that are highly interoperable.”
Priest says that as a result some funds are “going through a really fundamental deconstruction of the way their technical architectures work and their service models work”.
“They’re in-housing some things, and choosing more specialised service providers in other areas,” he says.
“The modern superannuation fund needs to be an orchestrator of services. The fund sits in the middle of a service architecture, and their core job is to manage their technical architecture and their data capabilities in a compliant way, to be able to build services, build service processes and deliver services that delight their customers.”
A poll of delegates at the Investment Magazine Chair Forum in January found that 78 per cent of respondents believed that ensuring tech innovation directly enhances member engagement and satisfaction should be the primary focus of a fund’s board. A long way behind – with 17 per cent of respondents – came value for money, with only an handful believing their primary focus should be compliance.
Novigi general manager of market strategy and propositions Kevin Fernandez says technology itself is one thing but finding the right people to help implement it efficiently and effectively can be challenging. He says one way to make the process of innovation simpler and potentially less threatening is to create what he describes as “safe experimentation”.
“It’s setting up these environments that allow you to put together proofs of concepts and actually experiment to see if these new approaches will work,” he says.
“Being very purpose-driven and conscious of success metrics is also very important. You want to have very limited experiments where you’re very clear about what you’re trying to prove.
“If there’s one particular element of a larger solution that you’re trying to prove, just prove that. Don’t worry about building the entire solution in experimentation mode.”
Fernandez says it’s important that all stakeholders – including executives and boards – are kept apprised of progress, and that organisations are honest about what’s working and what is not – or have the “freedom to try and freedom to fail” – with the clear caveat that failure needs to be in a “safe space” that doesn’t directly affect live services to members.
A data-driven activity
Developing effective member services clearly rests on understanding exactly what members need and value, and working that out is “a very data-driven activity”, Fernandez says.
“You can run customer surveys and interviews; you can do customer data analytics; and you can do things like A-B testing, building in experimentation,” he says.
Then, “[when] you’ve got something, you put it out in the world, you gather data on whether it’s working, and you review, you update”.
“So we need to take a very data-driven approach,” he says.
“There is a tech stack to allow us to do the kind of data analysis, to figure out on a continuous basis what it is that we want to build. When we do know we want to build, there’s another tech stack that, if we have it in place, makes building these things much easier.”
Fernadez says a fund can’t simply import or acquire new tech without understanding how (or if) it integrates with legacy technology and systems.
“Broadly, we’re trying to put in place an architecture that emphasises openness, automation [and] the ability to work with legacy technology – which is really important, because they’re all going to have legacy parts for architecture they just can’t get away from – and an architecture set up in a way that allows us to integrate new, cutting-edge technology,” he says.
Priest says the desire of funds to unbundle services and to be able to “pull apart the technical ecosystem, the service ecosystem, and in-source some things and outsource others” must be underpinned by a stable, flexible technology architecture.
“Boards really need to understand at least the base principles around what that architecture means and their issues, their limitations and gaps in that context to be able to then contemplate the work required to unbundle and build and orchestrate new services,” he says.
“And we see across the industry, really, that there are not many good examples of the appropriate architecture, and that’s one of the problems that’s playing out when it comes to innovating and transforming service delivery methods.”
