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Design Thinking: Creating a Blueprint for Equipment Finance Innovation

September 12, 2018, 07:00 AM

Evolving customer dynamics are pushing equipment financiers towards innovation with far greater speed than ever before. Bundling of equipment and services and usage-based payments are examples of irreversible consumption trends, which are transforming equipment financiers’ core business operations in all areas – from originations to servicing and asset management.

This combination of shifting customer trends and digital technologies is driving the equipment finance industry to go beyond just being “Fintech-like.” FinTech’s have largely transformed the customer acquisition and risk adjudication space by introducing intuitive originations solutions and evolved data-driven risk models. There is a third aspect equipment financiers will have to deal with: the Internet of things (IoT) capabilities incorporated into products by manufacturers or resellers. The monitoring of data coming from assets will provide manufacturers with insights into consumption patterns, leading to improved service and product quality. IoT is therefore becoming an essential component of all assets that the equipment finance industry needs to fund. Technology and medical device manufactures have been the leaders on this front, and it is only a matter of time before all assets become IoT-enabled.

With these multi-dimensional, irreversible trends impacting the equipment finance industry, the need to create a road map for the future is real and pressing. In developing a strategic blueprint, it is important to keep certain elements in mind.

First, the equipment finance industry remains a relationship business. It serves a wide spectrum of markets, from low-touch transactions to high-touch, relationship-focused businesses. Any blueprint for the future must keep the relationships between the lender, the distributor/dealer and the end customer at the very center.

Second, a piecemeal approach with organizational silos and an exclusive focus only on the front-end experience – excluding the middle and back office – will not work. However, lenders will find this hard to counter, as some have spent decades making incremental improvements by building layers of customization on their legacy systems.

Third, a “design thinking” method to problem solving will have to be adopted. The focus here is on customers and their emotional responses rather than on processes and technology. Design thinking advocates deep exploration of the feelings and motives of your customers and the emotions that come with specific business roles. It focuses on the overall “customer experience” instead of simple user-interface design.

Today, many equipment financers are actively looking at replacing or upgrading their legacy systems and spending millions of dollars in the process. A design thinking approach would contrast sharply with a typical technology project approach, where priority is given to analyzing current processes, identifying functional specs, and selecting possible technology vendors. In a design thinking method, equipment financiers would focus on visualization and “telling a story” about the solution, preferably in improvised, low-tech ways. Concepts must be iteratively tested early and continuously by collecting the feedback on target customers comprised of various “personas.” Design thinking requires a comparatively long period of purposefully sticking with the problem before moving into a solution-seeking mode.

This approach to transformation is necessary for the equipment finance industry because it simply needs to take a big leap of faith from operating on legacy systems, which in some cases are many decades old, to building a technology eco-system, where artificial intelligence (AI) and data-driven insights are engrained into the operating model. And this needs to be done in a short span of time. A design thinking approach is typically required in the following three situations, all of which hold true for the equipment finance industry:

  1. The impact sought is not incremental, but disruptive. Conventional approaches only deliver an incremental impact, but the need of the moment is for a more disruptive approach. Here, the leadership orientation should be towards building on lessons learned from any potential failures, as opposed to merely on holding people accountable for anything less than unqualified success.

  2. Excessive dependence on people and their tribal knowledge for running operations. Where core operations have highly customized solutions built over many years, there is a high degree of dependency on a few employees’ knowledge to run operations. In these situations, attempts to adopt innovative, technology-driven solutions are seriously jeopardized by those reluctant to embrace new ways of operating.

  3. Solutions sought are unique. In certain situations, alternative solutions aren’t easily found “off the shelf” or by copying “best practices. Given the specialized nature of financing deals and assets, equipment finance solutions can often be complicated and unique.

Design thinking sessions can add significant value when you start by imagining what your ‘target personas’ and their world-class customer journey would look like. Rather than issuing RFPs for selecting technology vendors, at the outset equipment financers stand to gain a wider perspective on a long-term strategy by using design thinking sessions. These can last anywhere from six to eight weeks and can be accomplished by small groups of cross-functional teams and your customers.

Once your future state blueprint plan been designed, tested, and refined, the next step is to develop the technology infrastructure to support it. Here, the need is for integrating new processes with legacy systems in a cost-efficient way. This can be accomplished in an agile manner by leveraging advanced workflows and various digital bolt-on technologies. The possibilities from an execution perspective can be numerous, given the advancement and availability of multiple technology and data/analytics solutions.

The business opportunity that lies ahead is incredible. The changing market place will reward those, who embrace change and move with speed. The need to rethink our approach to implementing digital technology could not be greater than it is today. It’s time to take our first steps in the right direction.

Anu Sachdeva
Senior Vice President | Genpact
Comments From Our Members

Bob Rinaldi • View APN Profile
Very interesting Anu! Thank you. Being creative is one thing and of course vital. The hard part is allowing the creative ideas of a few within an organization to turn into products and services that truly change the paradigm of the business in the future. Your concept of Design Thinking is a fantastic concept and high level model for any organization who wishes to future proof their business. Well done indeed! Respectfully, Bob
9.18.2018 @ 9:24 AM
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