In 2009, ING Retail faced the challenge of merging ING Postbank and ING Bank Netherlands into one single organization. At that time, the organization used two different cost models that were based on different definitions. As a result, there was no comprehensive picture of the costs of the combined entities. ING wanted to introduce a new cost model that would provide greater transparency in costs of all steps in the value chain.
Challenges
The units within the value chain, Sales, Operations and Finance, use different data for their analysis. This means that for a cost model, where all this data is important, the data needs to be compatible. The challenge was to align the requirements with these data.
In this new constellation, product management also needed information in order to take more informed decisions regarding the product range and the rationalization of the product portfolio.
Another challenge was to convince people within the project that the focus should be on influenceable costs, instead of non-influenceable costs (overhead). By providing insight in the allocation of costs, it became clear how these costs are related and where the most headway can be made.
Kees Stolk, manager ING: “First of all, the project needs continuous attention from the management in order to be successful. In addition, it is important that people from within the organization participate in order to increase the acceptance; they need to be the ambassadors that influence the internal customers.”
Project process and solutions
Together with the ING Management Accounting Department, Finext Financial Services executed this major project and completed it successfully. This project was divided into the following phases.
Phase 1: The migration process of Postbank
As a result of the merger of ING and Postbank, the two cost models of the previously autonomous organizations needed to be integrated into one. The approach adopted was to integrate the cost model and the corresponding data into the ING model. Especially the different data in the cost models required a wide internal acknowledgement and cooperation.
Phase 2: Modelling the value chain
After the fusion of the two cost models into one central model, it was necessary to further design and model the entire value chain. Together with ING, Finext has mapped the processes and requirements, determined the cost drivers within the value chain, simplified the entire cost model in SAS as well as providing an automated data-integration. The improved cost model of ING now provides the organization with insight in the costs per product/service. This information enabled ING to control the costs more effectively and also provided more transparency and visibility of the exact costs per product/service.
Phase 3: Cost reduction and operational excellence
The greater transparency in costs was the starting point for a new phase of the project where Finext and ING focused on cost reduction. By taking the previously developed value chain as a starting point, all direct and indirect costs could be allocated. The allocation of costs to the relevant parts of the value chain contributed to awareness and provided the organization with insight into the influenceable and non-influenceable costs of the value chain. Particularly regarding management information and reporting, this was a very important phase of the project. This improved insight into the costs and helped ING to determine which aspects help to manage the organization in the best possible way.
Phase 4: Optimization of management reports
Given the changes in the way of working, driven by the new cost model, the value chain and the improved insight into the costs, it had become necessary to optimize the existing management reports. The objective was the reporting of relevant management information that provides a clear view of the influenceable and non-influenceable costs.
Phase 5: Operations-to-business, ING Domestic Bank
In the last phase of the project, Finext Financial Services guided and monitored the integration at ING Group, Retail Bank, Commercial Bank NL and IT Operations. As a result of the integration, ING Domestic bank was created.
Results
- An improved future-proof cost model, managed by ING itself.
- Insight in and control of costs in all phases of the value chain.
- Insight in costs per product and per service, which can serve as a basis for (future) product rationalization.
- Improved insight in all processes and improved cooperation between the different departments of the organization.
- Reliable and detailed cost information that enables the management of ING to enhance the control and direction of the organization.
Characteristic approach
The starting point of the Finext approach, in general as well as for this project, is to enhance the cooperation of the different stakeholders within the value chain. We opted for the co-makership model to ensure that, after completion of the program, ING could maintain and expand the model independently.
