Cost to Serve – The changing face of technology costs

Cost to Serve – The changing face of technology costs

One of the fundamentally flawed assumptions we may be working to is that (as for most of history) People use technology

We are on the cusp of working in a business reality where we must lead, manage, and make decisions in an environment where Technology uses technology in significant manner and scale.

Consolidation and more complex service architectures are driving FSI organisations to greater automation to cut cost and increase the efficiency of digital channels, and therefore, stand up Centaur Teams (people teams enabled by generative or predictive AI).

Establishing how efficient one application of technology is over another is, or indeed how technology can become inefficient as new connections (e.g. API’s) and features are added, it will become increasingly difficult.

Moreover, applying traditional Lean Six Sigma efficiency analysis to uncover NOISE/MUDA/WASTE/EXCESS CAPACITY needs to address the nuances of technology service provision, not just taking the total cost of IT and dividing it by FTE/Customer/Volume.

This shift demands an informed approach to analysing operations with technology… Technology is no longer just an extension of human capability; it is an autonomous decision-maker, fundamentally altering the landscape of our operations.

Uncovering and understanding the hidden costs of technology is vital for being able to design, develop and evolve operating models. As we have said before a Modern Operating Model must foster adaptive capabilities, regularly review processes, and shift continuously to stay competitive.

Building modern models in the context of the above we suggest should include:

  1. Prioritising Technology Investments: Technology is a catalyst for efficiency; smart investments today lead to streamlined operations and sustained growth tomorrow. But these strategic investments hinge on evaluating their necessity, ensuring they do not create undue cost, and that they align with our operational goals.
  2. Analysing Resource Costs: Resource costs often exceed 50% of total operating costs, with over 33% lost to non-productive ‘Noise’ activities (Source: XeP3). It is crucial to scrutinise resource costs, understand how they are being allocated, then strategically automating processes that make sense.
  3. Improving Data Quality: As mentioned in our first bulletin, Automation’s potential is only as good as the data it relies on – ensuring quality data is a non-negotiable to understand the true cost of technology, empowering strategic decision-making.

How can cost be measured to best support a modern operating model?

The XeP3 total cost-to-serve model provides deep insights into resource allocation, technology investments, and operational inefficiencies. This robust framework driven by metrics and analytics to optimise costs, aligns seamlessly with regulations such as SPG516 – Business Performance Review, ensuring strategies are aligned with long-term objectives.

Understanding resource costs and technology impacts needs strong strategic oversight. By addressing these areas, we can help you transform operations, reduce costs, and improve service delivery. At IQ Group we understand this, and with XeP3, can provide comprehensive insights into cost to serve, enabling you to optimise resources and deliver exceptional service to your members.

Written by Graham Sammells

The 2024 Budget: An important step in the right direction

The 2024 Budget: An important step in the right direction

Don’t underestimate the importance of super on paid parental leave

Much of the industry response to the Federal Budget has been centered on what it didn’t deliver. But amidst the chatter, let’s not overlook the critical move towards supporting gender equity within superannuation.

In March, the government announced that it will continue its reform of Paid Parental Leave (PPL) by paying superannuation on the government PPL payment. This isn’t a casual decision, it’s a significant step the Government wouldn’t have taken lightly.

Commencing July 2025, eligible parents with children born or adopted on or after 1 July will receive a superannuation guarantee equivalent to 12% of parental leave payments. These contributions will be taxed at the superannuation tax rate of 15% and count towards the individual’s concessional contributions cap. This move, allocating $1.1 billion over four years, demonstrates a tangible commitment by the government in addressing the gender super gap.

This reform is the latest in a series of changes over the past few years by both Labor and Coalition governments that improve superannuation for women, and low-middle-income workers. Previous changes included removing the $450 per month threshold for super (thanks to senator Hume) and eliminating duplicated accounts and insurance. However, unlike these, the changes to paid parental leave come at a real and substantial financial cost to the Government.

The Super Members Council estimates that a mother of two will have $14,500 more in retirement thanks to this benefit. This helps mitigate the retirement income impact of taking parental leave, especially for women, and normalises parental leave as a workplace entitlement alongside annual and sick leave.

It is essential that super funds develop communication platforms to educate members, particularly mothers, about the new entitlement and its long-term benefits. This may involve interactive online tools and targeted messaging through member portals.

As a result of superannuation being based on your income level and the duration of your working life, it has an inherent bias towards advantaging people who are better off. This must be tempered by tax and policy settings to provide more equity and super on PPL is one of these, therefore we should pause and acknowledge this.

Otherwise, not much to see here…

Federal Budgets generally include a slew of announcements about superannuation. Mostly these result in improvements to the system and better outcomes for most Australians who have superannuation – but they also involve implementation challenges and costs.

This year’s budget was the exception. Beyond super on paid parental leave, there wasn’t much about super at all.

But as it turns out, this is a mixed blessing as the industry is also awaiting greater clarity about the way forward for payday super, financial advice reforms, and the retirement phase.

Waiting on payday super

The 2023 Budget highlighted the need to pay superannuation guarantee contributions at the same time as wages and salaries starting July 2026, but the steps to implementation remain unclear. This uncertainty affects super funds and employers, who need time to develop the necessary technological infrastructure and adjust payroll systems to cater to more frequent super contributions.

Reducing the incidence of unpaid super, increasing retirement incomes, and putting super on a level basis with other employer expenditure, means this initiative is worth it, and it’s great the government continues to be committed to it.

Planning better financial advice solutions

The other big initiative where we’re waiting for legislation to materialise is making financial advice simpler, more affordable, and more accessible. From allowing contact centres to provide more meaningful engagements with members, to new robo-advice platforms, and introducing different levels of financial advisors, there are lots of plans to turn legislative plans into a practical reality. This isn’t strictly a budget measure, but it’s eagerly awaited, nonetheless.

At IQ Group we understand the importance of preparedness and compliance to regulatory change and its impact. With our team’s deep domain experience and knowledge of regulations, systems, data, and process re-engineering, we assist clients to effectively plan for, adapt, and implement regulatory change.

Feel free to contact one of our friendly team members if you have any questions, or would like to learn more on how IQ can help you navigate regulatory change.

By David Haynes, Head of Industry Insights

Navigating Accountability in the Age of AI

Navigating Accountability in the Age of AI

In the evolving landscape of financial services and technology, executives find themselves under growing scrutiny. The Financial Accountability Regime (FAR) calls for transparency, ethical behaviour, and personal responsibility. But with Artificial Intelligence (AI) integration at an all-time high within organisations a key challenge arises: How do we ensure AI integration aligns with FAR obligations?

As AI continues to evolve, its implementation presents both promise and risk, with generative AI and predictive AI at the forefront of these discussions. These technologies can revolutionise financial operations, yet they also introduce complex ethical considerations and privacy concerns. This isn’t just about compliance—it’s about maintaining trust and integrity in an increasingly digital landscape.

Fred Kofman aptly said; “Power is the prize of responsibility; accountability is its price”.

Amidst the buzz surrounding AI, it’s crucial to recognise that rapid adoption and its potential benefits don’t absolve organisations from their duty to uphold ethical standards and accountability. Key risk mitigations to maintain accountability, trust, and integrity in the AI landscape are humans involved and high data quality:

  • AI is used to accelerate decision-making and the resultant outcomes. Under FAR, the executive remains the accountable person for the outcome no matter the process to get there. Adopting AI solutions ensures that there is a human involved to approve decisions and mitigates the risk of unwanted and potentially catastrophic outcomes.
  • The speed to decision as a feature of all AI places an even greater emphasis on data quality. Poor-quality data is the enemy of automation. Bad data in the AI era is (Bad data)2 and can lead to catastrophic outcomes. Accountability in the AI era increases the diligence required to ensure high data quality, again mitigating risk.

Enter the role of governance, the supporter of FAR frameworks.

Governance plays the vital role of embedding accountability into the core of all projects, including AI projects. Governance ensures transparency, ethics, fairness, and responsible decision-making are at the foundation of these projects. Governance can navigate the balance between innovation and risk, striving to prevent unintended consequences and optimise processes without compromising members.

At the end of the day, visibility over risk demands governance. At IQ Group we understand this need as well as the shifts AI demands and can provide comprehensive insight over activities, aligning them with FAR obligations.

Written by Angie Perry, John Hogan, and Mal Collins

Bring the Noise – Redeploying capacity through enhanced Employee Experience

Bring the Noise – Redeploying capacity through enhanced Employee Experience

In today’s evolving business landscape, a modern operating model isn’t only a luxury—it’s a necessity. Organisations must swiftly adapt to talent shortages, restructuring, and disruptions. But how? The answer lies in strategically identifying and addressing the “noise” within operations and redeploying capacity to gain efficiencies. Redeployment isn’t only about moving people—it’s about optimising capacity, leveraging existing talent, and ensuring agility to enhance employee experience (EX) and foster loyalty. However, that’s only half of the equation.

Over the past few years, customer experience (CX) has been a key driver across industries, notably within superannuation where the focus has shifted towards attracting and retaining members through investing in seamless interactions, personalised services, and intuitive interfaces.

But here’s the twist: CX and EX are intrinsically linked. Whilst EX and CX have historically been treated as separate entities there is a definitive link between the two. But what is it?

Let’s look at it in a “Noise” context:

  • Customer Noise: Imagine a customer navigating through your services. They encounter roadblocks—delays, confusing processes, or unresponsive channels. This “noise” impedes their journey toward their desired outcome – Customer noise manifests as frustration, dissatisfaction, and ultimately, churn.
  • Employee Noise: Now shift your focus to the employee’s journey. They face their own set of impediments—inefficient tools, convoluted workflows, or unclear expectations – Employee noise leads to disengagement, burnout, and reduced productivity. It’s the interference that hinders their ability to deliver exceptional service.

In most cases, the noise faced by customers mirrors the noise faced by employees.

So how can organisations tackle this?

  • Overlay Journeys: Map your customer journey alongside your employee journey. Identify touchpoints, pain points, and moments of truth. Pinpoint the areas where noise disrupts the flow.
  • Cost of Noise: Noise isn’t only annoying; it has tangible costs. Calculate the impact—financially and operationally. Consider the cost to serve—people, processes, and technology.
  • Agility as the Amplifier: Agility is your volume control. Be nimble in addressing noise. Iterate, experiment, and adapt.

IQ Group’s Modern Operating Model approach (powered by Xep3) focuses on engagement and knowledge transfer to address practical issues effectively. Recognising the importance of real data to understand these issues, IQ Group through XeP3 involves both employees and customers directly. This collaborative approach serves as a catalyst for change by breaking down barriers, and generating insights that quantify issues and opportunities. Ultimately, this empowers organisations to make informed, data-driven decisions based on a comprehensive understanding of their processes.

If you have any questions or would like to chat with one of our friendly team members, feel free to comment or contact us.

By Shane De Silva, Consulting Director

Automation does not equal efficiency

Automation does not equal efficiency

It’s no secret that organisations are diving headfirst into investing in automation, seeing its potential to make things more efficient through cutting down manual work to focus on more impactful work.

Superannuation funds are seizing this momentum, with 73.2% investing in data transformation, 69.6% in automation, and 21.4% in AI/Machine Learning (1).

But here’s the truth: Automation doesn’t always deliver the efficiency we anticipate.

To truly benefit from it, we need to take a step back and view it holistically. It’s not about quick wins; it’s about making things within an organisation work together smoothly – from customers through to suppliers, considering costs at every step, focusing on delivering customer needs, and being able to adapt to change effectively.

As Bill Gates aptly put it, “Automation applied to inefficient operations magnifies inefficiency”.

So, why doesn’t automation always lead to efficiency?

  1. Data transformation – Automation relies on things on reliable data. But when we automate critical processes, we can compromise the accuracy, availability, and reliability of our data.
  2. Suppliers – You need your suppliers and partners to be successful. It’s not just about cutting costs; it’s about working cohesively with suppliers to make the process efficient at every stage. Your supplier’s process is still your process.
  3. Customer experience – Customers drive success. Automating the customer journey isn’t just about saving money, it’s about making their experience better to create loyalty and lasting relationships.
  4. Employee experience – Employees shape the future. It’s not about saving time with automation, it’s about empowering employees to innovate in an environment that welcomes new ideas and creating centaur teams (2).
  5. Technology costs – Automation may seem straightforward, but carries additional, and hidden costs that we need to consider when automating.

In short, automation isn’t a magic fix for efficiency. It’s a powerful tool that needs careful consideration and planning to produce productivity over disorder.

Remember – automation today is the standard of tomorrow.

Written by Shane De Silva

For more information please feel free to contact Shane at