Innovation. Across industries, businesses understand how vital it is when it comes to rising above the competition and filling unmet customer needs.
At Crowe, we recognize this pressure to innovate and tackle it head-on with our Innovation Fast Track – a program designed to accelerate our new product development (NPD) process and quickly turn our ideas into ahead-of-the-curve solutions. Fast Track lets us quickly explore and evaluate the client or market need and reach proof of concept in 90 days – half of the average time the typical NPD process takes.
Take, for example, the development of our exclusive Crowe Credit360 for CECL™ solution. It provides a start-to-finish model of just how the three-step Fast Track process empowers us to launch first-to-market solutions when and where clients most need them.
We deploy Fast Track to identify and support our people’s best ideas by immediately exploring their potential to help solve our clients’ problems. The best ideas are determined by conducting an “impact assessment” that scrutinizes factors like the size, scale, breadth, and depth of the issue a proposed solution would address.
Equally important is the current state of the market. “Is there an opportunity to get in front of this issue?” says Ann Zakrowski, Crowe associate director, firmwide innovation.
Chad Kellar, a partner in the Crowe advisory services group who specializes in the financial services industry, saw such an opportunity in the new accounting standard for how banks estimate and report current expected credit loss, commonly known as CECL. The standard requires banks to implement and validate the models they use to estimate losses. These models are a collection of moving parts, from data segmentation and quantitative techniques to governance and documentation.
The release of the new standard set off a scramble, as financial institutions sought calculation and validation assistance before mandatory implementation to ensure they maintain adequate capital levels and achieve regulatory compliance.
“Here was a pervasive accounting standard that nobody had data on yet, and we were consulting with clients in real time about how to capture the data they needed to comply,” Kellar says. “What if we developed a model that collects all that data for each client but also anonymizes and aggregates it so we can both validate and set benchmarks that give clients valuable insights?”
This was the genesis of Crowe Credit360 for CECL, a technology-enabled solution that effectively challenges CECL reserves, analyzes portfolio risk, and provides aggregate benchmarking capabilities.
“Our involvement with the financial services industry allowed us to see that many financial institutions were looking for a way to better evaluate portfolio risk and identify that risk in real time, as well as forecast the risk of loss over the loan term,” Kellar says. “We brought together our deep knowledge of the industry, the accounting rules, and the use of technology to answer that need.”
Crowe Credit360 for CECL demonstrates the extent to which the voice of the client drives the Fast Track innovation process. “We engage clients earlier and get them involved before we put in significant time and the dollars,” Zakrowski says. “How broad is the need? How urgent is it? Is this something clients value and would pay for?”
The urgent need and the demand in this case were clear.
Ninety days from exploration to prototype – that kind of accelerated timeline requires a commitment to the philosophy of “fail fast.” Failures can teach us as much as successes, and each failure iteratively improves the concept or shifts the investment decision, optimizing time and money.
Crowe leadership’s promise to make specialists across business units available to the development team is essential. The Fast Track process kicks off with a one-week sprint that could take several months in a traditional NPD process. “We bring all the resources together to access those different viewpoints and reach a cohesive vision of the problem, the opportunity, the market, and the potential solutions,” Zakrowski says.
Mentors from the different business units assess and endorse the steps in the path forward and participate in 30- and 60-day progress checks. The business units dedicate time to focus on the solution, reshuffling workloads and giving their people the freedom to pursue the project.
Client feedback is an indispensable part of this step, too. “We spend the time in exploration and evaluation getting rapid prototypes and customer feedback early to confirm the interest and enhance the user experience design,” Zakrowski says. “This input helps us figure out if we have something we want to develop, if we should pivot to a different direction, or if we should not pursue the solution at all.”
Kellar’s team initially used internal teams to better understand the use case for Crowe Credit360 for CECL. “We looked at how they were affected by the CECL standard and how they could use the new information collected as a result of CECL,” he explains. “Fast Track helped us vet the application internally in expedited fashion so we could improve the final product released to external customers. It took about a quarter of the time it normally would have taken to develop.”
Prototypes that provide proof of concept are another critical part of the process – is it even possible to execute this idea? “Prototyping gives you an immediate feel for the user interface, the data flow, and the data points you need to perform the various analytics,” Kellar says.
Prototyping for the CECL solution involved people from the firm’s advisory services, applied technology, user experience design, and data science groups.
Their first hurdle required establishing that they could build a model that incorporates machine learning to power ongoing improvements. They also needed to show that model could be moved to a production environment that can work with hundreds of institutions’ data sets, as opposed to requiring bespoke, one-off models.
“Once we had the comfort of having that first hurdle behind us,” Kellar says, “it all hinged on our ability to standardize data from different systems. We had to prove we could build the data converter that would let us standardize the data flow from legitimate data sources through the models, analytics, and monitoring tools.”
They could, and they did. And that means clients don’t just receive a black-box answer – they receive analytics and data about their own portfolios that they’ve never seen before.
“Because the data is standardized and aggregated,” Kellar says, “model validation clients can see their portfolio trends over time and drill down into the portfolios to identify unique credit risks that indicate a propensity for loss.” Clients can use these insights to inform future credit decisions, such as compensating for risk and pricing imbalances by adjusting loan prices, structures, and loan concentrations.
This success propelled the Crowe Credit360 for CECL solution to the third step of the Fast Track process.
“The goal at the end of 90 days is to get as close as possible to an MVP that we can take to the market,” Zakrowski says. The team conducts marketplace testing to determine a solution’s viability and usefulness. The solution doesn’t have to be perfect – just minimally viable. “If the validation, feedback, and viability are good,” Zakrowski says, “we can move into development.”
The CECL solution team obtained immediate market feedback through live engagements before the platform was ever released. The data standardization, portfolio analytics, and visualization tools were vetted on more than 40 CECL consulting engagements with financial services companies as we helped them plot their path toward CECL compliance. These engagements helped us understand the broad data issues we’d face, the data limitations affecting modeling capabilities, and the data attributes of unique portfolios.
“Having gone through the Fast Track process, we’re light years ahead of the market in terms of credit data analytics and modeling capabilities.”
“So now we’re taking our solution to market.”