As one of the perks of my role, I frequently find myself in engaging conversations with business and technology leaders of a multitude of successfully run banking and financial services (BFS) firms around the globe. And regardless of the geography or size of the organization, when it comes to gauging its positioning within the competitive landscape, a recurring comparative yardstick its leaders seem to prefer is the relative future readiness of the organization versus its competitors in the space.
From my vantage point, and interestingly so, future readiness is not only a priority for BFS companies with burgeoning legacy technology landscapes but also for Fintechs, who despite their recent emergence on the financial services horizon are already looking to address the next generation of challenges around better, faster and cheaper offerings. Anyway, let’s leave the Fintech conversation for another day…
Coming back to the BFS world, as we go down the path of devising a strategy to achieve the much-coveted future ready status, our first logical step is to define what it means within our context. First off, if we happen to be a part of a BFS organization that is continuously disrupting the industry by innovatively re-shaping the value chain and delivering high value experiences for its intended audiences—then we’re already well on our way to being future ready! For the rest of us, our future readiness depends on the ability of our organization to continuously anticipate change, quickly adapt to a shifting industry landscape, and promptly respond with high-value offerings that enhance both revenues and profitability.
At this juncture, our next quest may be to understand the implications of the aforementioned shifting industry landscape. Here, the benefit of 20/20 hindsight makes it easy to see that the rapid changes in digital technology and customer preferences have been largely symbiotic, with momentum in one area feeding the pace of change in the other. This latest sea change of digital Darwinism—dubbed The Fourth Industrial Revolution or 4IR—has effectively blurred the lines between the physical, digital and biological world. Interactions and transactions that required the presence of people, physical locations and objects can now be conducted via bots, electronic channels and other digital assets.
Therefore, it comes as no surprise that the widely held consensus in the BFS space is that to achieve future readiness, the organization has to go through a metamorphosis—or digital transformation—to enable it to conduct and grow its business in our increasingly digital world. Such transformation needs to be driven via strategies which can take the organization from being a silo vying for business within a crowded competitive landscape to a platform where it is co-creating value with its service providers and partners, and effectively providing contextual and measurable value to a growing customer base.
Unfortunately, digital transformation efforts at most BFS companies have not been much more than skin deep. In my experience, while almost all organizations have embarked on a myriad of transformational journeys over the past few years, most have fallen short of their goals. In most cases, they have settled for distributing their current offerings to their existing market segments through digitally enabled multi and omni channel experiences without adding much to the value proposition of their offerings along the way.
Consequently, most BFS businesses have found it tough to grow their addressable market, all the while competing aggressively with other incumbents and fintechs for share of wallet within highly saturated market segments. The net result has been slow growth at best, and in most cases shrinking margins and loss of business to nimbler organizations, neobanks and fintechs.
Given the above scenario, it is evident that a more incisive digital transformation strategy is required to achieve the true essence of future readiness for an organization:
- In the short term, a strategy rooted in a deep understanding of the customer, focused on providing a valuable experience through highly useful and usable offerings, presented at the location and moment of need or desire, and via the channel of choice is the key to success. In a world where consumerism continues to gain rapid momentum, this is what most of us refer to as the provision of a frictionless customer experience.
- To be successful in the medium term, the digital transformation strategy also needs to align with the reality that with technology, customer needs, desires and preferences changing so rapidly, it is virtually impossible for any one BFS organization to meet every expectation from its existing and potential customers. The business, therefore, needs digital enablement to extend its value chain to not only co-create but also service its innovative offerings in partnership with best of breed technology, product and service providers.
- Over the long term, the digital transformation strategy needs to identify a few core areas of strength for the BFS organization. These could be foundational offerings and commodity services or “rails” which independent developers and 3rd parties can leverage to complement their own differentiated products and services. Such rails or offerings should ideally be deployed under a self-service and self-governing model where the 3rd party requires minimal to no handholding from its BFS service provider.
To summarize, so far we’ve given some substance to the hype around future readiness and its link to digital transformation. We have also looked at the key tenets of a baseline short, medium and long term digital transformation strategy to serve as the bedrock of future readiness.
In a future blog, we’ll move on to developing a recipe for the execution of our digital transformation strategy. Until then, good luck with your transformation journey. And if procrastination strikes along the way, remember the wise words of William Gibson, “The future is already here, it’s just not very evenly distributed.” So, onwards and upwards - let us be the ones who bring the future to the here and now!
Before you go… What are your thoughts around future-readiness and digital transformation and how do you intend to embrace such initiatives?