The Future of the Financial Industry – and Your Place in it
In the previous post, we looked at some of the problems faced by financial companies when attempting digital transformation. In many institutions, progress is happening slowly, or sometimes not at all.
However, ignoring digital transformation is simply not an option. According to a report by research firm Gartner, CEOs expect from digital business to account for 41 percent revenue by 2020. That’s not taking into account the idea of disruption – new technologies will create new markets, and that in turn will see the end for old markets. Those who fail to keep up will be left behind.
Forming your industry vision
The recommendation from Gartner is not to wait to see where the industry goes next. Instead, you need to form your own vision of the industry’s future. You then need to look at building digital capability that will allow you to take advantage of these trends as they emerge.
Building this kind of digital strategy involves four elements:
Every company should have an industry vision that describes the broad themes of the industry’s future. In banking, some of the big technology-related themes over the next few years involve: building a customer-centric business model; leveraging big data to create a competitive advantage; and enhanced management of risk and capital. Based on this industry vision, you can build a specific vision of your future. For example, a company with a strong retail brand might look at offering a fully smartphone-based banking offering.
In order to build this vision, you will need to expand current capabilities. In the example above, building a new banking app will require marketing experts to design the user experience, compliance experts to ensure that all requirements are being met, and engineers to create the app and supporting infrastructure. Often, this might mean making a strategic acquisition, or finding a partner who can temporarily provide the extra capability.
The company will require a new set of assets in order to fulfill its vision. That means more people with relevant skills. For a new banking app, that would mean support engineers who can maintain the network and analysts who can use data from the app to generate valuable insights. But the most important asset in the digital world is intellectual property (IP). Companies need to acquire or create the necessary IP, and guard it carefully from rivals.
Digital transformation is an ongoing process. Each new digital project offers a greater amount of data, data leads to customer insights, and insights help to identify emerging opportunities. To stay ahead, it is vital to have a digital platform that gathers relevant data, and analysts who can identify the emerging patterns. The digital transformation plan then needs to be revised and updated in light of the new insights.
Investing in technology
When discussing digital transformation, many people focus on buying new systems or upgrading old ones. This is digitization rather than transformation – it’s improving the infrastructure without changing the business.
True digital transformation means using technology to create new markets and new ways of creating value. It is a transformation of the entire business. That is why it is important to start with an industry vision, and a vision for the future of the company. Only then should you begin to discuss infrastructure investment, as a way of meeting your digital goals.