During the pandemic bankers and financial services in general, have been forced to engage with their stakeholders in new ways, often in digital ways. Embedding some of these practices into the ‘New Normal’, post COVID-19 world will prove essential. Adding digital to existing practices is not likely to be a successful strategy; the goal is to add the tech and then new processes and opportunities that go along with it. Financial services will increasingly become embedded in the world we live in, intelligently enabled and ambient, rather than existing as a separate function. How to remain relevant in a changing world is the key question. 40% of companies in the next ten years will likely become irrelevant, leaving market room for the others to grow, but pressing the question of ‘How do I/we remain successful?’
At the same time consumers are becoming more dynamic and creative than institutions, at least when it comes to finding new ways to solve needs. Most firms are already digital, but using digital tech will not be enough. It’s not one technology driving change, but multiple techs overlapping each other. Thanks to the IoT, and even the infinitely bigger, Internet of Nano Things, everything will be quantified, giving us access to vast pools of data. Knowing what to do with it will give us a great advantage if we choose to do new things rather than do current things differently. Transparent transactions over the net, delivered immediately is now a standard consumer expectation. Real-time is not the ultimate however, consumers now increasingly expect providers to anticipate their needs and act on it to their advantage.
The nature of our data is also becoming increasingly ambient, with systems and processes knowing where we are at most given moments and smart cities demanding to know what we plan to do next, at least where we want to go. Development with geolocation is likely to lead to new forms of regulation and how and when and in what context to engage with customers. For example, if it were possible to know, will it be ethical to conclude a mortgage over the phone at 11pm with the customer in a rugby club! Personalisation, the servicing of multiple identities (are we at work, leisure etc) will mean identity is a major issue tied up with contextual, real-time and even predictive offers. We will interact with data where it originates, changing the nature of how we engage with the customer and the nature of our offers.
Every time we implement a new tech, as a rule we get it wrong, because we employ the old processes with the new tech, Later, we figure out what it can truly do and develop new processes, capabilities and services. The challenge for financial services is delivering this using new technologies in one hit to our customers, without the lag of the learning cycle. Creating new beta like organisations can help us do this, by delineating clearly our future ‘blueprints’ in a fast, unfinished customer centric way, distinct from what we consider our core day-to-day activities.
Many will adopt ecosystem approaches to accomplish this. Forecast to replace around a third of total global GDP in the next decade, ecosystems can help us move towards positioning FS as being involved in day to day transactions often behind-the-scenes. Few consumers will resent advice or propositions on how they can be more successful, even less so when it’s done with permission. Organisationally, a move towards orchestration shifts the supply chain and ultimately the service away from product led provision. Take Ping-An, the giant Chinese finance house, which on the back of its tech capabilities, has morphed into a key wellness provider for millions of Chinese consumers. Wellness and banking have few natural synergies other than the fact that digital, ecosystems and data more generally are eroding boundaries and rewriting what it is that banking, finance or even insurance, actually are. Doing different things in the digital age doesn’t so much have technical boundaries as much as cultural, organisational and skill-based ones. Critically, in such a world, you don’t have to employ the same skills as you always have done, but rather, people that understand the new world. Ecosystems also carry a degree or risk; understanding the nuances of the difference between today’s partners and tomorrow’s rival will be key.
Are you ready to significantly change the way you run your business? Can we adopt tech at speed and scale? A.I. can grow revenue significantly and reduce operating costs, yet accessing the right people to implement and oversee it is a challenge. Technology will impact every single FS job, generating awareness of these technologies and their consequences is critical, at both the grass roots and board level.
There is no manual for adapting FS to this new world. That’s the good news – it’s up to you, the regulator, and the customer. With data at the centre of the model a whole host of new possibilities are emerging. Since consumers will end up owning their own data, building trust and offering additional value will be essential for future access to such data. Roughly half of all sensors that exist could be of use to FS – are we using this info to deliver what our customers want? Are we using it to change what we do? In real-time or predictively? What could we do that our customers love? Scenarios can enable the practitioner to embrace these possibilities and uncertainty rather than attempt to predict discrete events, as they develop strategies that can withstand profound changes to the macroenvironment. They can also highlight vital links, or weaknesses, between organisation processes such as innovation, leadership, risk management, strategy and required skills.
80% of FS executives already deem it hard to acquire the skilled talent they want and need. Manipulating and managing data, then figuring out what can be done differently as a consequence is key. More prosaically, we need to ensure that our data is right, accurate and correct. If it isn’t, for example, around 97% of insurance execs aren’t sure it entirely is, then we could be in big trouble. Data decommoditises what we do, especially in the retail space, where you can get down to a personalised level, but done badly it won’t only alienate customers in the form of completely inappropriate offers, but likely lead to lawsuits. The premium on the range of required data skills will rise, as will the very human skills that will rise in increasingly automated organisations.
FS needs to be proactive in shaping the future – asking what future do we want, and what steps can we take to get there? What skills do we need to get there? Three Horizons is a graphical approach that gives a structure for organisations to assess future directions, shifts and growth opportunities without sacrificing the array of urgent needs that confront any business in the present. It is easy, given the demands placed on companies, whether through changing consumer behaviour, legacy technology or thinking, outmoded organisational models or unclear leadership, to focus on immediate short-term necessities which is so important. During the Pandemic we learned to survive and to do that we embraced a range of new processes and digital technologies, video conferencing and remote working in particular. After the immediate crisis of the pandemic and during the period of economic recovery we need to start redefining our strategy and its implementation. FS leaders and executives can use the 3H model as a way of balancing attention to and investments in both current performance and opportunities for growth.
Knowing how to stay relevant in a dynamic environment will, as ever, be key to success.
Author: David Smith