
The Internet has now been mainstream for 20 years and the first iPhone arrived eight years ago this June. We are all repeat ecommerce customers, yet the biggest business model disruptions still lay ahead of us. Up until recently, traditional multinationals saw digital as just another route to market while thinking that the more routes they open, the more money they will make. The unintended consequences of such an approach is adding more complexity to their operations and a fragmented customer experience.
Companies now realise that modern businesses organise around the customer, not the channel. How then do they transform themselves to compete against agile start-ups unencumbered by the ‘baggage’ of legacy operations and systems?
This challenge increases exponentially as customers’ expectations change and they start demanding services customised to their own data sets, be it their energy consumption (Nest, OVO), location data (ibeacon), fitness data (Fitbit), content consumption (Netflix, Spotify), food consumption (OpenTable, Velocity), driving habits (Nexar) etc. Start-ups are scaling with increasing speed now that the many barriers to customer acquisition and brand building are reducing, even in the most traditional markets. Who would have thought even five years ago that people would have such trust in start-ups that they would buy a car online from one (Tesla)?
Technology, Marketing and Product Management Executives from digital native companies have by no means written off established brands. Indeed there is often great excitement expressed by them for roles that help a brand through the transition from old to new world.
Financial services firms realise the challenge that they face from emerging competitors of all sizes from start-ups focussed on specific banking functions (Stripe, Nutmeg, Ebury, Transferwise) to the threat of possible new-market entrants such as Google, Facebook or Alibaba. The advent of crypto-currencies and the IoT could further disrupt and disintermediate the role of banks in everyday life.
Banks are actively employing executives from digital native companies who can act as catalysts for change that will deliver digital services to the ever more demanding client base. This is a challenge to the status quo of these normally risk averse organisations, however there is recognition that dramatic change is required, else these bastions of the global economy will wither on the vine.
Some banks have created in-house Innovation labs where new technologies can be prototyped in an environment free from the barriers to adoption of culture and legacy systems. Other banks have also created innovation funds that seek to invest in start-up organisations that are deemed to be not only a decent VC investment, but have a disruptive technology that the bank can deploy for market advantage or internal cost reduction.
As banks face up to the reality of the tectonic challenge being posed by rapidly changing client demographics and demand, new challengers slowly biting away at the edges of their core services and the real danger of a global new market entrant, it is clear that fresh ideas and emerging talent is required to awaken these traditional organisations from their slumber. This talent needs to touch a bank at all levels and areas for there to be the necessary change to client service in time to enable them to survive.
Written by Sam Wilkins and John Doonan