Why financial services firms need to change their modus operandi

If you had a time machine and were able to go back 20 years, or even 10 years, you’d soon see that the thought processes behind business strategy for most companies were very different to how they are today (or at least, how they should be today).

Back then, business rivals were seen as the arch enemy that needed to be outsmarted and outmanoeuvred every which way.

Fast forward to now and it’s clear that viewing our competitors as the ultimate enemy that should never be fraternised with is, in fact, quite obsolete and could significantly hold businesses back and even result in their demise. If you have a shared goal with a rival to change a market or an industry don’t completely dismiss the idea of working together.

Businesses need to embrace the concept of partnerships and selective collaboration if they are to survive and thrive in this fast-moving brave new world where meeting the evolving needs of the consumer is business critical.

The risk is no longer that a perceived competitor will steal your innovative business idea. The very real danger is that you take too long from idea to launch and the market will have moved on by the time you get there. In a world where ideas are free it is only execution that counts.

Don’t miss the boat because you’ve compromised yourself with a range of self-imposed limitations of systems, resources and capabilities, such that your innovation is a dead duck anyway…

Financial services companies have a bad rep for being somewhat risk averse, resistant to change and pretty slow off the mark. In my opinion, this is justified. I used to work for a large, household name insurance firm and you could literally spend hundreds of thousands just getting a quote for the cost of implementing an innovative new way of doing things. That’s bordering on the ridiculous!

How many of us have witnessed significant expenditure on projects that we know a smaller, nimbler, more flexible external organisation could have launched in half the time for a tenth of the cost?

In 2018/19 and beyond, financial services companies need to think with greater clarity about who they are and what they want to achieve.

What is it that you are really good at? Now, if you’ve invented an amazing new method to turn rock into gold or water into wine, then you should definitely keep that under wraps until it is patented! But if you have an innovative financial services-related idea that could change the market or bring real innovation to a space you are already in; then prepare to compromise confidentiality for the sake of speed to market.

The pace of change is the real threat here not the originality of the idea. Even if that means working with a business that you might see as a competitor. A great example of this is Apple and Samsung. While both companies currently have a whole range of lawsuits against each other, believe it or not, they also collaborate.

Samsung makes about $110 for every iPhone X sold because it provides the display and some of the chips inside. Apple doesn’t care – all they care about is that they have the best constituent parts for their end product.

Samsung realises that most Apple customers are not Samsung customers. So why not sell their screens to Apple and increase their profits? Apple knows they can’t make screens as well as Samsung, so why not buy theirs? It’s a business win-win.

And it’s about time we started thinking the same way in the financial services sector.

Companies need to work out what they are truly great at and build from there. If they are average at something or worse, they need to shut it down and move on or quickly get better at it!

Today’s consumers will no longer accept mediocrity. This requires some serious self-reflection and honesty. I see lots of businesses who think they’re good at stuff that they, quite frankly, are not and that kills their propositions.

Large companies with big system legacy issues have gone from having all the advantages of scale and resources to being at a major disadvantage in today’s market. However, this is still largely due to poor ways of thinking.

Instead, financial services firms need to shift gears and change their modus operandi.  The trick is to not feel threatened by new entrants and new innovations anymore but to seek ways to collaborate with them.

Start with the dream and whenever you find yourself compromising, ask yourself – would collaboration improve the proposition for the customer or increase your speed to market?

If the answer is yes, you know what you need to do.