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By M. Isi Eromosele
There are important implications for the financial services
industry as it navigates one of the most financially devastating periods in
history.
In September 2008, we witnessed the demise of the
independent Wall Street business model, significant bailouts and double-digit
stock market declines around the world. Indeed, the recent credit turmoil has
made two things exceedingly clear: massive herding into new product areas and
geographies is taking its toll – and the industry faces an uphill battle to
overcome these instincts.
Not surprisingly, a large percentage of financial services
firms face substantial near-term change. And despite the need for rapid change,
two-thirds of financial markets firms rate their agility as moderate to poor –
and less than 5 percent feel confident about their risk management
capabilities.
Implications
Financial services firms must shore up their capabilities
from two angles: improving their ability to anticipate and drive change, while
instilling the courage and ability to act quickly on those insights. This
requires more than just data; having the right governance, culture and
incentives will allow financial services firms to manage change, not simply
react to it.
Innovation beyond
Integration
Clients are now better informed and more sophisticated when
it comes to acquiring financial services. The emergence of these kinds of
clients can have a positive impact on financial services businesses.
Across an array of industries, CEOs are increasing their
investment in customer service by an average of 22% to better serve their
increasingly informed clients. However, in the financial services sector,
companies are raising customer service investment by only half as much. This
has to change.
Companies that move slowly on this trend put their firms at
risk of losing clients to innovating competitors that are improving client
collaborations and segmentation capabilities. Too often, financial services
firms tend to guess at what their clients value.
In a previous research analysis, it was found that 75% of
Financial Services executives were out of step with what their clients were
willing to pay a premium for. This disconnect must be eliminated. As they
develop a deeper understanding of their clients and associated risks, they can
begin to segment them, based on behavioral factors beyond just type and size.
Above all, financial services firms need to collaborate more
directly with their clients – not only by developing stronger relationships,
but also using them to co-create meaningful innovation.
Globalization
The world economy is now more globally integrated than ever
before. Many financial services firms need to make business changes in response
to globalization. Right now, many financial services firms are struggling to
globalize beyond brand and footprint. With more than 60% of wealth increases
coming from growth economies, financial services firms should be concerned
about their rigid, centralized organizational models being able to capture
future global opportunities.
To compete effectively for emerging pools of financial and
human capital, financial firms must pursue global integration, not just a
global presence. Operating models need to be designed around three key tenets:
global asset leverage, dynamic capability assembly and seamless collaboration.
Financial firms must be able to access and deploy their
assets – people, process, technology, governance and culture – across product
and geographical boundaries. They must simplify complexities and build modular
capabilities that can be implemented rapidly to respond to shifting growth
opportunities.
To drive faster and bolder innovation, financial firms need
to provide their employees with the means to collaborate efficiently across
organizational silos. Despite the industry’s bias toward self-defeating
do-it-yourself approach, market realities are making external collaboration
inevitable.
Financial markets CEOs clearly need to be aware of the
potential upside of business model innovation. Most of the so-called
innovations going on within the industry are being implemented in the wrong
places.
Historically, most of them have not focused on innovation
that helps them differentiate and grow, staying instead within their comfort
zone, tweaking their revenue models.
The current credit crisis is forcing a critical reflection –
an opportunity, if not a mandate, to reevaluate business and operating models.
Leading financial firms must use this time of historic change, uncertainty and
volatility to differentiate themselves by reinventing their business model.
M. Isi Eromosele is the President |
Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
Copyright Control © 2012 Oseme Group
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