Ep. 07 – The Incumbent Predicament. Long Term Goals vs. Short Term Needs.

Greetings everybody!

In today’s episode, I will address a situation that faces many industry segments: how to deliver business results and compete aggressively against new “digital-born” players.

This is a follow-up to the previous episode, where we talked about how to start the Digital Transformation Journey.

I will refer to the financial industry segment as many professionals agree they have a complex scenario between incumbents and new players. (FinTechs)

I had a conversation last week with a friend (and newsletter follower) during which he asked the following question: 

As Digital Transformation is a journey, sometimes there is a conflict between the perfect solution, reached after several steps, and a quick fix, a “lukewarm” solution, to address a critical situation. Any thoughts?

How the Incumbent Deals with Short-term Needs and Long-Term Goals

Yes, a couple of thoughts.

In today’s world, almost every incumbent player in a vertical industry segment faces the competition of a new digital-born player.

We may think of Amazon vs. Walmart or Netflix vs. Cable Tv. Still, others are not that obvious, such as traditional Banking, Insurance, and Finance organizations vs. new Fintech players with a value proposition based on “Open Banking.”

May you please share some thoughts on what is happening to an incumbent in the Banking, Insurance, and Finance Industry Segment?

Open Banking icon

Sure, let me start by making a quick comment on Open Banking.

Open Banking is a framework wherein banks enable third parties to access customers’ financial data so they can provide new ready-to-use (“Prêt-à-porter”) financial products and services to customers.

It is a value proposition with deep roots in transparency and collaboration.

There is a regulation (a mandate) in EMEA asking all financial institutions to adopt Open Banking Standards, and the US is a step behind.

What is essential to understand is that as in the Financial Industry Segment, in other industry segments, there is a critical pressure from the customer to provide better solutions and services that are personalized, with data transparency, collaboration, and with the solid protection of personal information and privacy.

How is this affecting the incumbent?

While the incumbent has robust solutions designed for supporting big audiences, many times developed in-house or heavily customized, the new digital-born player (FinTech’s in this case) had a strong solution portfolio supported by “composable” applications (solutions simple to install e integrate with others via standardized connecting point, APIs), to attract premium customers.

What is a Premium Customer?

Among other criteria, a premium customer is a high-margin customer interested in taking control of their investment strategies in real-time via personalized services with high data transparency.

What are the incumbents doing to compete in this new business reality?

In another episode, I commented that there are two essential questions to understand how quickly you need to start and complete your Digital Transformation journey. They were:

1.     Have the customer expectations in doing business with you changed lately?

2.     Are your competitors willing to make the investments to respond to these new customer expectations?

Many Banking, Insurance, and Finance organizations agreed they need to act fast to address the new market dynamics.

Depending on their current situation, they take several of the following initiatives in alphabetical order.

Each of these initiatives is interesting enough to be studied in an entire episode.

One final comment, it seems a little disproportionate that you show a more significant number of internal initiatives compared to an external one. Any reason for that?

Yes, Digital Transformation is about becoming a better self: identifying and exploiting your unique value to customers.

Typically, the number of activities focused on fixing the internal will result in a significant number than those looking for synergies with other players, which is also a must to survive.

-> Working together -> Collaboration -> Coopetition.

But this is a whole new story. Maybe we can talk about that in a future episode.

Good enough?

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Well, I think this is a good start. 

These initiatives are typical but not exclusive to Banking, Insurance, and Finance companies.

What are your thoughts on the subjects raised in this edition of the Digital Acceleration Newsletter?

Share them in the comments below, and if you have ideas about other topics you’d like to see covered in this newsletter, feel free to add those suggestions.

Share them in the comments below, and if you have ideas about other topics you’d like to see covered in this newsletter, feel free to add those suggestions.

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