Gartner has identified six “business killers” that could topple financial services providers over the next two years, regardless of the state of the economy.
Financial firms and their CIOs need to be more innovative, customer-focused and forward looking rather than cost-obsessed and reactive, Gartner told delegates at its Cannes Symposium/ITxpo.
Focusing too much on technology innovation and not enough on exploiting the disruptive business models that shake up business will hold firms back. Peter Redshaw, research vice president at Gartner pointed to the example of the iPod: while the technology itself is not interesting, the link with iTunes and their effect on file sharing and copyright, for example, have been profound.
“Some banks have decided to stick to what they know and understand, and that’s a mistake as well. You’ve got to innovate in a world where there’s going to be slower growth, smaller profit margins and greater unpredictability,” said Redshaw.
Redshaw also charged financial firms with being in “wait and see” mode and anticipating the requirements of legislators, instead of being proactive. “If you don’t take risks in financial services, you do not make money,” said Redshaw.
The recession has also made many financial firms more inward-looking, concentrating on gaining internal efficiencies rather than thinking about how better to serve their customs. “In the past, companies could have got away with that, but I think the danger is now that there are more competitors and new entrants coming into the market,” said Redshaw.
In a similar vein, financial firms have become too cost-driven rather than revenue driven, despite the fact that investment in cost savings over the last year has failed to improve value. “The focus has been on cost because they have control over that, but there’s only so much juice you can squeeze out of a lemon,” said Redshaw, adding that IT spend on revenue is six times more effective than IT spend on cost.
Finally, financial firms have failed to change business processes to match technology changes. Increasingly, job roles are being realigned not with products or business units but across business silos, reflecting the way technology such as business process management has broken down business barriers. These roles, such as head of payments or process improvement or customer interactions are more strategic.
“Until now, many firms have been using twenty-first century technical solutions, but keeping nineteenth-century processes, which is like tying a USB stick to a pigeon,” said Redshaw.