When an animal is injured it retreats to safe pastures. There, away from danger it quietly licks its wounds and tries to recover before gingerly venturing back out into the world. But the urge to be cautious is now ever stronger and the pattern of behaviour is changed forever; opening up the way for bolder, more daring creatures to take its place in the old hunting grounds.
Sound familiar? It should because that is the scenario being played out in the financial sector at the moment. Banking institutions may outwardly profess to be reborn but the scars from the recession run deep and caution runs through every vein. Whilst the banks have retreated, new players have entered the marketplace and un-bloodied by the scars of the recession they are eager to do business. Unshackled by the legacy of the past these new players are not afraid to try something new, because for them everything is new so they are looking to innovate, to offer new and differentiated products, services and experiences and to make life easier for customers.
Admittedly these new players may go slightly over the top in their eagerness to capture the market. We’ve recently seen a retrenchment in some payday loan practices but as FCA Chief Executive Martin Wheatley recently said…
“The relative ease of going online, simply choosing the amount you want to borrow on a website refreshingly free of jargon, and to get an immediate decision, for many people, has its merits.”
With payday lenders, peer-to-peer lending, crowdfunding and other quasi-finance models entering the market in a big way, where does this leave the banks and traditional finance houses? It’s not as though they are in ‘head in the sand’ mode. They recognise the threat from new competitors but the perceived barriers to change are so high that they can seem insurmountable. As a strategic advisor on innovation I see all too often the way in which the traditional finance sector is ‘hung up’ on regulation with the FCA being perceived as a major barrier to innovation.
- We’ve committed to opening our doors to those (regulated and not) who come with new ideas about how to deliver financial services.
- We have promised to set up an innovation hub, so those who have fresh ideas can access our expertise to better understand the pitfalls and opportunities.
- Leveling the playing field by giving all firms eager to innovate access to us.
- True innovation also has a vital role to play.
- Our major banks need to be the innovators just as much as small start-ups.
All of these comments come from a recent speech by Martin Wheatley at the Mansion House. Do they sound like comments from a regulator who is anti-innovation? It is true that the FCA is still looking for customer care to come first but at the same time it recognises that if customers and are going to re-engage in financial services then something has to change.
So if the FCA isn’t the barrier to innovation, what is? How do banks transform themselves so that they not only compete with new and future players in the marketplace but also provide services and levels of service, which meet and even exceed customer expectations? Well stage one could be to really start to understand their customers. When around 60% of major UK company directors admit that their leadership teams fail to understand their customers then something is badly wrong and with Generation Z on its way into the workplace and marketplace, unless there is a re-designed approach to gathering insight then that lack of understanding is only going to grow.
I’ve set out the Generation Z challenge in another white paper, but in brief, Gen Z has grown up with fast internet. Both as customers and employees they are looking for co-creation, for experiences and for a products and services which connect with them as individuals. If organisations are going to meet the Gen Z challenge then they need to get much better at designing experiences rather than just new products. This not only aligns to what Gen Z will want it is also much easier to do without compromising the regulations/compliance.
But if you really want to understand your customers then simply doing surveys and gathering data is not enough. To innovate, to move the offering from the ‘what’ to the ‘how’ requires an understanding of ‘why’ and that means that organisations need to start involving the customers more. Only then will they be able to co-create, to develop products, which customers genuinely want. And with this in mind we’ll leave the final word to Martin Wheatley…
“This is the balance that we should be aiming for – change, some disruption, new models of distribution but all of it with the interests of the consumer at its heart.”
If you want to find out more about driving innovation-led growth perhaps it’s time you got in touch? Feel free to email Cris at cris@thefutureshapers.com or browse our website for more information on how Cris and The Future Shapers team help some of the world’s smartest companies succeed through innovation.