Financial services firms more ‘digitally sustainable’ than tech firms
TECHNOLOGY firms are pretty bad at keeping up with technology, a study by recruitment consulting firm Korn Ferry found.
According to reporting by South China Morning Post, technology firms ranked poorly on the firm’s “digital sustainability index”, which was instead populated largely by financial services companies. The report found that out of 362 companies surveyed across 14 countries in five industries, technology companies were far less likely than financial firms to have to retain their consumer base, and so had less to lose.
Michael Franzino, the president of Korn Ferry’s global financial services practice, said that financial firms are simply much more determined to serve the needs of their consumers, and have spent big bucks in keeping their business out of the hands of Silicon Valley upstarts. According to financial consulting firm PricewaterhouseCoopers, 77 percent of traditional financial institutions have boosted internal pressure to innovate, while 56 percent have included disruption as a pillar in their strategy.
Whether it’s through acquiring small startups or opening their own innovation labs, financial firms are bringing on-board and integrating the latest technologies into their customer service outfits, or improving their compliance and data security. It may have been slow-going when financial technology, or “fintech”, first entered the mainstream, but financial services firms are now among the first to adopt innovative technology such as blockchain, big data, machine learning and P2P platforms.
“Financial companies have, for some time, had the compelling commercial drive to shift culture, processes and practices – seeking to protect customer data and market share while meeting new customer and talent demands,” said Franzino to South China Morning Post.
A key factor in this acceleration lies in the threat posed by the startups such as TransferWise and Square, which are “unbundling” many service packages that traditionally make up the bulk to financial companies’ revenues. Financial firms interested in defending their territory began to fight back by embracing tools to improve customer experiences.
The result is a handful of “hybrid” firms which are marrying the best of traditional, in-person services and online platforms. These hybrids are creating increasingly personalized, convenient and intuitive customer experiences, but are also setting an example for what we could expect in the future from other industries struggling to cope with the digital future.
Furthermore, financial companies have an edge over technology firms: reputation. Unlike smaller firms, which will naturally see their business opportunities hampered with once they’ve arrived at a certain saturation point, many financial services companies have reputations and a credibility that necessarily makes them appear more trustworthy. The embrace of new security tech could further increase the perception of their trustworthiness for consumers.
Werner Penk, the president of Korn Ferry’s global technology division, said the tech industry’s own dinosaur-like legacies have had an adverse impact on companies’ ability to adapt to the changing tech landscape. He told SCMP that the tech industry wasn’t all Ubers and Googles – older firms such as IBM and large corporations are hampered by “historical baggage”, not unlike the legacy systems the financial industry has.
“The technology sector is not only made up of the high-growth ‘unicorns’ and disrupters of the world, but also decades-old legacy tech giants in need of structural, cultural and work process reform,” said Penk.
“The more traditional firms – once pioneers of the industry – now need to overhaul their strategies and work processes to ensure future survival.”
And unlike financial services firms, technology firms have been under significantly less pressure to innovate and accelerate out of their current positions.
In third and fourth places on Korn Ferry’s study are firms in the life sciences and healthcare sector, quickly followed on by those in the industrial sector. In last place is consumer goods suppliers and retailers, all of whom suffer from the unresolved tension between digital and physical businesses. They are “playing catch up rather than anticipating what consumers will want next,” the report said.