Financial Service Industries in the 21st
Century
What really matters?
Ian McCall
Lead Partner – Strategy and Operations Consulting
2nd June 2011
“The future is
already here – it’s
just not evenly
distributed”
- William Gibson, The Economist,
4th December 2003
What I am going to attempt to do is join the dots between a few
things that are “already here”
A few consistent
conclusions
6 things that are already here…
• The incredible vanishing value
– How large companies have ‘misplaced’ their value
• The death of the industrial age
– A democratised competitive landscape
• The loaded gun
– Seeing the change to which we are already sentenced
• Need finding and the search for meaning
– The importance of design thinking
• The fable of Pharaoh and Hosni
– How customer behaviour really hasn’t changed
• The ascendancy of the Digital Natives
– Immigrate or die
1. The incredible vanishing value - the Big Shift…
• The Shift Index
– 2009 Deloitte study of the US Economy
– Analysis of 25 metrics to quantify the impact of changing technologies, business
practices and public policy
– 9 major industry perspectives developed
• Key Findings
– Since 1965, ROA of US Firms has dropped by 75%
– Labour productivity has improved although at more modest rates
– “Firm topple rate” has doubled
– US Competitive intensity has more than doubled in the last 40 years
• The big question – where has the value gone?
There has been a long term trend…
… value has migrated to the ends of the value chain.
2015 Strategic Vision.
© 2010 Deloitte Touche Tohmatsu
No one is immune…
Changes in Competitive Intensity and ROA (1965 – 2008)
Competitive Intensity1
Static
Decrease
ROA2
Increase
Decrease
Static
Aerospace and
Defence
Consumer
Products
Retail
Increase
Health Care
Financial services
Aviation
Energy
Insurance
Life Sciences
Process and Industrial
Prod.
1 Static Competitive Intensity is defined as a change of less than .01(+/-) in the HHI.
2 Static ROA is defined as a change of less than 5 percent
Automotive
Media
Technology
Telecom
Ignore this lesson at your peril… it can move very fast
2015 Strategic Vision.
© 2010 Deloitte Touche Tohmatsu
2. The death of the Industrial Age
Who moved my competitive advantage?
Scale learning and collaboration not Scale efficiencies create value
2015 Strategic Vision.
© 2010 Deloitte Touche Tohmatsu
The democratising effect of information…
Impact Index
3. The loaded gun…
… the change to which we are already sentenced.
Markets
Firms
}
Competitive intensity, ROA, Consumer Power,
Returns to Talent
}
Internet activity, KX Flows, Travel Volume,
Worker Passion, Social Media
}
Computing Power, Digital Storage, Bandwidth,
Internet Users, Wireless Subscriptions
Flow Index
People
Virtual Flows
Physical Flows
Foundation Index
Amplifiers
Technology
Performance
Infrastructure
Penetration
Public Policy
Institutional innovation will be the most powerful form of innovation
• We haven’t fully realised the potential for change that is already built into the
world
Component Index Trends (1993-2008)
Foundation
7.83
Flow
5.95
1.93
Impact
1993
1994
1995
Source: Deloitte Analysis
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
4. Need finding and the search for meaning…
…the rise of design thinking
Use
Usability
Meaning
4. The fable of Pharaoh and Hosni – what has changed?
Exodus 8:1
“Let my people go that they
may serve me”
Power of the crowd to complain
Consumer complaint behaviour – three questions?
Why do people
bother to complain
– because they love
me or because they
hate me?
It often easier to
complain about
you than to you –
why?
Isn’t it all just a cost
benefit analysis at the end
of the day ….
…and the benefit of complaining about you just went through the
roof
Damned if you don’t…
• Vodafail_com - Looks like Vodafail to me.htm
Damned of you do…
• “Excessive posts drives many to ‘un-Like’ a brand on Facebook
A new study released by ExactTarget and CoTweet found the top reason for ‘un-liking’ a brand on Facebook was too
many posts with 44 per cent of U.S consumers agreeing to ‘un-like’ a page if the company posted too frequently.
The study also found 38 per cent of consumers would ‘un-like’ a brand if the content was becoming repetitive or boring
over time and 26 per cent said they only ‘liked’ a company to take advantage of a one-time offer.” –
DynamicBusiness.com.au
6. Behold the ascendancy of the Digital Native..
“
Technology is only
technology for people who
were born before it was
invented.
”
Alan Kay
Meritocratic
Hyperlinks subvert hierarchy!
19
Famous
2000 followers on twitter!!
20
Fast
Instant coffee is too slow!
21
Empowered
We believe us, not you!
Always On
What work/life balance?
Large
Closed
Top Down
Business Plans
Control
Privacy
Monologue
You
Fast
Open
Bottom Up
Iterate
No Control
Trust
Dialogue
Us
Immigrate
Learn to speak a second language!
So what does all of this mean?
• The incredible vanishing value
A more complex, fragmented
– How large companies have ‘misplaced’ their value and diverse set of value chains
delivering services to clients.
• The death of the industrial age
– A democratised competitive landscape
• The loaded gun
Talent extracting even greater
rewards than ever.
– Seeing the change to which we are already sentenced
• Need finding and the search for meaning
– The importance of design thinking
• The fable of Pharaoh and Hosni
– How customer behaviour really hasn’t changed
• The ascendancy of the Digital Natives
– Immigrate or die
An environment in which your
failures will be exposed more
quickly and to greater effect in
multiple media you can only
influence
A new set of consumer
attitudes that are shaped by an
empowering digital landscape.