Perfect storm of change demands innovative and agile response

The financial services industry is facing a perfect storm of change. The combination of advanced digital technologies, regulatory reform, mounting consumer expectation and rising competition from both incumbents and disruptors is accelerating change across the financial services landscape.

To succeed, both established and challenger brands need to identify risks and opportunities and be able to respond in a nimble and agile fashion.

According to McKinsey & Co, in a post-pandemic world; "Businesses that once mapped digital strategy in one- to three-year phases must now scale their initiatives in a matter of days or weeks."

Andrew Todd, chief technology officer of financial software firm Iress, expects that speed and agility will be the secret to sustained success.

Todd notes that history is composed of 'black swan' events - events that were never seen before and never predicted to happen. Each time such an event arises, organisations race to respond, they innovate with new products and practices designed to either take advantage of new opportunities unleashed by the black swan event, or protect themselves in the event something similar happens again in the future.

The best response, he says, is to learn from the event and build resilience into the DNA of the business. An organisation which has a culture of agility, which leads with an innovation-mindset and encourages self-testing is best placed for sustained success regardless of what the market or the environment throws at it.

From leaders this demands; "Critical thinking in relation to strategy, competition, courage and a willingness to be different. To not rest on past successes. To not be busy. It takes strong, bold leadership. It requires more than words - it requires investment in time and money and not following the status-quo," says Todd.

In terms of planning horizons for strategy he says that five years is too long and instead recommends that organisations focus on two horizons – a middle ground around six months ahead and then also cast forward two or three years to consider whether the trajectory makes sense.

To be fleet of foot in terms of responding to market needs and expectations demands both business and technology agility. Lengthy transformation projects that span years are unlikely to end well, Todd warns. Instead business needs a more iterative approach to transformation where goals are set, met, reviewed and adapted.

During the COVID crisis those organisations which were unable or unwilling to flex, and instead focused on stability, rigidity and command-and-control management methods either struggled to respond, or had to divert focus away from their customers to manage their own internal business operations, says Todd.

That, he says, is no longer sustainable as companies need to hone their agility to be prepared for accelerating change.

"Around a decade ago, Netflix invented a tool called the Chaos Monkey, the purpose of which was to intentionally try to break its technology environment - trying to simulate the worst that could happen," he says. That "what-if" approach allowed the business to pre-empt both worst case scenarios and likely changes in consumer behaviour and expectations and help catalyse meaningful innovation.

Leading financial services firms across Australia are considering these issues right now as they respond to regulatory change on the back of the Royal Commission and plan for potentially seismic changes through initiatives like Open Banking.

At the heart of these reforms are a growing expectation by consumers that banking and finance should be simple, easy and delivered on their terms. Todd believes this is where new technologies that support digital customer engagement such as

artificial intelligence and machine learning have the potential to deliver a high-quality customer experience at scale.

Todd stresses that; "Consumerisation exists and is driving changes in expectations of technology. It is essential to keep enhancing the user and client experience to make it more intuitive and frictionless – so they feel they are just using a nice piece of technology, whether they're playing a game on their phone or tracking their financial position."

In this new financial services world firms need to stay innovative, be agile and keep the customer front and centre.

Do you have what it takes to create an innovative, agile culture?