"When will Google launch a bank and what will it look like?" is a question I frequently hear from our banking clients. Google’s activities in digital wallets and payments, as well as its reputation as one of the most disruptive firms in the market, have obviously left many banking executives worried. Unfortunately, they’re asking the wrong question.
I’ll leave aside the issue of whether Google or perhaps Apple or Amazon should be the focus of this increased attention. Each of these players has its unique strengths and growth plans, and some of these correlate more or less closely with financial services. That’s not what makes the question so wrong. As I write in my new report, it’s the assumptions that are faulty here; assumptions that reveal precisely the type of legacy mindset that makes many retail banks so vulnerable to disruption.
Many retail financial firms still haven’t grasped the full potential of digital disruption. They think that new competitors will use their digital might to beat them at their own game, be that through more efficient processes, brilliant algorithms or better user experience. While these three things do matter, what matters most is the purpose which they serve. As I have written elsewhere, digital disruptors like Google are disruptive because they don’t play by the rules. Instead, they use digital technologies to deliver better or entirely new ways of meeting customer needs, often bypassing regulation and re-defining a given industry in the process.
Following the adage "a picture is worth a thousand words" we produced this infographic to support my keynote speech at the Technology Management Forum in Orlando (and the CMO CIO CX breakfast in Sydney). Feel free to tweet and share the unedited graphic. (Click image to download a higher res PDF; also free to share unedited).
It’s a very enlightening way of seeing digital disruption in action. When my wife and I bought our current house over a decade ago, we found it on a property website, but that’s where the digital engagement ended. We physically went to the estate agent to book a viewing. We were given a printed brochure about the house. Our mortgage application was done in person. We took photos of the house, printed them at the local Boots and stuck them in an album. When we moved we had to call our friends and tell them we’d moved.
It's clear that digital leadership is needed to achieve the transformation to a digital business. But does a company need a single digital leader, or do all executives need to become digital leaders?
Last month I published a report on digital leadership that examined the DNA of early digital executives. From this research, we learned that all digital leaders must be able to deliver on digital competencies across three dimensions: strategic, transformational, and operational. The degree to which digital leaders need to emphasize each depends upon the organization's digital maturity (see figure).
What is clear from our research into digital business is that your business needs both the CIO and the CMO to join forces to enable the transformation to a digital business. In conjunction with Forrester's Forum For Technology Management Leaders, we'll be revealing a new piece of research on digital business in 2014. This research digs into the data to reveal that state of digital business across a range of industries — identifying who is currently leading digital initiatives. As well as delivering a keynote at the Forum based on "Unleash Your Digital Business," I'll also be presenting a track session that gets deeper into the question of digital leadership to help you answer the question of who should really lead digital business transformation.
Calculating and avoiding risk is at the core of insurance. So what are we to make of the fact that insurance executives top our list of professionals who think that the digital disruption of their industry is imminent?[i] We should take it seriously, seeing it as admirable clairvoyance rather than blind fear. Unlike many other industries, at least insurers know the risks they’re facing. But will they act upon this vision? They might have no other choice.
Digital disruption has arrived in insurance. In our new report on trends in European digital insurance, we show that years of slow growth, low consumer trust, and heavy regulation have weakened incumbents. Meanwhile, customer expectations have been rising, fuelling the appetites of startups and companies not traditionally associated with insurance, such as digital platforms, car manufacturers, utility companies, telcos, and sensor and wearable manufacturers, whose utility and access to consumer data has placed them dangerously close to the core of insurance.
I’m writing this on the train. On my iPad. Connected to the internet (albeit intermittently, thanks to the occasional tunnel) while trundling through the British countryside. I booked my ticket online with Expedia. I used the Trainline app to check the most up to date timetable info just before I left the office. Digital is enhancing my journey. Making it easier.
Every single one of my fellow travelers, with the exception of the sleeping Hipster opposite me, has immersed themselves in their own digital worlds. They tap the screens of smartphones. They watch movies on their tablets. They type meeting notes on their laptops.
The world has gone digital.
But that’s not a surprise, right? Digital is a boardroom topic these days. C-level executives who barely had the faintest notion of what “digital” was a few years ago are waking up the threat that digital disruption poses to their business. Spurred on by apocryphal tales of iconic brands who flushed their futures down the digital toilet, they are facing the reality that their businesses need to take digital seriously.
But here’s the kicker. While senior executives in many firms may now understand the importance of digital for their firm’s survival, few know what to do about it.
At Forrester, we recently ran one of our largest ever global executive surveys in partnership with Russell Reynolds. We asked firms about their digital strategies. Here’s what we found:
Seventy three percent of firms that think they have a digital strategy. If this sounds high, that’s because many of these firms are mistaking the fact that they have a website, or a mobile app, as having a digital strategy.
Now that the media hype of 2013 has settled . . . somewhat, 2014 will be a pivotal year in which we see small, tangible steps towards reality. Below are a few trends and commentary on what we’re seeing in the market:
1. Ecosystem components begin to marry. Investments, acquisitions, partnerships, and new developments will focus around unifying printers, software, and services for seamless 3D printing experiences. For example, Adobe recently announced direct integration with MakerBot and Shapeways to close the gap between 3D modeling tools and what printers need to physically produce objects. Other major software vendors like Autodesk will play an evangelist role in bringing ecosystem players together to enable interoperability across proprietary platforms.
2. New startups stretch our imaginations of business model disruption. 3D printing is a catalyst for rethinking inefficient analog processes. Startup SOLS aims to disrupt the entire orthotics value chain with an end-to-end digital service for custom shoe insoles. Customers scan a 3D model of their feet, input data on weight, lifestyle, and activity patterns, and send to print.
Globally, executives acknowledge the disruptive influence that digital technologies have on their businesses. In fact, in a recent Forrester survey fielded in conjunction with Russell Reynolds, 41% of business and IT executives believed that their industry had already been moderately or massively disrupted and over half expected to see more disruption over the next 12 months.
You don’t have to look far to find evidence to back this belief up. In fact, you don’t even have to look globally — digital disruption is happening right in your back yard. Just take the UK as an example:
The UK government is transforming its public services to deliver “digital services so good that people prefer to use them.”
Retailer John Lewis is offering a £50,000 cash investment to the winner of its tech incubator “JLab.”
British Airways is driving for operational excellence in baggage handling by RFID tagging luggage.
Movie streaming service Blinkbox, owned by retailer Tesco, is expanding into music.
PruHealth is partnering with wearable technology firm Fitbug to offer rewards for active health insurance customers.
The fact that the world is becoming digital is no longer really newsworthy. It’s a boardroom topic for most firms. As it should be. You only have to open your eyes to see the impact that digital touchpoints have on business. As I sit here writing this blog, I am in the departure lounge of Brussels Airport en route to Stockholm for the last leg of a presentation roadshow. I’m surrounded by travelers on smartphones, tablets, and a few laptops. Almost everyone (with the exception of a sole individual filling in a crossword) is using a digital device.
Firms are beginning to acknowledge this digital-first culture. We’ve been presenting to audiences in cities all around Europe, talking about Transforming Into A Digital Business In The Face Of Disruption. The overwhelming feedback from these presentations has been that firms are beginning to realize that digital is critical to their future success (and in some cases, their very survival). This spans B2C and B2B. But in many cases, the executives we speak to say their firms don’t have a digital strategy, and even if they do, they doubt their capability to deliver it.
It’s clear — companies need help to make sense of what digital means to them.
It’s only crumbling, archaic companies that have to worry about digital disruption, right? Companies that cling to out-moded ways of operating, where out-of-touch, besuited executives languish in mahogany-paneled boardrooms pondering strategy over cigars and brandy.
Oh no. Digital disruption impacts every business and every company.
No matter how “born digital” you may think your firm is, there’s always room to get leaner, meaner and closer to your customers. Take this as an example.
You might think that Satya Nadella, recently appointed Chief Exec of software powerhouse Microsoft, has nothing to worry about. While Microsoft wasn’t strictly “born digital”, it isn’t far off. It boasts an impressive array of digital services in its suite of products – Hotmail, Xbox Live and MSN to name just a few. But Nadella is only too aware that what’s made Microsoft successful in the past will not continue to differentiate it in this uncertain future.
In a recent New York Times interview Nadella was asked about how he wanted to change the culture of Microsoft. He succinctly sums up exactly why every firm must become a digital business: