To stay competitive in their existing core businesses, financial service incumbents will need to invest in digital transformation much more deeply than they have previously in order to realize dramatic cost reductions. However, retooling existing businesses for digital efficiency will not in itself create shareholder value. Competitive pressure will mean that most cost savings are ultimately passed on to customers. Digitizing incumbents’ existing businesses, if done well, will preserve shareholder value, but not increase it.
Incumbents looking to grow shareholder value will need to build and sustain new competitive advantages. In the report, we discuss how incumbents can do so by organizing their overall transformation journey using three archetypes inspired by the tech industry: demand aggregator, platform provider, and component supplier. Each archetype describes a differentiated role a firm (or business unit) can play in a modular financial services ecosystem, as well as the capabilities it needs to focus on which will provide it with sustainable competitive advantages. In addition, the report explores the broader organizational implications of each archetype, and management actions that can guide an incumbent’s journey to building competitive advantages and increased shareholder value.
Retooling incumbents’ businesses for digital efficiency will not in itself create shareholder valueJohn Lester, Partner, Oliver Wyman
A conversation with the authors of The State of the Financial Services Industry 2017
To grow value, financial services incumbents will need to select an archetype (a differentiated position in emerging supply ecosystems), and then align capabilities, investments, and the entire operating model with that choiceRick Chavez, Partner, Oliver Wyman
