Every industry will face an inflection point at which technology will introduce dramatic change. Some companies will not be ready for their respective revolution, and their legacy business models and the quaint advantages upon which they traded will no longer be sufficient.
Digitalization in Banks
The banking industry is a great example. Banks are facing this challenge more immediately than most for a few reasons:
- Banks spend 6-8% of revenue on technology, more than any other industry.
- There isn’t anything necessarily tangible about banking services that requires in-person presence;
- Banks now compete against non-banks for some of their traditional services (Mint, MortgageTree, Etc.) and these competitors are typically internet based;
- Banks now compete outside of their geographic area with the online presence of other banks.
- Banking inherently produces data that can be leveraged in interesting big data ways.
It’s bigger than a nice website
I mean more than simply having a strong online/mobile presence, though that is obviously important. Digitalization impacts the most essential issues for a company, namely, how a company makes money.
- How would you behave differently if your total addressable market were the entire United States and you had to attract and serve customers at that scale without dramatically increasing overhead?
- How would your messaging change if you closed all of your branches, or if your largest competitor never opened any?
- Does this change the competitive landscape to the point that some lines of the business should be shed in favor of specialization?
- How can technology lead to more or deeper interactions with customers?
Small and mid-sized banks have to be particularly sensitive to these new dynamics as their traditional advantage of having a “local” presence loses relevance. A regional bank that gets ahead of this change could create a significant advantage and grow rapidly. In fact, a regional bank will certainly do that, and we will all take notice.
More than just banking
The change happening today to the financial services industry is a harbinger of things to come in every other industry. The speed of change, decentralization of the industry, and increased competition from unexpected quarters are all common trends that will soon face the rest of the economy.
Just as banks now face competition from many unexpected quarters and their customers expect experiences that many are poorly equipped to provide, your industry too will be pressured by digitalization.
Some companies and even some industries will not evolve quickly enough to keep up. It might be time to hire a CTO, even if you’re in lawn care.