2015 Strategic Vision. Technology Stream

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.