by Grant Ferguson, Lee Olson

How financial firms can thrive despite disruption

When mobile trading app Robinhood launched six years ago, few would have predicted that the startup would upend how stocks are bought and sold. But by offering commission-free stock trading, Robinhood was able to gain market share at a blistering pace, especially among millennial consumers.  Traditional brokerages would eventually give in and adopt the fee-free model, but not before Robinhood topped 10 million accounts to become a top 5 brokerage by number of accounts.

Financial services firms are bracing for disruption like this on all fronts. Apple, Amazon, Facebook and Google are creating payment networks that threaten to blur the line between banks, credit cards and retailers. The growth in digitally native consumers continues to push the expectations for convenience. Visa’s $5.3 billion acquisition of Plaid shows how far financial companies will go to get a tech-powered advantage.

How can financial services companies compete in this environment? The answer lies in building teams that can respond to the changing marketplace and read the minds of consumers.

If you can’t lead, follow fast

With the exception of the largest companies and a handful of startups, most firms lack the large war chests necessary to create speculative new products from scratch. But if they think strategically, financial services companies can use this to their advantage.
As the Robinhood example shows, companies that wait too long to respond to a disruptive idea can pay dearly. But firms that scan the market for new ideas and adopt them quickly can become “fast followers” that ride the disruptive wave.

The key here is to build processes that enable adaptation — both in the way teams work and products are created. But doing this requires new kinds of organizational leadership, one that prioritizes experimentation and customer feedback.

Build startup teams without the startup

Over the past 25 years, Point B has worked with financial services firms to create strategies to handle disruption. Our playbook is to implement processes and solutions that allow people in financial services to thrive in a fast-paced, ever-changing landscape.

When it comes to organizing for a changing landscape, a one-size-fits-all approach to teams won’t work. Instead, companies should build teams around their current objectives and the products they hope to create.

Many organizations mistakenly believe that they can succeed by applying the model that has worked for mature products to new initiatives. But our experience tells us that developing a new offering is vastly different than servicing a current one, and the team’s structure should reflect this difference.

For starters, a new product team is likely to be much smaller than a mature one. And its members should be comfortable wearing many hats. They should adapt quickly to new goals and be at ease with the ambiguity that comes with creating something from nothing. Leaders should allow these new product teams to live outside of internal approval processes that threaten quick progress. This is especially important in areas where the company wants to be a leader in their category.

These startup-style teams may look different from the more mature parts of the business. But they shouldn’t be siloed. They still need to be able to engage with stakeholders in other departments to communicate the value that the new product is bringing to the customers. While much of the product development will happen through an independent process, teams can bring in stakeholders from other parts of the business through program reviews, product demonstrations and roadshows.

Create with a consumer focus

Mature product teams are often swimming in years of customer feedback that informs both the current offering and its future evolution. Creating a new product, on the other hand, is as much an art as a science. Teams have no choice but to assume what the customer will want and build the product prior to testing it for feedback.

For that reason, new product teams need to find ways to bring the voice of the consumer into their everyday operations. By prioritizing speed and consumer metrics, teams can supercharge the pace at which they invent, test and iterate new ideas.

Financial services firms have immense amounts of proprietary data, which they can use to spot customers’ pain points and spur the development of products and features. Companies should also consider using other sources of customer data like social media and reviews, which can be harnessed for actionable feedback with artificial intelligence and natural language processing.

When analyzing reviews and other sources of customer feedback, product teams should look deeper than their comparative star rating or score. The comments customers provide should likewise be turned into actionable data. Point B recently partnered with several organizations to gather voice of the customer feedback by leveraging AI driven-analytics to find out what drives satisfaction and dissatisfaction — not only for their own products, but for competitors as well. This holistic view can drive product innovation and enhance customer touchpoints, helping firms to create value.

Focus on your metrics

Once teams have identified new ways to work and have removed unnecessary impediments, it’s critical that they identify the metrics that will drive success. These metrics are often aimed at measuring and improving customers’ engagement with the platform. Common options for technology products include active daily and monthly users, as well as stickiness, which is the average active daily users divided by the average      monthly active users. Other important measures may be screen flow, or the number of users that complete a path or process as designed, and conversion rates that measure the number of users that complete a desired behavior.

The most critical metrics must be clearly communicated and measured with clear targets for improvement. As product teams add new work to their backlogs and roadmap, it should be clear how that work will ultimately advance the core metrics.

Financial services leaders should embrace the disruption that is occurring in their industry and use it as a catalyst to build a more adaptive approach to product development and serving customers. By selecting the right team size and structure and integrating data into their processes, teams will become nimbler in their decision making, ultimately allowing them the flexibility required to create great customer experiences through their products. 

In the end, it isn’t just the first movers that succeed. Financial services firms that are nimble enough to keep up with the expectations of customers will also thrive in a disrupted landscape.