"A business that doesn't change," Frank Perdue once said, "is a business that is going to die." Wise words from a corporate visionary who during his lifetime transformed a small-time chicken farm into a multibillion-dollar-a-year business.
But what does the success of one chicken farm have to do with the financial services industry? It was Perdue's swift adoption and mastery of the midstream business pivot that can serve as a guidepost to any business or industry challenged by disruption.
While there are a host of definitions out there, the pivot is essentially defined as an organization's adaptation of its business model to account for changing consumer demands, technological innovations, financial issues, and the list of catalysts goes on and on.
Few industries are feeling more pressure to keep up with marketplace shifts than the financial services sector. Historically a laggard when it comes to adopting new technology and customer-centric transformations, many entities in this vertical are just now entering the digital phase.
While agile fintech start-ups are satisfying consumer demands for transparency, 24/7 connectivity, and a delightful user experience, other members of the financial institution community are falling behind in their digital transformation and customer service efforts. The banking arena in particular is looking over its shoulder; a McKinsey study predicted that "legacy financial institutions will see profits decline 20 to 60 percent by 2025" if they fail to innovate.
Fortunately for leaders in financial services -- and at the helms of other industries facing disruption at every turn -- there are some best practices for thoughtfully pivoting your business model in a way that takes timing, technology, and the all-mighty consumer into account.
How to know if it's time to pivot
Whether it's introducing a new product or drastically changing your entire customer experience, pivoting your business is going to be challenging, and will require strategic planning to successfully bridge to the next phase. Clear signs that modifications might be overdue include:
- Shifting customer demands: Your target market's needs are changing, and your company is no longer keeping up with client appeals.
- Stagnant performance: Your business growth is stunted, and prospects for future advancement are dismal without a major shift.
- Too many fire drills: You're spending too much time solving crises and removing obstacles that threaten your company vision.
- Client and talent churn: You've lost the loyalty of your customers and the faith of your employees, and both are headed out the door.
- Behind the eight ball: You're constantly in reactionary mode when it comes to adopting new technology and customer feedback.
The good news? Success stories of financial services organizations successfully switching midstream are out there.
Consider PayPal, which pivoted at least five times before solidifying its roadmap to success. Originally marketing themselves as Confinity, a product built to beam IOUs between Palm Pilots, the company later merged with a financial services provider X.com, became the preferred method of payment for eBay sellers, and launched itself into payment processing history, churning out $13 billion in revenue in 2017 alone.
If all other tips fall on deaf ears, take this one to heart from PayPal CEO Dan Schulman: Listen to your customers. During strategy sessions, Schulman was asked if PayPal was a tech or financial services company. "It might have been easy to choose one or the other," Schulman said, "but instead I said I wanted to become a customer-champion company -- a company that focuses on various segments of the market and solves real problems for people."
Key considerations for the pivoting process
Despite the numerous challenges facing the financial services arena right now, industry experts cite the most critical concern as the lack of connection many traditional players have with their customer base. In fact, according to a study by Deloitte, only 37 percent of all US banks have a defined customer experience program.
Once you've decided your business needs to pivot, listening to feedback from your clients is key. Other important factors to take into consideration as you amend your business model include:
- Understand what your clients really want. For example, according to CGI's report "Understanding Financial Consumers in the Digital Era," bank consumers want to be rewarded for their business, provided with wealth-management advice, and offered the technology to check their transactions at any time and any place.
- Create a meaningful customer experience. By fully embracing digital transformation, you'll offer technology that caters to individual client preferences and provides engaging content at every turn.
- Watch and learn from the competition. Traditional financial institutions realistically may not be as agile as fintech startups, but can still adopt their core values of transparency, timeliness, and convenience.
- Educate customers before rolling out changes. Giving clients plenty of time to understand new processes, products, and technologies, and explaining how they add value, builds trust and reduces churn. Don't forget to put a feedback loop in place.
- Embracing Change is a Show of Strength Concerned about how a midstream business pivot is going to look to your clients, employees, and investors? Don't be.
Today's rapidly changing marketplace demands agile changes to business models for companies to create opportunities, expand revenue, and stay relevant. And let's face it, the alternative -- stagnant growth and a dated brand --certainly isn't going to wow your stakeholders.
"Pivoting does not mean that your vision is dead, and that you are a complete failure," said Illai Jacob Geseit of Amazon Web services. "It doesn't mean you are not a good CEO or entrepreneur. Just like in science, it means that your experiments brought you to a new discovery, that will lead you to fulfill your vision."