How to flip your thinking on transformational change
Around the world, companies of all sizes are experimenting with new business models and products. It’s more than innovation – it is disrupting entire industries and the pace of change is continuing to accelerate.
GE’s latest Global Innovation Barometer found a significant majority say they want to embrace ‘innovation that disrupts markets’ – even if it deals a blow to their own established business models.
So is this new age of disruption a threat, an opportunity or both? And how can your business lead the change, rather than fall victim to it? We asked Ben Perham, Head of Corporate Development & Strategy for Macquarie’s Banking and Financial Services Group, to share his insights.
Technology: friend or foe?
“Marc Andressen, one of the co-founders of Netscape, told us in 2011 that ‘software is eating the world’,” says Perham.
“We’ve seen technology take over so many different business models with a new approach. And because it’s software, not hardware, with the ubiquity of wireless bandwidth, cloud storage and consumerised devices, we can create a much better business proposition.”
However, it would be naïve to think that this is all opportunity and no threat.
“It’s important to see it as both,” Perham emphasises. “You need to engage both parts of your brain or you’ll miss the importance of taking action. Threat triggers your ‘flight, fright, freeze’ response, while opportunity stimulates your ‘reward state’ and helps you create solutions.”
So how do you do this? Here are three ways to find your disruptive niche.
1. Study other markets
It’s essential to look at what’s already happening in other industries. “Draw analogies between what you see in your industry and what has happened elsewhere,” says Perham.
“Compare Blockbuster with Netflix or Borders with Amazon. In every case they saw change coming, but they didn't think it would be that significant and so they didn’t move quickly to adapt.”
He says it’s a very human response for incumbents to underestimate the impact of change. “We see people in financial services say, ‘alternative lenders are interesting, but it’s tiny volume, there’s no market share.’ I think if you wait five or ten years, it will be too late – the change will be significant and it will have overtaken you.”
Scenario planning is one useful tool for this. Force yourself to imagine some different scenarios for the future where your market is being disrupted. Even if you don’t believe those scenarios will eventuate, imagine they do and ask yourself how you would respond. Then look at those responses and consider whether you should be acting now.
2. Get closer to new ideas
Globally, 77 per cent of executives say they are looking to startups and entrepreneurs as partners – a marked increase on 38 per cent the year before.
Perham says getting close to startups is a great way to challenge the incumbent mind-set. Consider building relationships with venture capital firms, or shared workspace hubs such Stone & Chalk in the FinTech space.
3. Be design-centric and agile
The traditional “waterfall” approach to product development no longer works in a disrupted world. Perham says agile delivery methods mean doing the opposite.
“Get a minimum viable product in front of people fast, and watch how they use it. Understand the feedback, and adapt,” he explains. Human-centred design is a constant process of ideation, prototyping, testing and learning – all the time focusing on how customers will use it.
The FinTech challenge
Perham believes financial services is a sector ripe for technological disruption and the only reason it hasn’t happened sooner is regulatory barriers.
“It’s really all about information and data, not physical goods, and that lends itself to software disintermediation,” he explains.
“The global financial crisis was also very damaging to many financial services brands around the world. Although this wasn’t as extensive in Australia, it’s certainly a catalyst for change.”
Perham is also seeing a critical mass of FinTech alternatives gaining ground – from Paypal to Lending Club and OnDeck. He says Macquarie is positioning for this brave new financial world and is currently in the process of delivering a Core Banking platform.
“It’s an open platform. In the same way Google and Apple have had success with their open platforms (Android and iOS), we can do the same in the banking space. We’ll create the infrastructure so others can create the customer experiences and applications on our platform, which is unique.”
Looking beyond its own infrastructure, Macquarie is also investing in potential startup competitors via the FinTech Collective.
“It’s a venture capital firm based in New York, with a global mandate,” he explains. “The equity investment gives us a direct benefit, but indirectly we’re also getting to meet and understand these new companies, and potentially partner with them.”
He describes this as a ‘cultural transformation’ that allows Macquarie to operate in a “modern, agile and tech-based” way.
“You’ve got to take a long-term mindset for your business, and that means you need to think about the long-term impact of these disruptive forces.”
Ultimately, that is the difference between being Kodak or Fuji, Borders or Amazon, or Blockbuster or Netflix.