But the real news makers in these years were not incumbents but fintechs and big techs. Though incumbents made huge forays into digital, other than a select few, have not been the real disruptors. Most have taken cautious route via incremental re-engineering. While this has delivered certain benefits, it has not helped them leapfrog or build significant competitive differentiation in comparison to traditional or the non-traditional competitors entering the market.
To ensure sustainable growth in digital paradigm, incumbents need to reinvent not re-engineer. The idea is to have a digital native value proposition and not replicate existing value proposition on digital channels. The best way to do that is to build a challenger model within the organization and let it grow organically. It may replace the traditional model over a period or just enable two speed business depending on the markets addressed and goals of the organization.
Reinvention by itself has not proved to be enough though, banks that have developed innovative digital propositions have not necessarily seen strong adoption. Customers have demonstrated inertia towards change for various reasons. This was true for some of the digital leaders as well, it is the reason why some of the large e-commerce players are supporting disruptive pricing, cash back, discounts for years to gain scale. The only way to break the initial inertia is to deliver overwhelming value to the consumers to make the shift. These need not necessarily mean financial incentives; significant value can be delivered by innovations in offerings, bundling of offerings or making things frictionless.
As much as the organizations should focus on getting the digital native value proposition and business models right, they need to focus on a frictionless operating model as well. The recent disruptions to operations due to pandemic accentuates the need to move towards zero touch operations. If organizations get it right it will deliver radical cost take-outs and superior customer & employee experience.
The other important thing organizations trying to reinvent should keep in mind is that very rarely they will get it right the first time. Thus, organizations should avoid monolithic multi year transformation programs and adopt lean and agile principles. Lot of banks are doing it customer journey by customer journey. It is a good approach, but banks need to ensure that they have defined a North Star upfront and carefully choose minimum viable journeys to ensure they are able to assess the product market fit based on the minimum viable product. This will help pivot and course correct in case of low adoption. Early feedback and ability to pivot is at the heart of lean & agile and key to succeed in the digital reinvention journey.
To sum it up incumbents, need to reinvent around native digital value propositions and business models, deliver overwhelming value to consumers to gain scale, push towards zero touch operations and adopt lean and agile to transform at speed while responding to continuous customer feedback.