Just a few years ago in New York City, the yellow cab was dominant. The service and comfort weren’t great, the cabs were often dirty, and they were scarce when most needed, but they were so lucrative that a taxi medallion cost over $1 million.
Technology had already disrupted everything from music to retailing, but yellow cabs owned Gotham’s streets. When Uber launched in the Big Apple in 2011, the taxi industry rested on its laurels, confident in its business model. Today, a taxi medallion is only worth $160,000. The lesson for another great New York business — Wall Street — is that no industry can be complacent in our new digital world and every executive leader must be ready to disrupt their own business before others do.
Rapidly advancing technologies — such as cloud hosting, artificial intelligence and blockchain — will create disruption, opportunities and change in financial services. Amid the upheaval, too many executives, like those in the taxi industry, are trying to hold on to what they already have, instead of preparing for what comes next. Among business leaders, 84% say their business is being disrupted or will be soon, and nearly half believe their business model will be obsolete by 2020, according to a report by Harvard Business Review Analytic Services. Nevertheless, the survey found that, “fewer than half of respondents have a fully formed digital strategy — surely a cause for concern, given the imminent threat of disruption most organizations say they face.” As Harvard’s Howard Stevenson wrote a generation ago in his book Do Lunch or Be Lunch, companies must either evolve or be overrun by others.
Effective leadership requires holding on to a company’s strength in existing technology while at the same time developing innovative new capabilities. It requires responding to what customers want today while developing plans for better products that customers will want in the future. A case in point is the mobile phone. My first cellphone, in 1984, took up a large part of my car’s trunk and came with a chunky handset inside the car and an antenna glued to the car’s roof. The device cost me a small fortune and served only one purpose — making occasional phone calls on the move. Today, phones are powerful computers in our hands, offering us endless services that we never knew we needed, from instant stock trading to better driving navigation. Now, the last thing I do before I go to bed, and the first thing I do when I wake, is check my mobile phone.
Phones were transformed when Apple opened its ecosystem in 2008, allowing other firms to develop all manner of new apps and tools to delight its iPhone customers. Similarly, Broadridge was inspired by the Wall Street paper crisis of the late 1960s, when brokerages were drowning in a sea of paperwork produced by surging trade volumes. Our initial goal was to declutter back offices, but we’ve expanded along with technological innovation. In 2016, we acquired DST Systems Inc. and became the largest distributor of consumer communications, placing us on a quest to reinvent consumer content using next-generation digital cloud-based technology. As part of that effort, we’re collaborating with Amazon Web Services to go beyond simply storing documents and data in the cloud, to using machine learning and artificial intelligence technology to transform the dusty archives of the past into actionable information.
Across the financial services industry, a growing number of smart companies are partnering with firms that have developed platforms, realizing they don’t have to create all their own bespoke technology solutions in-house. Staying current on technology often means collaborating and leveraging platforms — an approach that in financial services has produced substantial change in the past. For example, the Financial Information eXchange (FIX) protocol started out in 1992 as a platform for equity trades between just two firms. But in a little more than a decade it grew into the global standard for trading.
Today, when financial services firms build new products, they should develop them so they can have many uses, just like smartphones do so much more than allow us to make calls. For example, a back-office tool that helps banks take care of trade reconciliations and regulatory reporting should be able to add new capabilities in the future as they are developed. That could include incorporating artificial intelligence and machine learning tools to reduce risk and execution errors.
In this digital financial services world, finding the right partner is essential to ensure your company continues to be not only relevant in the future, but also a leader. Maybe someday soon there will be a new book that’s titled, “Do digital transformation or be eliminated.”
- Do digital transformation or be eliminated.