Can a bank become Uber or Amazon?

Where a large, diversified financial services interest could go as a platform business

Can a #bank become and compete as a #platform? An over used example yet effective?—?the world’s largest hotel owns no property, the world’s largest car service owns no cars, the world’s largest media outlets generate no content. Everyone thinks of Uber and Airbnb or Facebook in this space but what about Amazon? Although not a two-sided platform like an Uber, part of their business is that alongside their proprietary offerings and service businesses. It is an interesting business model or more accurately a portfolio of business models.

What makes Amazon so interesting?

They have the ability to store, sell and ship both online and offline. They have turned each layer of this into a business. Amazon is one of the major cloud players in the B2B space. They also use this cloud for their own products such as a Dropbox like storage offering and video and tv streaming service.

Their own books were just the beginning. If you sell through Amazon, they can store and ship your items as well. Each capability they have built up to support their own ecommerce store operations is now it’s own business line. The buyers (customers) get a consistent experience and now the sellers have options in how they engage with the platform. With their cloud business, they can not only leverage their capability as a business but also manage excess capacity across both their business and external businesses.

Amazon did this by leveraging its own brand. That’s where each strategy started and the success of those businesses, their customer relationships and capabilities laid the groundwork for what came next.

So how does this relate to a bank?

The world is truly in a period of disruption with new capabilities being likened by some to a new industrial revolution. Companies with very different ways of doing business are creating value for customers and as companies at a pace faster than any seen in a long time. Look at Amazon, Google, Netflix, Uber, Facebook or any of the many other examples. Established players have capitalized as well, just look at Apple.

Let’s start with what’s in it for a bank of today. Banks need to stay relevant and should also be able to create brand new, even completely different, forms of value for their customers (and ultimately for their companies) through these same trends. Forces of change represent opportunity for those who take action and step into rather than shy away from material change.

What are the strengths of a successful bank?

Banks have a large established reach through both physical and digital channels. In addition to their branch delivery models they have been using machines (ATMs), telephone (Call Centers/IVRs) and web (Online Banking) for a long time. Banks also have established customer relationships and wide reach for the experiences they create. These relationships are quite sticky. The fact that some have compared certain banking services to utilities hints at what is a huge strength. These customer “jobs-to-be-done” are embedded in our society. The question is how these jobs will be done in the future. It is the experiences of the future that will define where this all goes next.

Becoming a platform, creating value for customers and company alike, based on existing strengths, is a compelling path. Where can you go when you have strong core offerings which have created mega brands and millions of ongoing customer relationships? What capabilities do you have which you may not think of as your “product” today?

Three key areas:

1. Customer relationships (large market share due to broad market need)
2. Technology (trusted for secure transactions)
3. Customer experience (lots of repeat customers as a default)

All three are as much about brand presence as they are about themselves. Brand benefits from these three and they benefit from the brand. Take technology for example, the safety perception is built on the brand as much as the successful operation of the technology. Successful operation of the technology only reinforces the brand. The insight here is that it takes time to earn these outcomes, the longer you delay the longer you delay success.

It is about being people focused in design not just execution

Back to the customer’s job-to-be-done, technology companies are creating new experiences based on new capabilities. They are able to adapt and personalize their products and services much faster & cheaper than you can with physical experiences. The testing and interaction that you can observe also grows exponentially with technology.

They run experiments daily and continuously improve upon their customer (user) experience. This is an environment where customer centric (human centric) design flourishes. Experiences can be boring and cold or alive, intuitive and emotional. Tech firms have proven that is it possible to create emotional and compelling experiences with technology. It’s all about the method you use to create them. The methods you use to create the final result. The final result (output) cannot just be copied or cloned.

Banks have relationships with a lot of customers. The largest banks have long standing relationships with millions. This ongoing interaction is extremely valuable. This can be an offering in and of itself. No platform works without having customers. You need many, returning customers to make a platform work. The brand recognition and ongoing relationships makes the existing customer experience the starting point and this can be adapted as the relationship with customers expands.

Your customers, your customer experience and brand will attract other organizations to your platform just like it has for Amazon and others. At Amazon these are outsources using their services and sellers using their store platform. At a bank these might be housing developers, realtors, stores or lawyers, accountants and many more. Think about who comes before or after a bank in the customer’s true journey.

Beyond your own products and services

External products or services accessing the platform plug into your established customer experience. This could start small with referrals perhaps with complimentary externals or enabling initial interactions between the third party and the customer. It could also move directly into the platform space starting with complimentary products and services.

In this way the bank can also start to plug into the customer’s journey more directly. Helping with the initial jobs-to-be-done that lead to financial needs. It also would allow for direct links after the financial step as well. Think of all the new customer experiences that can be created in this space!

What’s not mentioned above is a real differentiator. The human touch, in person or over the phone. We are still social creatures and although we like the convenience of the different communication methods today, self-service only goes so far. Yes these parts of business models can be costs and hurdles to chasing faster, digital only competitors but what if they aren’t? What if they were actually the competitive differentiators?

Combining digital and human interactions

These techniques can benefit the digital world as much as they can the human experience. Anything you are doing on your digital platforms for customers can also be routed to your people to aid them in their work with your customers as well.

The platform can also be used to provide onboarding, education/training and so much more. Experiences are what’s around your product/service, not just the product/service itself. The best players in this space know that and it’s a major driver of their success. Experiences are interactive, not communication or marketing but the full end to end including onboarding, training and support.

Getting local, again

The really interesting thing about where we are at is that it may be a different path back to where we were when we started the computer and networking technology revolution. Back then we were in a place where things were still quite local. Yes we had telecommunications, trading and travel but the world was still very much human to human local relationships. Getting local is also about personalizing. Each 1x1 interaction in the real world allows for a tailored conversation and interaction. It is important to see that side of it.

These human interactions were still based largely on geography. After that came rapid globalization, borders quickly went away and so did barriers to information. With that came unprecedented global interaction, trade and movement of people. In that rush we were scaling things so fast that many parts of our lives became depersonalized or abstracted.

Technology can create personalization

With the direction that platforms and personalization are going today we are getting back to that ability to connect directly. Finding ways to do this with technology and right there locally with a person will lead many differentiated possibilities. The systems themselves can be given a personalized and human centric feel. In addition we can combine that with human to human interactions enabled by technology like getting two people face to face over a video call.

In this environment companies have the ability to connect with customers locally and anytime. To create truly customer centric experiences in how they are designed, not just a service promise. In this new world having presence in the customer’s journey matters. If you can do both digital and physical interactions and offer the human touch, things really start to get interesting. The path has already been paved by the consumer tech companies.

Artificial Intelligence is being talked about by everyone these days. The science was already in application decades ago in business but it has really hit it’s stride today due to a myriad of factors such as technologies like processing but also the emergence of such a rich array of technology enabled products and services.

This has all led to the capability to get very sophisticated with the science as well as the rich data required to take this approach. The attention it is getting is building on itself and today most businesses are trying to wrap their head around the capabilities. It is no longer just the domain a savvy direct marketers and hedge fund investment models.

We are now learning to harness cognition the same we we learned to harness external energy and to automate repetitive tasks. Innovation is the development & application of new technologies or the novel application of existing technologies to create a valuable result. It is creativity with a benefit. Companies need to innovate to compete.

The competitive landscape

Where there is growth and profitability others follow. This is especially true in the technology space. With technology we are making massive leaps in efficiency & effectiveness. Businesses that are design & innovation driven are gaining market share at unprecedented rates. It is limiting to call them tech companies. Technology is a key capability but they are much more than tech companies today. They are media, transportation, hospitality and many more different things.

The competitive set just got a lot larger. Everyone knows the FinTech case and is aware that tech can come at their industry. The important aspect here is not awareness that they could though it is how they will come. They will come through human-centered design, experience personalization and the massive scalability of technology driven experiences. They will carve out unique value proposition through taking very different approaches to delivering alternatives to your customers. Unique capabilities lead to unique outcomes.

Generic strategy may still hold, cost vs. differentiation, however these companies have many new ways of competing on either cost or differentiation. The new competitors seem to be building their capabilities in narrow areas and then rapidly applying them to broad markets as well as moving to adjacent verticals. They are also very good at continuously opening up new opportunities. They are amazing at entrepreneurial management where successful search is the goal rather than low variance repeatability.

If you are a not a technology company though you cannot ignore what is happening. As was once famously said, software is eating the world. It is a major leap forwards. What is interesting though, back to the Amazon example, is the novel application of both physical execution and digital together. This creates another way to create unique value propositions.

It’s time to get great at innovation

This is not about losing the capabilities you have around high probability/high success in the delivery portion of your products/services. It is time to also get great at innovation and to gain new opportunity by doing so. The key here is *also*, this isn’t about one or the other but doing both at the same time.

For many established, successful businesses this means running two parts to your business. One focused on execution and one focused on core innovations. The promise of technology, analytics and design allow the creation of new and novel ways of doing almost everything. Whether that is in partnership with a person or a fully technology based process and it’s not just for customer facing parts of business. Employees and internal processes like management, finance and others are just as flush with opportunities to increase effectiveness and efficiency.

When competing with companies for whom digital is already a core capability, the ability to move quickly and always change while being design driven matters. These will create or break companies facing digital incumbents as it is those digital companies core capability.

The intent of this article was to inspire some new thinking and conversation and not to go too far into how to tackle getting to this type of business morel here. What I think’s really interesting about this opportunity is the strategy of how you build a business like this. Where do you start and how do you sequence things to go from your current state to your future state. I would love to chat!

Use what you have…but not too much. This is about innovation but innovation that can leverage your existing capabilities and position. Banks are in a position to become platforms if they can evolve their companies from execution excellence to both execution and innovation excellence.