Across financial services, companies have started to launch a variety of applications for smartphones and tablets with 58 per cent of companies believing that failure to embrace these initiatives will severely impact how competitive they are1. However, until now these services have mainly been mobile versions of existing internet services.
New services are now emerging that have the potential to distort the competitive balance and change the industry structure. These could change the relationship between customers and banks and lower the barriers to entry. Many different types of companies, from banks and credit card companies to telecoms operators and companies such as Google, are already looking at the potential of mobile payments. This could change the face of the financial services industry but no one really knows yet what these services will actually look like.
In order meet this challenge banks need to move away from trying to predict which single service will emerge and instead adopt a portfolio or venture capital experimental approach.
Given the uncertainly about what applications will be the most important ones, consumers and suppliers need to learn together and be prepared to manage the unexpected. One of the most well-known examples of an unexpected success in a new category is the SMS text-messaging service. This was launched despite limited prior interest from consumers, but ultimately proved hugely popular. This shows that focus groups and market research are of limited value in these situations – in order for consumers to learn if and how they want to use new technology, the new services need to be launched as experiments.
Experimental services can then be adapted and adjusted as consumers learn how to use them and start formulating their preferences. This approach does mean that a number of services will inevitably be unsuccessful and companies need to be prepared to act quickly to shelve them. So the key step is to launch a portfolio of initiatives at the least possible cost, follow-up rigorously and adjust, invest or close down based on market response.
All this means that the key to becoming a leader within mobile services is less about doing the right market analyses and developing the best plans, and more a question of setting up the management, structures and processes that will allow agile and cost efficient approaches. This is partly counter-intuitive, in that banks who want to be truly customer-oriented need to start by looking inwards and getting their internal operations ready to meet those aims. However, they should not spend too much time doing this and remember that the main objective is to become more market oriented.
The banks that can do this and adopt the processes and the mindset that allows them to experiment will increase their chances of discovering the product that truly changes their interaction with customers and puts them ahead of the competition.
1. Smart Organisations: PA’s business leader survey results
To find out more about how PA can help your organisation put the structures in place to support experimentation, contact us now.