I was recently invited to address a conference on planning in elite sports – as part of the 2024 Olympics preparation. It got me thinking that when excellence is central to success, people have long time horizons. However, that was only half the point. Why ask someone like me along to a conference about sports? Answer: Because I might, just might, have an insight into, say, the economic environment in 2020 that might, in turn, be material to success in 2024.
In the same period I got talking to a fan of Kanye West and the discussion centered not on the music but on the incredible level of collaboration that West uses to sustain himself as the most successful rapper of all time – that’s collaboration through sampling and by bringing in artists and producers who can change his mind and change his music.
Let’s take these characteristics into the business community, particularly to banking, a sector struggling with how best to change.
There are few environments with a more complex technology environment than that found in banking – but they exist. I recently had the opportunity to talk with people who’ve worked on the inside of Alibaba. One called it scary. An environment pushed to the limit by the scale of the Chinese market and by the contest, in the China tech industry, to be first with the next app, the next O2O application area, the next financial opportunity.
Therein lies a key to the future of financial services – because Alibaba is now a bank, as well as a taxi firm, a logistics giant, an e-commerce behemoth, a wealth management firm, a media empire and more. However, it is the banking industry that needs to wake up to what it means to have a competitor like this.
Alibaba will drive change in finance (and already has done so) in months not decades. Internal resistance to this, from say dissatisfied programmers or people whose feel pushed aside, is a non-starter. Banks must somehow put aside internal frictions, very very rapidly. Some of those frictions arise because of the need to scale back costs, some because banks treat IT as infrastructure, some because there is uncertainty over the right technology choices.
In the banking sector right now tech strategy (the portfolio of choices) has three main strands:
- Many organisations are banking on distributed ledger or blockchain technology – this is so pervasive as to be religious.
- There are banks working on new core platforms to overcome silos and provide a better single user experience (Nordea in Sweden recently announced its new core platform partners and they include Accenture and Tenemos. That means the new core platform will be a Tenemos design with Accenture consulting. It is expected to take 4 – 5 years to fully implement. The bank is taking a Euro 334 million impairment charge as part of the project).
- Finally banks are investing heavily in startups, which now look like being bleeding edge innovators on behalf of the banks rather than disruptors. Bank investments include the obvious – P2P finance – and adventurous – China financial services.
What you don’t see much of in banking is a determined effort to change culture (certainly not repeatedly), like Kanye West does or to seek out the small pieces of knowledge that might make a marginal difference down the track, as athletes do.
That brings us back to Alibaba because Alibaba changes shape all the time, as its recent forays into O2O testify. It is not hanging out there dependent on one tech paradigm (blockchain) coming good or not. Nor is it necessarily making a fetish out of its core.
It is chasing down customers wherever they seem willing to go. And for the most part its technology-base is the same as every other tech companies’ – taking plenty of open “source standards” (like Hadoop, MapReduce) and squeezing advantage out of them through the relentless and rapid application of strong coder culture. On that base, its business leaders push every envelope they can find. They are as eclectic as the current generation of music impresarios, as hungry as any athlete.
While the banking community bemoans the entry of Silicon Valley, startups or Apple, the real challenge is coming from the East. And the challenge is this – there is no core competency because Alibaba will be in every industry and will integrate financial services into every offer it makes to its users. There will be no separate financial services, acting like a cushion for banks.
Banks have to contemplate integrating their businesses with the business of platforms, like Alibaba’s, and creating platforms that can compete with and complement customer-centric platforms like Taobao and WeChat. If you want a shorthand for it – welcome to the platform wars.