Operational flexibility in the financial sector
There was a time when financial services companies enjoyed all the benefits of a stable business environment and customer loyalty. Then came the financial crisis, which undermined confidence in traditional providers, and the rise of disruptive technologies, which led to a surge in internet adoption and a new-found trust in online competitors. The result is an industry facing many uncertainties, such as fickle customers, disruptive technology and non-traditional competitors.
In the face of such challenges, we have to ask ourselves whether traditional financial institutions are responding fast enough.
If a traditional financial business cannot increase the level of flexibility in its operation to a point where it can satisfy its more demanding customers, it will become vulnerable in this mass-customization era.
The author seeks to answer the question of how banks and insurance companies can transform their operations in order to make them sufficiently agile and nimble to tackle these new challenges and uncertainties?
He recommends that the financial services business would be wise to learn some lessons from the way the manufacturing industry has adapted to survive over the years. The manufacturing industry leveraged innovative operational concepts, such as flexible production, to strike a balance between customization and mass production. Particularly in recent years, technological innovation has enabled a high level of operational flexibility in multiple industries and businesses, allowing them to achieve the objective of mass customization.
Read the full article to learn the lessons from manufacturing, understand exactly what is meant by operational flexibility and what the implications are for the financial services industry.
The author concludes by detailing where the industry can make changes and warns that the journey to a flexible operating model is not a smooth one for most traditional banks and insurance companies. They need to be committed to the end goal to facilitate and manage the key changes necessary:
- Let the customer get involved and engaged (this is the most important change)
- Build a flat organization to encourage innovation
- Delegate decision-making powers to customer-facing employees
- Train frontline staff to help them gain diversified skills and credibility
- Break rigid business processes to fit different customer-service scenarios
- Take advantage of new technologies
All the above require financial institutions to develop flexibility as a core organizational competency, thus allowing them to make the best of these valuable innovations rather than being defeated by them.
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