FinTech and the Push for Transformation Readiness

The following is an excerpt of a soon-to-be-published paper, “FinTech and the Push for Transformation Readiness.”

FinTech and the Push for Transformation Readiness

There are two basic ways to prepare for change.

The first? Prepare for a linear, predictable change.

          The second? Prepare for possibilities—that is, anything that might occur.

As it turns out, responding to predictable change requires different capabilities than planning for unknown change.

Planned Changes are defensive strategies that respond to a certainty or near certainty. This is also known as transitional readiness. For example, consider the hypothetical reasons behind Netflix and their success transitioning to a streaming model. Envisioning that physical DVDs would follow a similar path to video tapes—that is, be phased out by consumers in exchange for the next great technology—Netflix planned a heavy investment in their streaming business while concurrently reducing focus on their physical DVD rental model. For Netflix, this planned change worked brilliantly, and the media company used it to launch into the leader stratosphere.

Planning Possibilities resemble offensive strategies. They depend on flexible systems available for deployment as circumstances change. Such flexible systems create a state called transformation readiness. For example, consider the Internet’s flexibility enables it to grow the number of users and new service capabilities. Similarly, a flashlight prepares you for the event that there’s no light.

Two approaches illustrate the differences in these readiness capabilities:

In 1965, Gordon Moore, founder CEO of Intel, noted that computing power within a single transistor doubled over regular time intervals, an observation that came to be known as Moore’s Law. This assumption guided long-term targets in the industry until, in 2015, Intel confirmed that the pace of advanced development in semi-conductors had slowed, forcing management to seek new growth opportunities.

At Xerox PARC, on the other hand, Alan Kay and the scientists learned a different lesson. Moore’s observation signaled to scientists at Xerox PARC that their present design and development efforts could safely build on certain future capabilities— specifically, faster, smaller, and considerably cheaper processing capabilities than what were presently available. Their transformational readiness coined its own phrase expressed by Alan Kay in 1971: “The best way to predict the future is to invent it.”


Thank the Internet, and its ever growing connectivity, for enabling further digitization of business processes. Digitization makes it possible for more information to move from one location to another faster, better, and cheaper. Add to that the changing environment in which physical and digital environments are coming together, and you get to where we find ourselves today.

A look at Uber and AirBnB, among other examples illustrates the point. Uber owns no cars; AirBnB owns no hotel rooms. Yet, they compete against traditional businesses with physical assets. The changing operating environment allows these businesses to offer customers enhanced convenience.

In fact, unlike the early days of e-commerce, which assured users security and privacy, new offerings stress convenience. New digital capabilities include the abilities to:

  • Deliver high volume services, globally in the physical world.
  • Displace inventory and significant fixed assets once deemed necessary to run and sustain the business.
  • Deliver convenience and value by taking advantage of the inherent capabilities of digital channels often overlooked by existing market players.

Recognizing a transformation can be tricky. Identifying a one-off insight, such as a pain point, or technical advance, for example, creates some value; however, it could lead to a “fad” with no scalability or longevity. Amazon’s transformational readiness comes from both systems planning and analysis abilities. Their ability to connect information at multiple levels makes their execution significantly more effective than those using traditional planning and transitional readiness strategies.

So how does this play in Financial Services, a busy and growing sector?

Financial Service providers continue to respond to evolving customer needs by increasing the sector’s diversity of offerings. Peer-to-peer trends in FinTech extend beyond retail financial services and cut across asset classes including FX, Equity, and Debt.

It all raises a strategic question: Are these narrow service offerings merely repeating the errors of the past, making the next phase of consolidation more costly?

Traditionally, the core institutions and the ring of regulatory, supplier, and support services focused on three things: licensing; customers; and the ability to affect financial transactions. Processing priorities and systems focused primarily on delivery that was efficient and effective; accurate, and auditable. The bank was synonymous with its core data and event handling capabilities.

Today, customer experiences command considerable attention and priority. This change in focus represents a transformation in service delivery in this sector to match expectations and standards established by other sectors—in retail, that means Amazon; in research? It’s Google.

Customer experience goes beyond the visible contact touch points. The experience includes the ability to create and sustain relationships, which depend on effective management of multiple and diverse transaction events and data.

These tasks are not simple niche, one-off specialization services narrowly delivered. Bank customers expect more fully integrated services and support on their terms. How will banks deliver and permit customers to manage savings and borrowing, wealth and investments, payments, and insurance all through a singular, centrally coordinated layered solution?

To retain the leverage and resources that their branded reputations earned by making offerings sticky and relevant, leaders are pursuing multiple paths at once.

This blog post is an excerpt from the soon to be released paper, “FinTech and the Push for Transformation Readiness.”

[UPDATE: This paper is now available for download.]

Michael Heffner

Global Practice Lead, Financial Services