Vitaminas

In recent years Financial Services, as many other industries, have experienced a significant disruption mainly triggered by digital technology; a 2015 study by the Global Center For Digital Business Transformation (an IMD and CISCO initiative) had ranked it 4th out of 12 in “vulnerability76

to competitive disruption by digital technology” (Bradley, Loucks, Macaulay, Noronha, Wade, 2015).

76 _{The assessment of “vulnerability”, which we mention here, was made by the Global Center For Digital} Business Transformation on the basis of a survey, which included 941business representatives across 13

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The evidence of disruption is indeed a fact; however, sometimes, it fails to be recognized in many organizations either in terms of importance and in terms of potential risk; thus, according to Bradley, Loucks, Macaulay, Noronha & Wade (2015), 45% of companies (across industries and countries) seemed not to consider digital disruption a matter that is “worthy a board-level attention” and 43% of them did not see adequately disruption-related risky consequences; in a nutshell, only 25% of them self-evaluated as “proactive” with reference to the phenomenon.

The digital disruption has been and still is changing the competitive dynamics within many industries, the profitability and attractiveness of which, using the 5 competitive forces framework by Porter (2008), is questioned by factors like innovation and technology and it is seriously threatened by new-entrants’ and substitutes’ increasing pressure, due to technology- eroded entry barriers and to new business models based on disintermediation of industry incumbents, and even by customers’ enlarged force, if we consider how technology is empowering buyers and putting them at the center of strategy-making.

If we look at Financial Services industry’s competition, in particular, we see it is more intense today than it used to be in past years, not only among industry rivals, but also between incumbents and new entrants (like tech giants) or substitutes (such as disruptors coming from Fintech universe) or customers (who are becoming more informed and influent).

If compared to other businesses, such as the airlines’ or the travel agencies’ ones, the retail financial services have been feeling the threat of digital disruption just recently, most of all because they’ve always used to be a very regulated business and the complexity of regulation used to protect their industry from the entrance of disruptors; by the way, many new participants to Financial Services industry have recently started to emerge by leveraging technology and mobile penetration at their own advantage and bypassing regulation by building vertical offers, namely very niche-focused and value-adding products and services (Lopez Moctezuma, 2018).

This wave of disruption does not only trigger firms’ need to profoundly change themselves end-to-end, in terms of processes, culture and business models, but also forces them to strategy-making in terms of reaction to new competitive forces. Indeed, (as can be

countries. The score assigned to each industry was based on the following parameters: “Investment” (the amount of investors’ contribution given to disruptors – as it can be predictive of the market’s bet/expectancies on disruption with reference to the industry), “Timing” (time-lasting of the impact triggered by disruption), “Means” (the measure of entry-barriers limiting the entrance of disruptors and, on the other hand, the means of disruption at disposal to digital disruptors), “Impact” (the weight of digital disruption’s effect on the industry, e.g. in terms of existent market shares, etc.).

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seen in figure below), the surveyed industry participants (with reference to the above study on the assessment of digital disruption on industries’ reshaping) see an average of 4 firms belonging to their industry, namely about 4 out of their direct rivals, losing their places in the “Top 10” of their respective industries, with Financial Services ranking second in terms of industry-specific number of companies at risk; such places are often taken by “unicorns”77, whose commonness is on the rise, or, on a general basis, by digital disruptors (Bradley, Loucks, Macaulay, Noronha, & Wade, 2015).

Within such prevailing context of profound change, the incumbent players often fail to fight or exploit disruptive forces; their inner barriers to innovation can be many, as cultural impediments towards change, lacking entrepreneurial mind-set and a rooted habit in performing established processes and routines. This made us accustomed to the death of many

77 _{The term “unicorn”, within venture capitals and start-ups world, was coined to refer to startups with valuation} of over $1billion; as the mythical term can easily recall, the rationale under such label lies in the low frequency of such cases. The list of current unicorns includes, among others, Uber, Airbnb, Spotify, Dropbox, till Lu.Com or Stripe (as Fintech companies). See: https://www.cbinsights.com/research-unicorn-companies

Fig. 33 – The Mighty Will Fall

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champions which used to dominate their industries, till digital disruptors deposed them; just think of Blockbuster’s decline given the advent of Netflix.

By the way, despite the common impediments and difficulties to face innovation and even taking into consideration the risks and possible drawbacks that come with the rise of digital disruption, we could say that today there are a large agreed consensus and a rising evidence of the beneficial aspects of such disruptive forces, for the society as a whole; although it may seem paradoxical, such belief is even shared among surveyed executives from industries currently threatened by digital disruption, as more than the majority of them agrees digital disruption is either “a form of progress” or “good for society” and it even “improves quality of life”, etc. (Bradley, Loucks, Macaulay, Noronha, & Wade, 2015).

In a nutshell, many traditional firms know they cannot think to boast a competitive advantage for ever and, in the case of banking, there is an increasing awareness of the need to change. As a matter of fact, regardless how innovation will be put in place, listening to the imperative of change is vital, inevitable and wise at big banks’ organizations; in a very simple world, we could claim banks need to “fintegrate” (a term coined by Heather Cox, then-CEO of Citi FinTech), namely to adapt to change prompted by Fintech, to digest it and spread it throughout their organizations, and, finally, to learn from disruptors’ capabilities (Gandel, 2016).