Act now on innovation, as disruption revolutionizes the rules

Act now on innovation

There is a need for strategic new approaches to innovation among investment management firms.

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Investment management organizations are struggling to keep up with unprecedented disruption of their markets and business models. The immediate need for strategic new approaches to innovation that will keep today’s businesses on a competitive path to future growth and success has perhaps never been greater.

In a KPMG Global CEO survey of 73 CEOs from the investment management (IM) industry, nearly half of the IM CEOs surveyed, 47 percent, said they expect their organization to be ‘transformed’ into a significantly different entity over the next three years.

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As the rules of the game evolve dramatically, businesses can no longer sit back and rely on the status quo. Redefined business models and new competitors continue to fuel a major push toward advanced automation involving cognitive processes and artificial intelligence to improve efficiency and deliver enhanced products and services. The impact of digitization is raising customer expectations everywhere – including investment management – for instantaneous, around-the-clock access to services and information. On the regulatory front, there’s the need to anticipate and respond to continuing regulation changes and compliance issues.

CEOs are voicing worries about customer loyalty

The survey shows that CEOs in investment management are expressing concern over how to solve issues that will define their future. About 90 percent are concerned about customer loyalty and 92 percent are worried about the impact of millennials on their business. Meanwhile, 87 percent are concerned that regulations could inhibit future growth and 85 percent are concerned about integrating basic automated business processes with artificial intelligence and cognitive processes.

The vast majority are also worried about: competitors taking business away, keeping up with what’s next in services and products, keeping up with new technology, and the quality of data used in decision-making.

The status quo no longer works but many businesses are struggling with the immediate need to innovate and transform. To position themselves for future success, businesses must focus on strategic innovation that integrates technology, people and processes in order to drive revolutionary advancements that include:

  • An enhanced customer experience and greater customer retention amid the proliferation of new players, products and services. Smart use of data and analytics will be crucial;
  • Enhanced control of the flow of funds outside of the organization and a secure, trusted online experience for customers;
  • Improved oversight, quality and consistency of data to drive smarter decision-making and more precise reporting for clients, stakeholders and regulators.
  • Eventual automation of data-based decision-making via cognitive processes and artificial intelligence, to enhance efficiency, deployment of talent, the customer experience and risk management;
  • Improved cyber security and the ability to respond to problems quickly.

Reassessing leadership’s role in driving innovation

Firms should begin by asking themselves where they expect to fit in and compete and how they will make intelligent decisions to forge a competitive and sustainable operating model for the future. Secondly, firms will need to quickly establish appropriate capabilities and infrastructure for the organization going forward, including potential new partnerships with third parties such as Fintech.

Organizations should also be re-examining leadership responsibilities and the need for senior leaders to act as ‘agents of change.’ KPMG firms typically see a ‘disconnect’ today between leaders and their IT function, for example. Firms need to create new levels of collaboration in order to sharpen their focus on disruption, innovation and cyber security. As the survey revealed, many CEOs are uncertain about how prepared their business is for a cyber-security breach.

The quest for data quality to better support risk management

Intelligent new risk management strategies are a key part of the industry’s immediate innovation journey. Companies will need to dramatically improve risk-management capabilities amid increased scrutiny and pressure from regulators as well as from investors, business partners, customers and other stakeholders.

This includes the critical question of how businesses, amid rapid change and innovation, organize and manage data oversight and data quality to ensure their data is consistently reliable for future decision-making.

New partnerships offer solutions but the time to act is now

As the KPMG Global CEO survey showed, competition is a key concern in today’s environment as technology enables new entrants like Fintech to quickly deliver competitive new offerings. 

But these new players are no longer being viewed simply as competitors to be feared, but as potential partners and allies offering fast, effective, cost-efficient solutions.

While progress toward innovation and transformation is being made by some organizations, the industry needs to show a far greater sense of urgency. Successful organizations understand the new reality that massive digital change is accelerating and that they need to become very strategic about innovation to remain competitive.

Businesses that turn today’s challenges into opportunities will create critical competitive advantages for their future success.

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