from transactions to relationships: innovation's next horizon
DESCRIPTION
Innovation in financial services has never been greater, yet so many financial institutions have such poor relationships with their customers. Why? So much of the innovation in financial services has been about improving transactions, but financial services are inherently collaborative. How can we shift our innovation focus from transactions to relationships?TRANSCRIPT
![Page 1: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/1.jpg)
From Transactions to Relationships: Innovation’s Next Horizon
JP Nicols, CFP®
1© JP Nicols, 2012-13
![Page 2: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/2.jpg)
He is the CEO of Clientific, a partner at Bank Solutions Group, and the co-founder of the Bank Innovators Council. He has served in senior roles at top financial institutions, including as the first Chief Private Banking Officer for U.S. Bank. He writes about leadership and innovation at jpnicols.com.
A leading voice for leadership and innovation for the future of financial services, JP combines 20+ years of experience with a fresh perspective on combining high-tech with high-touch. His work has been featured in some of the industry’s top publications, including American Banker, Investment News, BAI Banking Strategies and Bank Innovation.
JP Nicols, CFP®
![Page 3: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/3.jpg)
3© JP Nicols, 2012-13
The tailwinds that helped the financial services industry during most of our careers have mostly turned to headwinds…
![Page 4: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/4.jpg)
S&P 500 1980-2007
Stock Market
4© JP Nicols, 2012-13
![Page 5: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/5.jpg)
10 Year Treasury 1980-2007
Interest Rates
5© JP Nicols, 2012-13
![Page 6: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/6.jpg)
Era of Deregulation
Source: Center for Economic and Policy Research
6© JP Nicols, 2012-13
![Page 7: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/7.jpg)
7© JP Nicols, 2012-13
And then…
![Page 8: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/8.jpg)
8© JP Nicols, 2012-13
2008
![Page 9: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/9.jpg)
9© JP Nicols, 2012-13
Most importantly, 2008 was not just a bad year, or the start of a rough patch…
![Page 10: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/10.jpg)
10© JP Nicols, 2012-13
… It’s an important milestone at the start of whole new era.
Let’s look at the industry through a familiar lens:
![Page 11: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/11.jpg)
Threat of New Entry
Supplier Power
BuyerPower
Threat of Substitution
Competitive Rivalry
Porter’s Five Forces
11© JP Nicols, 2012-13
![Page 12: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/12.jpg)
Supplier Power
12© JP Nicols, 2012-13
This Era of Reregulation is a useful proxy for supplier power
Dodd Frank
![Page 13: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/13.jpg)
13© JP Nicols, 2012-13
The number of banks is shrinking, but that’s not a positive force. Those that remain have greater market power.
![Page 14: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/14.jpg)
Threat of New Entry
14© JP Nicols, 2012-13
![Page 15: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/15.jpg)
15© JP Nicols, 2012-13
Financial services companies used to be gatekeepers of closed platforms and asymmetrical information, but customer power is growing and their expectations are changing.
![Page 16: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/16.jpg)
BuyerPower
16© JP Nicols, 2012-13
![Page 17: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/17.jpg)
Changing of the Guard
$41 Trillion*
Wealth of Gen X + Gen Y expected to exceed Boomers
by 2018
*90% of heirs switch advisors
17© JP Nicols, 2012-13
![Page 18: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/18.jpg)
18© JP Nicols, 2012-13
Perhaps most profound, financial services companies used to have no real substitutes…
![Page 19: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/19.jpg)
Threat of Substitution
19© JP Nicols, 2012-13
![Page 20: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/20.jpg)
20© JP Nicols, 2012-13
…and the pace of change is ever quickening…
![Page 21: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/21.jpg)
Time to 50MM Users
21© JP Nicols, 2012-13
![Page 22: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/22.jpg)
22© JP Nicols, 2012-13
…But we don’t seem to be taking this very seriously as an industry.
![Page 23: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/23.jpg)
23© JP Nicols, 2012-13
![Page 24: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/24.jpg)
24© JP Nicols, 2012-13
No wonder we’re not perceived as being a very innovative industry.
![Page 25: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/25.jpg)
Most Innovative Global Companies
Banks; 4%
BusinessWeek Top 50
25© JP Nicols, 2012-13
![Page 26: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/26.jpg)
Can’t Happen To Us… Right?
26© JP Nicols, 2012-13
![Page 27: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/27.jpg)
27© JP Nicols, 2012-13
So, how do we avoid the Fate of the “Dumb Pipes”?
![Page 28: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/28.jpg)
28© JP Nicols, 2012-13
![Page 29: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/29.jpg)
29© JP Nicols, 2012-13
Think about how telephone companies have changed their marketing…
![Page 30: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/30.jpg)
From Pin Drops…
30© JP Nicols, 2012-13
![Page 31: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/31.jpg)
…to Screen Shots
31© JP Nicols, 2012-13
![Page 32: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/32.jpg)
32© JP Nicols, 2012-13
It’s not about your branch network, or your ATMs or even your mobile banking platform. Those are just your “dumb pipes”
![Page 33: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/33.jpg)
33© JP Nicols, 2012-13
It’s about the quality of the content you can deliver through those pipes.
![Page 34: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/34.jpg)
34© JP Nicols, 2012-13
And it’s about the quality of the relationships you have with your customers.
![Page 35: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/35.jpg)
35© JP Nicols, 2012-13
![Page 36: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/36.jpg)
36© JP Nicols, 2012-13
OK.So, how do we refocus our innovation from transactions to relationships?
![Page 37: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/37.jpg)
Four Imperatives
37© JP Nicols, 2012-13
1 2
3 4
![Page 38: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/38.jpg)
38© JP Nicols, 2012-13
First, we have to shift our focus from execution to diagnosis.
In healthcare terms…
![Page 39: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/39.jpg)
39© JP Nicols, 2012-13
… we have to focus our people’s time on more psychotherapy, and less on handing out prescriptions.
![Page 40: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/40.jpg)
Standardized Process Specialized
Low
Touch
In
tim
acy/E
Q H
igh
Touch
Execution Diagnosis
Adapted from True Professionalism by David H. Maister © 1997 David H. Maister, used by permission
Fees
Scalab
ility
40© JP Nicols, 2012-13
![Page 41: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/41.jpg)
41© JP Nicols, 2012-13
Technology can increasingly help us run our business. But there is no replacement for actually understanding the problem.
![Page 42: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/42.jpg)
Standardized Process Specialized
Low
Touch
In
tim
acy/E
Q H
igh
Touch
Execution Diagnosis
• Standard Credit• Product Advice• Onboarding• Estates• Complex Issues• Retail• Small Business
• Goal Setting • Financial Planning•Nonfinancial Issues• Moral Support
• Custom Credit• Asset Mgmt• Trust Admin• Corp Banking• ABL•
• Basic Service• Statements• Std. products• Transactions• Item processing• Payments
Technology
Artificial IntelligenceMachine Learning
Data AnalyticsBusiness Intelligence
42© JP Nicols, 2012-13
Adapted from True Professionalism by David H. Maister © 1997 David H. Maister, used by permission
![Page 43: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/43.jpg)
43© JP Nicols, 2012-13
And we have to understand the whole picture.
![Page 44: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/44.jpg)
A Need for Aggregated Data
44© JP Nicols, 2012-13
![Page 45: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/45.jpg)
45© JP Nicols, 2012-13
Second, we have to build trust and loyalty with our customers.
![Page 46: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/46.jpg)
46© JP Nicols, 2012-13
How?
![Page 47: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/47.jpg)
Competence
Consistency
CustomerIntimacy
CustomerAdvocacy
Trust
47© JP Nicols, 2012-13
Building Trustand Loyalty
![Page 48: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/48.jpg)
48© JP Nicols, 2012-13
In other words, uur customer have to perceive (and believe) that we:
• Know what we’re talking about,• Will do what we say we will do,• Understand them deeply (more on that later), and most importantly…• Will look out for their best interest
![Page 49: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/49.jpg)
49© JP Nicols, 2012-13
First build trust. Loyalty come from consistently providing value.
![Page 50: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/50.jpg)
Third, we have to move from product development…
50© JP Nicols, 2012-13
![Page 51: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/51.jpg)
51© JP Nicols, 2012-13
You know, that process where you launch a product your team has been asking for, then point fingers internally when results fail to meet plan.
![Page 52: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/52.jpg)
…To customer development
52© JP Nicols, 2012-13
![Page 53: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/53.jpg)
53© JP Nicols, 2012-13
A customer-centric process that makes sure you are solving a problem or meeting a need that paying customers actually care about.
![Page 54: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/54.jpg)
54© JP Nicols, 2012-13
How do we do that?
That’s our fourth imperative… We have to engage the ecosystem.
![Page 55: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/55.jpg)
Engaging the Ecosystem
55© JP Nicols, 2012-13
![Page 56: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/56.jpg)
56© JP Nicols, 2012-13
Before we launch anything, we need to understand what problems our customers want solved, what the value chain looks like and what help we’re going to need from our partners, vendors, etc., and…
![Page 57: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/57.jpg)
We have to avoid co-innovation risk and adoption chain risk along the
way
57© JP Nicols, 2012-13
![Page 58: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/58.jpg)
58© JP Nicols, 2012-13
It’s not easy, but it’s not rocket science.
![Page 59: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/59.jpg)
59© JP Nicols, 2012-13
If we can shift from execution to diagnosis, build trust and loyalty, move from product development to customer development and engage the ecosystem…
![Page 60: From Transactions to Relationships: Innovation's Next Horizon](https://reader034.vdocument.in/reader034/viewer/2022051411/54577764af79594f558b5047/html5/thumbnails/60.jpg)
60© JP Nicols, 2012-13
Financial services firms can move from transactions to relationships, and innovate new paths to profitable growth.