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Financial Industry Under Threat: Study Shows Top 3 Imperatives in 2017

January 18, 2017 by Susan Galer

Financial services firms have long pioneered the use of advanced technologies, but a new study shows executives may be overstating their digital bona fides. While executives rated their proficiency in digital transformation readiness high (70 percent), just 38 percent of executives and 42 percent of employees said decisions are made in real-time.

Worse, only 50 percent of executives and 46 percent of employees said their organization can adapt to real-time decisions. The punchline is, decision-making matters very much to industry executives, who said technology usage is critical for data analytics that guide strategy.

The SAP SuccessFactors-sponsored study from Oxford Economics analyzed feedback from over 4,100 executives and employees worldwide. Oxford Economics found a direct correlation between high-performing companies – called “Digital Winners” − and specific winning business practices and results. I detailed the characteristics of “Digital Winners” in a previous blog. Here’s a summary of the latest whitepaper, “Digital Leadership in Financial Services,” which details some intriguing industry-specific findings.

Source: Oxford Economics study: Digital leadership in Financial Services 2016

Close Gaps to Prepare for Fintech Disruption

Executives at banks and insurance companies had high ratings in many areas that define digital enterprises including technology implementation and diversity. However, responses also showed that many of these senior managers aren’t as focused as they should be on the potential disruption threatening their organizations.

Almost amazingly, survey respondents ranked business model disruption a low-level concern (24 percent), far below global economic conditions (50 percent) and increased global competition (42 percent). While the increasing pace of change is a top focus for Financial Services executives (38 percent), it’s going to take a lot more effort to drive the major transformation required to compete in an entirely new market landscape. Interestingly, larger companies were even less focused on business model disruption. Just 15 percent of banks and insurers with over $5 billion in revenue cited disruption as a top concern compared with 28 percent of firms with $250 million to $1 billion in revenue.

Step Up Efforts to Capitalize on Diversity

The good news is that executives from Financial Services are more likely to report increases in diversity among senior and mid-level leadership than their industry peers. Yet only one-third of executives said their company has effective diversity programs in place. Not surprisingly, female executives tended to be more critical of diversity programs and succession planning.

Study: only 1/3 of financial executives said their company has effective diversity programs in place

Source: Oxford Economics study: Digital leadership in Financial Services 2016

Invest in the Next Generation of Leaders

I wrote earlier about the landmark Workforce 2020 research, which found Financial Services employees want more feedback, mentoring, and training than workers in other industries. The latest study reinforces this point. Financial Services employees cite the ability to inspire and motivate workers as the Number One leadership quality, but only 45 percent said senior management is proficient in this skill. North American employees reported higher rates of loyalty to their manager (80 percent compared to 56 percent of other regions), and were more satisfied with their jobs (85 percent vs. 58 percent of other regions).

The ramifications for companies are clear. Evaluate emerging challenges to your business model and nurture future leaders who can navigate and stake out the new competitive turf. In the historically male-dominated Financial Services industry, it’s especially important to continue cultivating workforce diversity. High-growth companies are more likely to say diversity has a positive impact on financial performance and that leadership recognizes its value. Companies also need to do more to develop skills, leadership capabilities and loyalty among the next generation of workers. Younger executives are skeptical that management has the skills to drive digital transformation, and their critical eye may be valuable in speeding up that process.

Top image via Shutterstock. All others via SAP.

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