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Marc Andreessen, Ron Shevlin, and Innovation: How Banks Can Best Adapt in the Digital Age

Andreessen's Twitterstorm

The recent twitterstorm from Marc Andreessen outlines why timing is so crucial to the success of startups. He says that startups typically overestimate the importance of being first to market and that being too early can be a bigger risk than being too late. In fact, Andreessen goes so far as to say that the moment when a startup worries that they’ve missed the window of opportunity might be the sign that the timing is just right.

Here’s a clip of the storm:


Bank Innovation

It all reminds me of last week’s post from Ron Shevlin, “Maybe Banks Don’t Have to Innovate.” In the post Shevlin talks about how 12 years ago he advised a large bank to hold off on adopting mobile banking and invest elsewhere instead. Shevlin says that that the bank’s chief technology officer later thanked him for the advice — it was the right thing to do.

Shevlin used the story to illustrate his assertion that instead of worrying about being first to market with each new financial technology, banks should do these three things:

  1. Monitor and assess technological innovations and their market potential;

  2. Acquire (i.e., invest in) those innovations at the right time; and

  3. Deploy (i.e., assimilate or exploit) the acquired innovations.

Shevlin’s point is parallel with Andreessen’s. The most innovative companies (the ones that are first to market) don’t always win. It can be better to sit back, monitor the markets, figure out the appropriate timing, and then execute better than anyone else.

The obvious example here is Apple. Both the MP3 player and the tablet existed long before the iPod and iPad hit the scene, but the timing hadn’t been right. Apple went to market at the right time, and they brought together a few critical ideas such as iTunes, an app store, killing the stylus, beautiful marketing, and so on. All of this led to the wild success of the iPod and iPad.

Unfortunately, the task ahead of banks is by no means simple. After all, they still have to solve the problem of pinpointing the right timing.


The Pivot in Banking

To get the timing right, it’s crucial that banks pay relentless attention to their market. As an echo from our post from earlier today, banks should be highly attuned to the data that KPMG highlights in their recent report, “Banking Outlook 2014: An Industry at a Pivot Point.”

There are two key charts in this study. The first has to do with the fact that return on equity for banks has been miserable, with a slow recovery, since 2007:

The second chart has to do with the fact that banks are getting squeezed on net interest margins:

Together, these two charts showcase the heart of why KPMG says that banks “will have to move from what has essentially become survival mode—coping with the fallout from the credit crisis and complying with new regulations—to relentlessly focusing on change that drives top-line growth.” By “top-line growth” KPMG means that banks will need to “find new ways to connect with customers” by leveraging information technology. KPMG says that in 2014 banks should move from defense to offense.

In other words, now might be the time for banks to invest in technology that can truly engage the customer and win wallet share from competitors. Ron Shevlin talks about this concept in his post “Why Don’t Banks Innovate?” when he references banks’ miserable return on equity and then says, “with advent of mobile technologies, the shift in demographics, and the economic issues facing the industry, we might actually be on the cusp of some bigger change.”

What do you think? Is it too early to tell what the future holds, or is the timing right for some big changes in banking?


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Source: http://bit.ly/1roO0IV 

Topics: fintech