Re-envision Client Value
The first act of your Reset4Value transformation journey
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This article was first published on August 5, 2021, and is part of Oliver Wyman's "Reset4Value series," a collection of content to help business leaders transform cost and ignite growth.  


It’s often easier for leaders to focus resources on what their organization does well, rather than understanding what the customer values.

Now is the time to Reset4Value

As leaders remain pressured with ongoing cost and consolidation pressures, they need to find ways to best leverage disruption and drive new opportunities. Our previous insight described our “Reset4Value” approach — a sustainable way to transform cost, and take these savings to ignite growth in your business. Leaders can pick their spots for quick wins, reallocate resources to the highest priority areas, and accelerate self-funding to monetize new capabilities.

What follows is a deep dive into the first act of your Reset4Value transformation journey — “Re-envisioning client value.” Here, we bring industry trends and insights from the front lines. Customer values are changing, and today there are immense opportunities for CEOs and financial services leaders to capitalize on market trends, fuel growth, and drive new revenue streams — but to get there businesses need the right capabilities and business leaders need the right mindsets. Below is an except of the report, for the full version, please click here.  


Customers' needs are changing, and so are the rules of the game.

Provocation

The traditional rules — manufacturing a product and distributing it through well-understood channels, with the right price and appropriate brand awareness — no longer work like they used to. Today, consumers have many more choices to fulfill their needs, and they are open to both established and new brands that represent innovation, progress, and ease.

Increased commoditization in financial services has made it harder for companies to differentiate on features, functionality and price. As your company strives to differentiate, you need to focus on the value you are bringing to customers today — and going forward.

Our recent “Think CustomerFirst” paper shared perspectives on realigning corporate strategy with investments that are deeply tied to customers’ needs. With our structured, systematic approach, we can help executives navigate this next wave of uncertainty and beyond.

Traditionally, organizations focus on products, and what they do well...

We sell products, but don’t solve customers' problems

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“When facing a life event, my products are not top-of-mind for customers.”

 

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We are competing on features, functionality and price

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“We spend too much time tweaking products to stay competitive rather than truly innovating for customers.”

 

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We are playing defense, instead of offense

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“We are not keeping up with digital disruption and we are spending too much on resources without staying relevant in the market.”

 

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We believe leaders should Reset4Value, and use transformation exercises as opportunities to increase growth ambitions and drive new value and service quality to clients.

Firms are truly challenged to transform

Cost takeout has been a perennial objective, with many financial firms in efficiency mode for the last decade. Although the banking industry has started to see some margin improvement, for many asset managers and insurers, margins have declined despite cost programs.

Most incumbents are facing declining margins and a low-growth reality

-3%
point change over the last 10 years in North America, Insurers and Asset managers have faced declining net income margins (Source 1)
90%
of the Fortune Top 50 companies have announced a cost action since the beginning of the pandemic (Source 2)

Only 35%
of survey participants rated their cost programs as very successful (Source 2)
Only 25%
of investors are confident digital transformation strategies will be effective (Source 3)
Source 1: S&P Global Market Intelligence
Source 2: Oliver Wyman’s “All Eyes on Cost” report, July 2020; Oliver Wyman Cost Survey, June 2020.
Source: 3: Oliver Wyman’s, “The State of the Financial Services Industry 2020 report, When Vision and Value Collide”; and Oliver Wyman and Procensus investor survey, November 2019.

Why is this happening?

A collision of mega trends are changing customers' needs. Many of these trends have accelerated over the last few months with COVID-19.

Mega trends

COVID-19 has accelerated change and what customers value
Our Oliver Wyman “Consumer Sentiment analysis 2020” surveyed consumers’ financial services activities during COVID-19. Approximately 15 to 20 percent of consumers surveyed are changing their financial services behaviors. This presents untapped opportunities for financial services providers.
Source: Oliver Wyman Consumer Sentiment Survey 2020

Opportunities: There are huge unmet financial needs

46%
US adults that have no life insurance
84%
Adults who lack disability insurance

Source:  LIMRA Insurance Barometer Report 2020: www.LIMRA.com


66%
Adults that don’t have Individual Retirement Account (IRA)
50%
Adults who lack basic financial literacy

Source: “Invest in You Savings Survey” conducted by CNBC and Acorns in partnership with SurveyMonkey, 2019


Opportunities for firms with the right capabilities

Firms that understand what customers value most have an opportunity to accelerate growth and consider which capabilities to invest more or less in. Look beyond where you have traditionally played and consider the specific value customers are expecting from both traditional and non-traditional competitors, as well as the unmet customer needs not yet fulfilled by players in your market. This will allow you to double down on capabilities that truly differentiate and are unique, while reducing spend on capabilities that customers value less.

Below are examples (not exhaustive) of capabilities matched to what customers value.

Get started: Re-envision how you create client value

 

Activate a CustomerFirst mindset

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Firms need to move toward understanding customers' needs and focus on solving problems that enable “real progress” in their consumers’ lives (for example, triggered by life events). By solving customers’ most pressing problems and doing more of what customers value, firms will win more share of consumer attention. Our “Think CustomerFirst” paper shared seven practical considerations to begin making this progress and poise organizations for long-term growth.



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Build a treasure trove of customer data

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Financial services firms will need “on the ground” information to get ahead of where customers' needs are going. Increased consumer attention allows firms to build a treasure trove of customer data — signals of future intent versus records of past transactions. This data can help companies develop better value propositions and richer solutions for customers — with a greater scope. Solutions need to be customized and proven with data. To achieve this, embracing a test-and-learn mindset is crucial. The approach needs to: (1) Test with customers, early and often; (2) Capture signals generated by customers’ engagement to improve the experience, function, or both; (3) Iterate the experience and functionality (4) Evolve the experience in lockstep with becoming richer and stickier with increasing functionality.



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View cost programs as a way to fuel growth

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Rather than performing a one-time slash of expenses (that often trickles back in), leaders need to change their mindset and view cost programs as a way to fuel growth. This can be achieved by building capabilities linked to customer value, growth and the firm’s differentiation.

We believe “unconventional times require an unconventional mindset.” You may already have the necessary capabilities in your arsenal and our Reset4Value approach takes this into account. We can help your firm to bring large opportunities into plain sight and gain a true view of your differentiation. Using our structured playbook, firms can look at what they are doing today through a new lens — and optimize current and new capabilities to create more customer value.

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Four Acts of Unconventional Leadership

Performing the “Four Acts of Unconventional Leadership” in a cohesive, self-reinforcing whole is key to fusing your cost transformation efforts together. Our upcoming papers will take subsequent deep dives into the next set of Acts. With Act 2, we will build on re-envisioning client value. We will showcase how leaders can segment and align costs to client value — to further drive discussions on which capabilities can fuel future growth. This synthesis of the business portfolio ensures leaders are spending the appropriate amount of time, money, resources and attention to the right areas and priorities.

As we’ve said, it’s often easier for leaders to focus resources on what their organization does well, rather than understanding what the customer wants. Using our Reset4Value playbook, we can help your management team focus — to solve your customers’ most pressing problems, align the necessary resources, and execute on the change.

The time to get started is now.