“Financial services is an industry facing significant disruption and the need to transform has never been greater. But right off the bat, we have a number of conflicts. Like other heavily regulated industries, financial services has been slow to change in the past. That’s not all directly related to regulation, however. Some of the inertia is linked to a reliance on legacy systems, a historic lack of customer churn and even a lack of competitive differentiation that may have created complacency.”
Isabelle Jenkins, UK Financial Services Leader at PwC
In the heavily regulated pharmaceutical industry, companies are looking to be faster, more effective and more personal in their offerings. Anthony Bruce, Pharmaceutical and Life Sciences Leader at PwC, says: “Regulation is vital for building trust, as it is in other sectors such as financial services. In pharma it gives patients and healthcare professionals the assurances they need, it ensures controls and safety. That is good for the sector and for society, but it does mean there are extra considerations when it comes to transformation and the pace of change. However, change is happening. For example, products are being increasingly tailored for personalised treatment, with drugs targeted directly to an individual's disease."
“Pharma has long operated on a one-to-many model. Now the opportunity is a shift to a one-to-one."
Anthony Bruce, Pharmaceutical and Life Sciences Leader at PwC
Bruce adds: “Similarly, organisations are looking at ways to improve the relative efficacy of current treatments by looking at innovations in the patient experience, to change behaviour, such as how to better engage patients and get them to take medicines as prescribed."
Andy Wisnia, a Telecoms, Media and Technology sector Partner at PwC Strategy&, sees fundamental challenges for what many would consider a mature industry.
“In many markets, core telecoms services such as smartphones, home broadband and TV subscriptions have reached or passed their peak” he says. “With lower growth, increased competition and price pressure, operators have to innovate in different ways. Expectation is building for the next wave of technologies such as 5G, although these may take several years to bear fruit. At the same time, companies are racing to make their current operations and infrastructure leaner and more efficient, using automation and artificial intelligence. It’s a complex landscape and telecoms companies have tough choices to make on prioritising investments and transformation efforts.”
Transformation means rethinking the way the business works at every level. Only then can you think about the tools needed to make it work and be its best. This includes breaking silos, consolidating customer information and using data analytics to offer products and services personalised to a business or individual.
Many of these kinds of transformation, which involve high degrees of process improvement, are as accessible to heavily regulated organisations as to any other kind of organisation, providing the mindset, ambition and skills are in place.
The model of one-to-many that Bruce mentioned has long been present in regulated sectors.
With competition limited, incumbents were guaranteed good returns on whatever products or services they offered, giving rise to the complacency Jenkins mentions.
That must change - and it can.
In financial services, organisations are breaking with tradition and looking for ways to make money that don’t rely on interest margins and products such as mortgages, given today’s extremely low margins and declining home ownership in the UK.
In pharma, organisations are exploring new models of investment such as the role of private equity to fund transformation, including the use of technologies such as AI to accelerate research and development and the virtualisation of clinical trials.
Banks are also using cloud-based apps to build responsive customer interfaces that use customer data to offer personalised product offerings, while pharma is looking at digital channels to engage better-informed customers who take a more active role in managing their health with data from wearables. And telcos are offering additional services, such as streaming services or getting into content production.
All these focus on the customer and exist largely outside the historically core, most heavily regulated parts of the business, allowing for greater innovation.
“Telcos can only do so much to transform their core business,” says Wisnia. “A slow shift towards digital-first customer experiences was accelerated by the pandemic, with operators investing more in data platforms and customer insight.”
“There’s been a material focus on finding growth from new services in related markets such as content streaming partnerships, connected home devices or the industrial internet of things, further pushing the need to transform products and operations.”
Andy Wisnia, Telecoms, Media and Technology sector Partner at PwC Strategy&
Customers have come to expect quick, smooth, personalised services from their regular interactions with the likes of Apple, Amazon, Google and other tech companies. Furthermore, people take these expectations with them when they go to work, so what is expected in B2B relationships is changing as well.
Given the criticality of data, embedding cyber security throughout the organisation and operating model is essential for successful transformation and ensuring customer confidence for all organisations.
Customers are also now valuing environmental, social and corporate governance (ESG) concerns more highly than ever. Being open, transparent and responsive with customers, investors and other stakeholders will be as important as complying with regulators and transformations that enable richer reporting and increased transparency can make a significant difference to any organisation.
Similarly, the way in which teams work is an area ripe for beneficial transformation, as organisations seek to embed behaviours adopted in response to the pandemic.
Those organisations who moved to remote working overnight were not only able to keep productivity levels high, but also realised much of the inertia to digital transformation was not as insurmountable as once assumed.
For example, organisations realised they could liberate both their people and their data from within a tightly controlled perimeter without undermining compliance and data security, providing the right measures and protections were in place. That now sets a direction of travel for all organisations to explore.
By getting important parts right – technology, business model, customer experience and remote working – organisations can achieve far more.
The modern economy, with an emphasis on easy digital interactions, personalised customer experiences and 24/7 accessibility, is a work of “less friction and more fragmentation”, says Jenkins.
But there is still more to be done.
In pharma, the rapid, collaborative development and fast-tracked testing and approval that has led to the availability of COVID-19 vaccines in less than a year is still the exception, says Bruce.
So was the quick organisation and disbursement of the UK’s government assistance for businesses, which banks got up and running in just a few weeks.
But examples such as these, which would have previously been thought impossible, show what is possible when the need is great enough.
And as that need to transform becomes greater - across all industries - finding what is possible will be critical to the success of all organisations.