sb66 12104 winning moves for 12 industries

8/2/2019 Sb66 12104 Winning Moves for 12 Industries

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strategy+business

issue 66 SPring 2012

reprint 12104

by the PartnerS anD Pr aCtiCeS of booz & ComPany;

introDuCtion by thomaS a. SteWart

Winning Moves for12 IndustriesEvery industry faces its own challenges in 2012s turbulent, uncertaineconomic environment. These capabilities systems could pave the way

for business growth and development in a dozen key sectors.


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INa prolonged period o economic weakness,

its easy or business leaders to ocus their

attention on the external macro-level chal-lenges acing them: political and regulatory uncertain-

ty, skittish consumers, rising commodity prices, and

slowing GDP growth in emerging economies. Each

industry also has its own challenges and uncertain-

ties. For example, pharmaceutical companies are con-

tending with a dramatic wave o patent expirations on

blockbuster drugs at a time when overall growth

is slowing and R&D productivity is slumping. The

chemicals industry is changing dramatically because

o the sudden boom in natural gas rom shale rock,

producing a sureit o raw material or ethylene-based

plastics. The retail banking industry is transitioning

rom a high-margin business to a lower-margin one. And in commercial aerospace, the BoeingAirbus

duopoly is eroding as new companies rom China,

Russia, and Canada enter the industry.

Yet its not enough to look externally; internal

actors make all the dierence. In good times and

bad, some companies succeed while others ail. Suc-

cess is determined in large part by the particular mix

o capabilities the combination o processes, tools,

knowledge, skills, human capital, and organizational

orms that companies deploy. Thats why, par-IllustrationbyHarryCampbell

Every industry faces its own challenges

in 2012s turbulent, uncertain economic

environment. These capabilities systems

could pave the way for business growthand development in a dozen key sectors.

by the partners and practices of Booz & Company;introduction by Thomas A. Stewart

WINNINGMOVES

FOR12 INDUSTRIES


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ticularly in dicult years like those weve experienced

recently, every corporate leader should be asking, Do

we have the capabilities we need to win in our industry

going orward?

All companies need at least two types o capabili-

ties. The rst group o capabilities are prerequisites or

entry into a sector. Kellogg School o Management pro-

essor Thomas Hubbard calls these competitive neces-

sities; we at Booz & Company call them table stakes.

For example, every consumer products company must

manage a supply chain; every oil company must meet

environmental and saety requirements; every telecom

operator needs to develop and reliably maintain its net-

work technology.

Distinctive capabilities make up the second group:

They are unique to each companys identity, linked to

its strategy, and hard or competitors to copy. A com-

panys investment decisions, operating model, and prod-uct and services mix align to support and enhance these

dierentiating capabilities. In successul companies,

these combine into a mutually reinorcing capabilities

system, dening what the company does well, and are

applied explicitly to everything it does: every product

and service it oers, every market it enters, and every

deal it makes (including M&A). (See The Capabilities

Premium in M&A, by Gerald Adolph, Cesare Main-

ardi, and J. Neely, s+b, Spring 2012.) Whether in aero-

space, consumer products, or telecom, companies that

succeed in building such a system are invariably better

positioned to outperorm competitors. Disneys excel-

lence at marketing to youth and Amazons prociency

with online retailing are two prominent examples.

Every year, Booz & Company industry teams

take a step back to think broadly about the challenges

and opportunities their client companies are likely to

encounter in the months and years ahead. This year,

these eorts included a concerted emphasis on identi-

ying the capabilities and capabilities systems that are

most likely to result in success in home markets andaround the globe.

What ollows is a sample o the thinking rom these

teams. For each o 12 industries, weve highlighted just

one or two distinctive capabilities as intriguing sources

o strength. (Links to longer, more comprehensive write-

ups or each industry by the same authors are also pro-

vided.) Not surprisingly, some recurring themes emerge.

Capabilities that enhance a companys digital platorm

loom large in consumer packaged goods, retail, re-

tail banking, and wealth management. In automotive,

healthcare, and pharmaceuticals, capabilities that allow

a company to operate more eciently and eectively,

rendering it t or growth (in Booz & Company par-

lance), are o central importance.

We hope this collection o vignettes provides you

with ideas and perspectives about what capabilities you

can develop in any industry as your company sets orth

to grow stronger.

Thomas A. Stewart

[email protected]

is the chie marketing and knowledgeofcer or Booz & Company.

1.ChemicalsDeploy NaturalSupply Chains

There are certain things that chemical

companies cant change: where their

customers are, and where they buy raw

materials. External orces, such as new

supplies o oil and natural gas, are mak-

ing the cost and availability o eedstocks uncertain, and

demand depends on the global economy. In this con-

text, the most orward-looking chemical companies are

distinguishing themselves in the way they design and

develop their capabilities.

One important capability in this industry is using

the natural supply chain: using all unctions cus-

tomer service and marketing, logistics and storage eec-

tiveness to serve customers in a more dierentiated

way, and thus to grow the top line while keeping costs

competitive. This includes designing rigorous production

and distribution strategies tailored to customer needs.Natural supply chains rst segment a chemical com-

panys product portolio into three main categories

basic chemicals, specialties, and petrochemicals and

then urther segment them by the way the producer adds

value. The goal is to apply common elements across the

enterprise as market requirements allow; or example, us-

ing one set o logistics when there are long lead times and

standard supply volumes, and another or products with

shorter lead times or greater need or order fexibility.

This capability makes chemical companies ar


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more operationally eective; ater implementing natu-

ral supply chains, one large producer improved ulll-

ment times by 20 percent, reduced inventory by 40percent, and cut operating costs by about 20 percent.

Another important cross-unctional capability has

to do with the way some companies take their expertise

to market. These companies adopt the role o solutions

providers: They oer partnership, guidance, and ser-

vices to help customers make the most o materials and

products. This capability combines deep knowledge o

customers with innovation in chemical applications and

technology, and perormance-based pricing (in which

the materials provider assumes some o the risk and

gains some o the reward in customers innovations).

Thus, or example, the Swiss chemical company Lonza

Group Ltd. markets itsel as a partner o choice in bio-

tech, providing expertise in mammalian and microbial

ermentation, as well as in lie-science manuacturing,

to allow its pharmaceutical customers to bring their

products to market more rapidly.

Companies that build this kind o capability can

enjoy the sustainable and stable revenue returns inher-

ent in any razor blade business model in which the

original sale opens the door to an ongoing customer re-lationship. By selling the chemicals themselves at rela-

tively low prices, they can keep customers coming back

or ancillary products: in this case, more value-added

services and collaboration.

Dennis Cassidy Jr.

[email protected]

is a partner in Dallas.

Marcus Morawietz

[email protected]

is a partner in Frankurt.

Jayant Gotpagar

[email protected]

is a principal in Houston.

For the 2012 Booz & CompanyChemicals Industry Perspective,see booz.com/chemicals-2012.

2.

IndustrialsEmbrace Strong-Form ProductManagement

This is a perect moment or industrials

companies the companies that make

and maintain heavy machinery, con-

struction and building components and

equipment, energy products such as

turbines and windmills, and similar products to in-

vest in developing distinctive capabilities.

One o the most promising is improved productmanagement. At too many companies, decision making

is ragmented across a variety o unctions. Sales decides

which products to maintain and which to kill; R&D

determines when an enhanced version o a product is

ready or release; and operations may have the nal say

in choosing suppliers. Product managers are little more

than administrators without much decision-making

power; they police the results, ocused on one or two

broad mandates. At a low-cost manuacturer, they nix

costly eatures that are nice but unnecessary; at a pre-

mium company, they block cost-saving initiatives that

would erode the customer experience. Although nar-

rowly valid, this siloed approach oten results in cus-

tomer insights that are gathered but never used, slow

innovation, and disappointing product protability.

By contrast, strong-orm product management ele-

vates product managers to a cross-unctional role, giving

them the authority to make decisions about the timing

o innovations, pricing, channel strategy, and every-

thing else that aects the success o product portolios.

This ensures that the companys core strategy makesits way into the design and launch o products and ser-

vices. At a company practicing strong-orm manage-

ment, product managers become the ocal point or a

higher level o strategic judgment.

At its best, strong-orm product management is an

accountability model a way o assigning responsibil-

ity or results to a single individual who can take a lie-

cycle view o a portolio o related products, rather than

to a series o people who lack a holistic perspective. At

a time when competition and customer demands have


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intensied, this can be a dierentiating capability, or-

tiying the connections to customers and increasing the

odds that a company will make the right trade-os and

win in the marketplace.

Dan Holland

[email protected]

is a principal in Detroit.

Barry Jaruzelski

[email protected]

is a partner in Florham Park,N.J.

Arvind [email protected]

is a partner in Chicago.

Marian Mueller

[email protected]

is a principal in Florham Park,N.J.

For the 2012 Booz & CompanyIndustrials Industry Perspective,see booz.com/industrials-2012.

3.AerospaceShorten the Product

Launch CycleThe commercial aviation industry is

poised or intense growth, particularly

in emerging economies. But it is also

rapidly becoming more competitive.

From outside the U.S. and Europe,

manuacturers such as Bombardier (headquartered in

Montreal), Comac (Commercial Aircrat Corporation

o China), and the United Aircrat Corporation (rom

Russia) are preparing to challenge the long-standingAirbus and Boeing duopoly. At the same time, the sup-

ply base has become more concentrated.

A clear understanding o the industry structure, as

it reaches a new equilibrium in each supplier market, is

thus essential or making strategic decisions. One major

capability that is becoming critical is aster, more in-

tensive innovation. The industry is already beginning

to see a shortening o the product launch cycle and an

increase in R&D spending.

The service lie o aircrat could be reduced as air-

lines opt to buy newer, less expensive narrow-body air-

crat, rather than urther extend the liespan o their

existing feet. This means that suppliers will also see a

shorter services stream on their installed base. Suppli-

ers that can aggressively manage these shorter lie cy-

cles, and handle changes in demand, will be in a much

stronger position. For example, Boeing and Airbus are

under pressure to respond to the new aircrat challeng-

ers with their own designs or narrow-body airrames.

To do this, they need eciency improvements and oth-

er innovations. Many o those will come rom the sup-

ply base. There are signicant opportunities or suppli-ers with strong capabilities in research and innovation.

Jono Anderson

[email protected]

is a principal in Los Angeles.

Randy Starr

[email protected]

is a partner in Florham Park, N.J.

For the 2012 Booz & CompanyAerospace & Deense IndustryPerspective, seebooz.com/ad-2012.

4.

TechnologyDigitize the Verticals

The combined trends o cloud com-

puting, connectivity, and big data ana-

lytics are orcing inormation and

communications technology (ICT)

companies, and their customers, to re-

think their established ways o doing business. Technol-ogy is nally living up to its promise: Industry ater in-

dustry healthcare, utilities, transportation, and others

can now change their product oerings, go-to-mar-

ket strategies, and internal business operations, thanks

to emerging IT building blocks. This presents an op-

portunity or technology companies to become active

partners o industry verticals (the value chains o inter-

related companies in particular sectors) as they embark

on digital transormations.

To take on this role, however, the leading IT com-


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panies will need to build new capabilities systems. They

must get even better at understanding how each indus-

try vertical conducts its business, where to nd oppor-

tunities to drive value, and how emerging technologies

can help solve the specic challenges each industry ver-

tical aces. They must learn to work collaboratively with

customers to build industry-specic solutions that can

scale across corporate boundaries. They must provide

the security and reliability that no one else can, especial-

ly across the span o a supply chain. In short, IT compa-

nies must become better at designing new high-touch,

customized operating models or new types o custom-

ers the companies embedded in vertical industries,

traveling down the digital road.

Toshiya Imai

[email protected]

is a partner in Tokyo.

Alex Koster

[email protected]

is a principal in Zurich.

Kenny Kurtzman

[email protected]

is a senior partner in Houston.

Matthew Le Merle

[email protected]

is a partner in San Francisco.

Pierre Peladeau

[email protected]

is a partner in Paris.

For the 2012 Booz & CompanyTechnology Industry Perspec-tive, see booz.com/tech-2012.

5.

AutomotivePrepare forBlack Swans

In 2011, U.S. car and light truck sales

exceeded 12.5 million units a nice

bump up rom 11.6 million in 2010,

but still ar short o the 17.3 million sold

at the turn o the millennium. In the

mid-2010s, earnings or automakers will depend on anumber o unpredictable actors the rapid introduc-

tion o inexpensive new models rom around the globe,

the growth in demand in emerging markets, and the

competition over market share in the U.S. between Japa-

nese and Detroit-based automakers. The most impor-

tant capability or automakers continues to be optimiz-

ing operations or greater protability. They have to get

the undamentals right: creating new vehicles that the

market wants, aligning supply with demand, and invest-

ing smartly in new technology.

Last years headlines highlighted another capabil-

ity: managing the risk o supply chain disruption in a

cost-eective way. In 2011, two major black swanstyle catastrophes the Japanese tsunami and the

fooding in Thailand orced several automakers, in-

cluding Toyota, Honda, and (to some extent) Nissan, to

curtail production around the world. There is a natural

tendency ollowing such horric events to evaluate a

ull range o risks and prepare large-scale contingency

plans. But most black swans are devastating because o

the cumulative impact o a cascading series o events. It

is not justiable to build costly, ully redundant supply

chains when more ocused and fexible preventive mea-

sures would be more eective.

Companies are better o learning to prioritize their

preparations according to such actors as magnitude,

chance o exposure, expense, and ease o implementa-

tion. For example, manuacturing key electronic com-

ponents in one location may yield attractive economies

o scale but also create signicant risk. To mitigate that

risk, automakers could split global volume across at least

two acilities in dierent regions. Developing agile re-

sponse systems deep in a supply chain is very dicult

but unavoidable; it is the heart o this capability.

Michael Beck

[email protected]

is a senior executive advisorin Chicago.

Brian Collie

[email protected]


Scott Corwin

[email protected]

is a partner in New York.

Evan Hirsh

[email protected]

is a partner in Cleveland.

Jan Miecznikowski

[email protected]


For the 2012 Booz & CompanyAutomotive IndustryPerspective, seebooz.com/auto-2012.


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6.

PharmaceuticalsGo to Market MoreEffectively

During the past two decades, large

pharmaceutical companies have relied

on a sales and marketing approach

based on prescription drug blockbust-

ers. But now, this model is no longer

generating growth. (See Big Pharmas Uncertain Future,

by Alex Kandybin and Vessela Genova, s+b, Spring 2012.)

Going orward, pharma companies will need to

ocus on building distinctive new capabilities systems

or taking products to market. This is especially truein emerging markets, which are orecast to make up 30

percent o the global pharmaceutical market by 2015

(compared with 19 percent in 2010), and which have in-

digenous healthcare models or authorization, pricing,

reimbursement, and distribution.

The needed capabilities will include payor engage-

ment working with insurance companies to address

market access, pricing, and reimbursement (including

innovative pricing agreements). Pharma companies will

help develop value-enhancing patient services, such

as compliance management programs supported by

nurses, or telephone hotline services. They will need

to know where value can really be attained rather than

over-investing in marginal benet.

They will also be drawn into multi-stakehold-

er marketing targeting all relevant players in the

healthcare system, including nurses and pharmacists

instead o just marketing to prescribers o medi-

cine. This will require close coordination among vari-

ous teams (medical, sales and marketing, market access,

and pricing) to secure pricing and utilization that refectthe value o each product.

Related to this will be better commercial trade

channel (CTC) management: engaging more closely

with key stakeholders in the distribution chain, includ-

ing wholesalers, pharmacists, and patients themselves.

CTC capabilities include new distribution models, such

as direct-to-pharmacy (DTP), in which manuacturers

sell straight to pharmacies, enabling a direct trade re-

lationship and paving the way or targeted loyalty pro-

grams. Other CTC examples include patient loyalty

card schemes, which are common in Mexico, Brazil,

and many other large emerging markets. The success o

these new CTC models depends on the management

o new partnerships with specialist third-party service

providers (or example, to provide logistics services or

DTP or to operate loyalty card programs) as well as

close collaboration among product supply, marketing,

and commercial trade unctions.

Peter Behner

[email protected]

is a partner in Berlin.

Rick [email protected]

is a senior partner inWashington, D.C.

Marcus Ehrhardt

[email protected]


Greg Rotz

[email protected]

is a partner in Washington, D.C.

For the 2012 Booz & CompanyHealthcare PharmaceuticalIndustry Perspective, seebooz.com/pharma-2012.

7.ConsumerPackaged GoodsInvest in Shopper

MarketingNo single group o capabilities can serve

all consumer products companies; the

industry is too broad and diverse.

Nonetheless, one capability shopper

marketing represents a rich oppor-

tunity or growth in all consumer packaged goods

(CPG) categories.

Shopper marketingis a term given to eorts to en-

gage with and infuence consumers at the time o pur-chase. These include in-store shel displays, digital ki-

osks, shopping list apps, and e-coupons all o which

generate digital data that marketers can use to urther

rene their pitches. For example, ConAgra Foods Inc.

developed a menu-based shopper solution program,

Give Every Night New Flavor, that oered recipes

or popular meals, such as stir-ry and pasta, and all the

products needed to prepare them, displayed together.

The company reinorced shopper awareness away rom

the stores by creating a microsite, providing digital


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coupons, and advertising on search engines as well as

in print. Within stores, signs and coupon books led

shoppers to pallets that eatured the recipes and theiringredients.

This program delivered double-digit growth over

the prior year in numbers o items sold, revenues,

and prot. It also generated signicant market share

gains or a leading grocery retailer that partnered with

ConAgra. By creating wins or retailers this way, manu-

acturers can gain more valuable opportunities, such as

better display space, visibility on retailer websites, and

access to retailers loyalty program members.

No consumer company has yet gured out all the

ramications o shopper marketing or created the ca-

pabilities required to ully exploit it, especially when

combined with digital media. But many companies

in the U.S., Europe, and parts o China are

trying hard, and are outpacing their competitors in

the process.

Matt Egol

[email protected]


J. Neely

[email protected]

is a partner in Cleveland.

Richard Rawlinson

[email protected]

is a partner in London.

For the 2012 Booz & Company

Consumer Packaged GoodsIndustry Perspective, seebooz.com/cpg-2012.

8.

HealthcareCut Costs,StrengthenSegmenting

The U.S. Supreme Courts decision to

hear challenges to the Patient Protec-

tion and Aordable Care Act in March

2012, combined with the national elec-

tions, would ordinarily have a paralyz-

ing eect on the healthcare payor industry (which in-

cludes health insurance and managed care companies).

But whatever happens to the healthcare reorm laws,

there is sucient certainty about the uture or payors to

pursue long-term strategies and develop the capabilities

they will need to succeed.

For example, baby boomers will continue to age

and get sick. Medicare will account or ever-increasing

percentages o patients and revenues. Employer-spon-sored plans will continue to be the major source o

health benets. Sophisticated IT systems will be de-

ployed. Cost reduction will remain a priority, and pa-

tient segments will urther expand and shit.

Payors have built their established businesses by

serving employers and large groups. Now they will in-

creasingly serve other segments o the market, particu-

larly individuals. The new capabilities they will need

include managing Medicare and Medicaid populations

across multiple sites o care, developing new ways o en-

Last years headlineshighlighted a capability thatauto manufacturers need:

managing the risk of supplychain disruption.


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gaging patients, and reaching individuals through new

or revamped retail channels.

Healthcare providers hospitals, clinics, and

medical services groups make up the sector in the

U.S. in which most costs are determined and incurred.

Thus, working with payors, providers need to build a

new kind o cost reduction capability or the industrys

long-term scal health. Care distribution will shit rom

a hospital-centric model to one more ocused on ambu-

latory services (with care given at patients homes or in

other locations). Investment in next-generation IT sys-

tems will continue, until most diagnoses, procedures,

and results have been codied and an inrastructure

or inormation exchange established. We also expect

continued productization, especially o high-cost

inpatient services and chronic disease management.

System-level coherence with shared incentives and

seamless interactivity among providers, payors, and pa-tients will be more valuable than ever beore.

Gary [email protected]

is a senior partner in Chicago.

Gil Irwin

[email protected]

is a senior partner in New York.

Minoo [email protected]


Jack [email protected]


Also contributing was health-care writer Philip Lathrop.For the 2012 Booz & CompanyHealthcare Payor/ProviderIndustry Perspective, seebooz.com/payor-2012.

9.TelecomProvide Experience

Telecom operators are pursuing a vari-

ety o strategies as they struggle to winin their converging, complex markets.

One o the most intriguing strategies,

rightully pursued by only a ew, is be-

coming an experience provider: oering customers a

compelling combination o targeted applications and

content, and a high level o online user experience. This

is a dicult path or many telecom operators to ollow,

but it holds promise or those who have enough o the

requisite capabilities, and who are willing to invest.

The capabilities needed or this strategy include de-

veloping innovative new applications and services, creat-

ing world-class user interaces, and delivering excellent

customer service. NTT DoCoMo Inc., a Japanese pro-vider o mobile voice, data, and multimedia services to

more than 58 million customers, is an early exemplar.

It oers a wide variety o innovative services, including

an e-wallet, an advanced personalized inormation app

combining data rom a variety o sources, and access

to music, video clips, and games. Key to its success has

been complete end-to-end control o the value chain,

along with a strong pipeline o new product oerings

and service delivery options. It boasts the top ranking in

its market or customer satisaction, and a rapidly grow-

ing customer base. DoCoMos personalized app i-con-

cier, or example, has garnered 6.2 million subscribers

since its launch in late 2008.

The model isnt limited to the most advanced tele-

com markets, such as Japan. Trk Telekomnikasyon

AS, Turkeys largest telecom operator, provides a variety

o Internet oerings including telemedicine services,

audio with childrens music and spoken airy tales, and

two e-learning portals through a simple user inter-

ace, as well as innovative devices such as a video-calling

device or the home. The telemedicine subsidiary alonebrought in US$18 million in revenue in 2008.

Bahjat El-Darwiche

[email protected]

is a partner in Beirut.

Roman Friedrich

[email protected]

is a partner in Dsseldor.

Michael Peterson

[email protected]

is a partner in Dsseldor.

Karim Sabbagh

[email protected]

is a senior partner in Dubai.

For the 2012 Booz & CompanyTelecommunications IndustryPerspective, see booz.com/telco-2012.


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10.

RetailBecome BetterCurators

Now that shoppers are bringing online

devices into their stores, retailers will

aggressively compete. They will ex-

pand their capabilities or bottom-line

growth by driving operational ecien-

cies and or top-line growth through richer customer

experience. Another capability may not be as obvious,

but or some retailers it will be the most critical dier-

entiator: their ability to develop a curatorial approach to

merchandising, less bound by product categories and

more dened by customer wants and needs.

In an era o rugal consumers, placing the right

product in the right store at the right price is essential.

Consumers demand a more curated selection; they

want the right styles, prices, and experience, all in one

store. They also want to shop at stores that refect localtastes and preerences.

Retailers will be asking themselves a set o very

ocused questions: How should product assortment in

each store dier by region and by the unique demo-

graphics and characteristics o the trade area? How

much space should be dedicated to one category or

product versus others? What should be the base price o

particular SKUs in a given category? How should they

be promoted, and when?

Localizing each store and getting the merchan-

dising right can be a Herculean task with no apparent

shortcuts. Many retailers will need to upgrade their mer-

chandising capability holistically by integrating people(especially analytical talent), IT systems (such as store

trait databases, point-o-sale checkout systems, and pric-

ing systems), analytical engines (tracking demand ana-

lytics, price elasticity, promotion returns, store cluster-

ing, and more), processes (including basic assortment

planning, promotions, campaign tracking, and peror-

mance measurement), and organization (or example,

positioning roles, responsibilities, and decision rights

around the center o gravity o the enterprise). The re-

turns or undertaking this eort can be dramatic: Weve

seen retailers improve their top line by 2 to 3 percent.

When the economic outlook is sluggish, eective

promotions are critical, especially in the ercely compet-

itive and spending-constrained lower- to middle-income

market. These rugal consumers are highly sensitive to

pricing and requently use coupons. Leading retailers

invest in shopper marketing and loyalty programs, they

tailor promotions to their customers, they partner with

manuacturers to design and rene promotional events

or particular consumer groups, and they develop the

measurement and analytical capability they need to bet-ter evaluate the results.

Deniz Caglar

[email protected]

is a principal in Chicago.

Nicholas Hodson

[email protected]


Karla Martin

[email protected]


Marcelo Tau

[email protected]

is a principal in Chicago.

For the 2012 Booz & CompanyRetail Industry Perspective, seebooz.com/retail-2012.

Turkeys largest telecomoperator providestelemedicine services, audio

with childrens music andspoken fairy tales, and twoe-learning portals.


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11.

Retail BankingBuild Customer-OrientedCapabilities

With limited avenues or growth, the

banking sector will be hypercompeti-

tive or the next three to our

years. Banks will ace competition not

just rom innovative nancial-services

companies, but also rom nonbanks, such as mobile

phone companies with bill-paying apps. They will also

need to resolve long-standing customer pain points. Too

many customers eel that dealing with their banks is

complicated and time-consuming, that they receive im-

personal treatment and little recognition, and that they

are not empowered to make decisions. They also want

the banking system to provide a way or them to engage

with riends and amily on nancial matters.Traditionally, retail banks have dierentiated them-

selves in several ways: nancial management, human

capital management, risk management, operations, IT

inrastructure, and acquisition and integration. Now,

these capabilities are quickly becoming basic competi-

tive necessities. For a sustainable right to win, banks

must invest in and develop additional capabilities that

will truly set them apart.

For many, this will mean assembling a more cus-

tomer-oriented capabilities system, drawing together

ATM

diverse processes, practices, and skills. The elements

will vary rom one company to another. They might

include designing an integrated multichannel customer

experience incorporating the online bank and local re-

tail branches; expanding the use o act-based decision

making or loans and investments; putting more ana-

lytically driven decision-making processes in place; de-

livering highly tailored, customer-ocused product and

service oerings; ostering greater collaboration across

organizational silos within the bank; and partnering

across enterprise boundaries.

Investing in these new capabilities will be expen-

sive, and unding will need to come rom somewhere:probably less rom raising ees and more rom wring-

ing costs out o the operation. Banks will have to con-

tinuously ocus on expense control on how work gets

done as well as what work to do using lean and tech-

nology-enabled process redesign. They will also need

to tap new ways to make money. For example, many

banks provide skills and inormation to customers, par-

ticularly in commercial and small-business sectors, as

bundled add-ons or even as loss leaders. Some o this

can be unbundled in a way that more eectively mon-

etizes the banks existing capabilities. Banks could ag-

gregate inormation or the marketing and sales eorts

o middle-market and small businesses, leverage their

nancial and risk management expertise or clients, o-

er white-label analytics, and perorm outsourcing and

transaction processing services. Companies ranging

rom Amazon to American Express to General Electric

to UPS have converted capabilities built or internal use

into new revenue sources. In these times, every bank

should be doing the same.

Paul Hyde

[email protected]


Ashish [email protected]


Corey [email protected]


For the 2012 Booz & CompanyFinancial Services RetailBanking Industry Perspective,see booz.com/retail-banking-2012.


13/14

12.

Wealth & AssetManagementBolstere-Relationships

These are hard times or investors.

Many are adrit, uncertain about where

to put their money and who to trust.They need sound advice as never be-

ore, but they have been badly burned

in the last our years, and their patience and trust have

worn thin.

I being an investor in this climate is challenging,

so too is operating a wealth management rm. The

market is unusually fuid at the moment, making the

competitive positions o long-entrenched rms less se-

cure. Investors are more willing to test new relation-

ships, and thereore this is an ideal time to exploit ri-

vals vulnerabilities and peel away clients.

Its also a good time or wealth management rms

to distinguish themselves by using emerging technolo-

gies to enhance the client experience. Many rms strug-

gling with top-line revenue growth and increased regu-

latory costs will under-invest in this critical capability.

That could be a grave long-term error.

New inormation technologies that have been

slowly developing (or example, tablet computers with

rich interaces and new displays, online tools that can

help rms gain client insights rom a trove o unstruc-tured data, powerul 4G networks, and public and

private clouds) have reached a tipping point, allowing

rms to run their operations and engage with clients in

innovative and more ecient ways. Its possible to envi-

sion a uture in which the clients connection with the

rm is ast, always on, and ull-service through multiple

channels; and where these interactions with advisors

and also with peers via social media are collabora-

tive and secure. A ew wealth management rms will

assemble these capabilities into vibrant systems, geared

toward solving real customer problems, and transorm-

ing the clientadvisor relationship. In time, those who

are served well by wealth management rms could goon to start other businesses, and thus a highly capable

wealth management company could become, in itsel,

an engine o growth or every sector in the economy.+

John [email protected]


Srini [email protected]


Gauthier [email protected]

is a senior executive advisor inNew York.

For the 2012 Booz & CompanyFinancial Services Wealth &Asset Management Industry

Perspective, see booz.com/wealth-asset-2012.

Reprint No. 12104

Resources

Steen Lauster, Elisabeth Hartley, and Samrat Sharma, ConsumerPackaged Goods: Escaping the Consolidation Mentality, s+b,June 6,2011, strategy-business.com/article/00081: How a single industry has

realigned itsel around capabilities; other industries are doing the same.

Paul Leinwand and Cesare Mainardi, The Essential Advantage: How toWin with a Capabilities-Driven Strategy(Harvard Business Review Press,2011): Explains the value o a capabilities system and its link to a strategic

way to play in the market.

Booz & Company, Industry Perspectives or 2012, booz.com/global/home/what_we_think/eatured_content/perspectives_12/49987698: The

ull collection o Industry Perspectives rom which this article was drawn.


14/14

2012 Booz & Company Inc.

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