2023’s business strategy for IFA firms – the race is on

Race horses galloping in racing competition

By AdviceBridge

Last month you may have read about what financial advisers, wealth managers, and financial business owners were concerned about as the UK was easing out of the pandemic restrictions, and heading into 2022. This month, step into the future as we delve into the McKinsey Global Survey on digital strategy to find out what the industry expects in 2023.

11% believe current business models won’t survive

It’s no longer news that Covid-19 has increased the speed of digital acceleration in financial service businesses. But only 11% of respondents to the McKinsey survey believe their current business models will be economically viable through 2023. And 64% say their companies will need to build new digital business to help them get there.

Business is vulnerable to digital disruption

While digital ways of working have accelerated, the pandemic has created vulnerabilities in the way advisers do business.

We’ve all witnessed customers, employees, and partners increase their use of technology. This has the knock-on effect of lowering the barriers to digital disruption and made technology-driven changes essential.

The McKinsey survey spanned industries beyond financial services, including high tech/telecom firms, public and social sectors, healthcare and pharma, among others. Respondents revealed vulnerabilities across the board, particularly to their profit structures, ability to bundle products, and operations.

Digital and technology spend has increased

Despite budget cuts in other areas of business, spending on digital and technology increased during the pandemic. New demands mean that digital and technology investment is needed across the entire business model.

The amount of resources deployed to technology is a clear indication of its importance in both strategy and operations. According to the research, funding of digital and technology increased, and the number of full-time digital and technology roles also expanded in line with this increase.

51% are using technology to strategically differentiate from competitors

Last year, executives were beginning to take a more strategic view of technology.

This year, 51% of survey respondents are actively investing in digital and technology to differentiate themselves.

Highest-performing companies made bold investments in technology

Previous research has clearly shown that bold investments in technology are more likely to support success in transforming business than smaller investments.

For businesses to succeed in their ambitions, they must first understand what it really means to differentiate themselves from others. “Technology” and “digital” are broad terms and can have different meanings in different organisations.

In light of this, McKinsey specifically asked about technology that underpins successful digital transformations. As you can see from the chart below, the results indicate a close link between technology investment and economic performance.

Source: McKinsey & Company – Digital strategy in the post pandemic era

Tech-savvy leadership set top performers apart

Perhaps unsurprisingly, the top performers have taken more action than their peers to meet technology objectives. If you’re not already leading as one of the top economic performers, catching up will become increasingly difficult.

Now, with technology in place, these forward-thinking organisations are moving on to invest in new talent, engaging in new partnerships, and increasing spend on research and development.

As a result of taking a bold approach to innovation and technology investment, top performers now win a large share of sales from products or services that didn’t even exist a year ago.

In addition, tech leaders are more likely to play a major role in innovation and product development.

Source: McKinsey & Company – Digital strategy in the post pandemic era

Look and plan ahead so you don’t get left behind

For businesses to recover from the effects of the Covid-19 crisis it will be necessary to make permanent changes to many areas of their organisation.

Businesses must assess:

  • The pace at which they conduct their business
  • The nature of their value proposition
  • The talent, capabilities, and leadership needs required for success.

Digital and technology disruptions are creating wider gaps between businesses, and, as the McKinsey reports states, “creating winner-takes-all dynamics in more and more industries”.

To thrive companies are being forced to invest and strengthen their use of technology throughout their business. If you haven’t already made bold investments in your technology, the time is now.

Equip your business in a rapidly evolving landscape

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