Risk and capital agenda. Financial-services firms will seek to stabilize long-term funding by raising more common equity, defending their base of client deposits, and rebalancing their portfolios of asset- and liability-rich businesses. They will also upgrade their risk and capital management systems. The crisis revealed that many firms did not adequately understand, quantify, and prepare to manage certain sources of credit and market risk. Regulators are demanding that firms do better. To accomplish this, they will need to develop more rigorous processes throughout the organization. Accountability for risk and capital management processes has been siloed too often in the past; now those processes will be aligned with each other (with capital as the “currency of risk”), integrated into strategic management, and shared more broadly across the firm.
Growth agenda. Moving forward, most firms will find profitable growth harder to attain. The industry leaders will need to set realistic but ambitious growth targets, create more organizational and investment focus on specific product and client markets, and enhance their capabilities for growth, through organic means as well as mergers and acquisitions. This growth agenda will be informed by a clear view of how profit pools have shifted and where they will be located in the coming years.
Capabilities agenda. Leading companies will identify and develop a carefully selected system of mutually reinforcing and differentiating capabilities that support the firm’s growth agenda. A capability may take the form of superior knowledge of a particular client segment (such as premium clients) or client needs (such as payments), the management of a particular asset (for example, a payments network), or an organizational ability (such as innovation or talent management).
- Operating model agenda. Financial-services companies will need to align their cost structures more effectively with growth and value creation. For instance, a better focus on new markets and revenue sources will often require them to deploy their capabilities systems more consistently, while also reducing costs. Most financial firms are likely to invest in multiyear transformation programs designed to implement leading-edge technology solutions. Many of these programs will use lean methodologies to drive down structural costs and improve customer service throughout the organization.
By recognizing the profound and enduring changes the industry faces and crafting a new strategic direction, the most farsighted financial-services companies will position themselves for renewal and growth.
Resetting for Revival
Fresh on the heels of the Great Recession, senior leaders are changing their perspective. They have managed their companies through a period of sustained and painful adversity. They have a heightened awareness of what makes sense — and what doesn’t — for their businesses. And they are keenly aware that success in the new era will require new skills and capabilities.
The reset for business is real, and its consequences are still somewhat unclear. But this year, for the first time since 2008, one can see the shape that revival will take. Some companies will embrace its nitty-gritty, frugal, customer-oriented ethic. A handful of them will learn to focus their strategic choices (with enough discipline to divest the businesses that don’t fit). These relatively coherent companies, with a relatively clear view of their potential growth path, will be leaders of the new industries and masters of the new practices that emerge.
- George Appling is a Booz & Company partner based in Houston. He primarily advises telecom operators, device manufacturers, and retailers. His focus areas include marketing and branding, sourcing and supply chain transformation, organizational improvement and change management, and retail strategy. He has recently worked and developed expertise in the mobile application space.
- Jose Gregorio Baquero is a Booz & Company partner based in Dallas. He specializes in go-to-market strategies and operating model design for multinational consumer goods companies around the world.
- Michael Beck is a senior executive advisor with Booz & Company based in Chicago. His focus is strategic and operational improvement for automotive and industrial clients.
- Scott Corwin is a partner with Booz & Company based in New York. He focuses on helping to develop enterprise transformation strategies for clients in the automotive, media, information, and consumer industries.
- Roman Friedrich is a Booz & Company partner based in Düsseldorf and Stockholm. He leads the firm’s communications, media, and technology practice in Europe and specializes in the strategic transformation of fixed-line and mobile communications, technology-based transformation, and sales and marketing in the communications, media, and technology industries.
- Elisabeth Hartley is a principal with Booz & Company based in New York. She specializes in helping consumer-focused companies achieve strategy- and capabilities-based transformation across the consumer goods, media, and nonprofit sectors.
- Evan Hirsh is a Booz & Company partner based in Cleveland. He has more than 20 years of experience focusing on business strategy and operational improvement for automotive and industrial companies.
- Paul Hyde is a partner with Booz & Company based in New York. He consults with senior executives in the U.S., Asia, and Australia on a range of strategic and organizational issues, primarily serving the financial-services industry.
- Barry Jaruzelski is a partner with Booz & Company based in Florham Park, N.J., and is the global leader of the firm’s innovation practice. He has spent more than 20 years working with high-tech and industrial clients on corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.
- John Loehr is a Booz & Company partner based in the firm’s Chicago office. He specializes in helping automotive, industrial, and aerospace companies reach a position of product and market leadership through a combination of product strategy and functional restructuring.
- Leslie Moeller is a senior partner with Booz & Company based in Cleveland. He leads the firm’s consumer, media, and retail market practice in North America.
- Marian Mueller is a Booz & Company principal based in Florham Park, N.J. He focuses on organic and acquisitive growth strategies, portfolio strategy, and operating model and organizational design for industrial companies with a global footprint.
- Kasturi Rangan is a principal with Booz & Company based in Cleveland. He focuses on corporate and business unit growth strategies for automotive and other industrial companies.
- Roman Regelman is a partner with Booz & Company based in New York. He focuses on corporate and business unit strategy and business transformation programs for capital markets institutions.
- John Rolander is a Booz & Company partner in the financial-services practice, based in New York. His work focuses on growth strategy, sales, and marketing across a broad set of financial institutions, with particular depth in private wealth management.
- Karim Sabbagh is a partner with Booz & Company based in the Middle East. He leads the firm’s global communications, media, and technology practice. He specializes in sector-level development strategies, institutional and regulatory reforms, large-scale privatization programs, and strategy-based transformations focused on strategic planning, partnerships and alliances, marketing, and business process redesign.
- Joseph Sims is a partner with Booz & Company based in Dallas. He has more than 25 years of senior management, consulting, and business development experience in software systems integration, electronic commerce, telecommunications, and Internet-related businesses.
- Gauthier Vincent is a senior executive advisor with Booz & Company’s financial-services practice in New York. He advises senior management at banks and financial companies on corporate strategy, managing for value, and business unit growth strategies. He has 15 years of experience in financial services as a management consultant, an investment banker, and a bank executive.