One of the central questions of running an established business, in any sector is the ever present balance between staying the same, and adapting and progressing, and the nature, the pace and practice of handling that. But what risks do we take by inaction, not moving fast enough, or moving to fast?

Of course there is not a single on/off choice to be made; rather the way we deal with change is something that is part of operational structure and policies, but also presumably ingrained in culture, history and the narrative that has been built about how things are done internally and externally.

We see a lot of companies facing this dilemma in the face of digitalization and quickly changing consumer preferences, and behavior. Retail, finance, hospitality, transportation is just some of the sectors that re being deeply effected by this.

The premise is that you want to make sure your are relevant to your customers needs, and at the same time maintaining a positive cash flow, as well as keeping a cost structure that is sustainable going forward. If you are successful in your current operation, any transformation that might challenge status quo is at the same time a risk of losing important revenue or something else vital to the current business.

Quite simply, it’s a very, very delicate balancing act.

So why do large corporations, typically fail to innovate in the right pace?

It’s not primarily resources*, it’s not that they can’t see or understand it.

But at the core it is a strategic and operational inability. Strategic in a sense that there is a lack of alignment and common ground, and as a consequence, sub optimization and conflicts of interest ensue. Operational in the sense that people do not really now what to do or where to go.

So how do you identify the right approach?

Looking at data and statistics can almost always be perceived from different perspectives. It’s rather tempting to fall in the trap of analyzing data in a benevolent way, or making an analysis that lends itself favorably to your business.

Let’s say a segment of our customers say they are not happy with a current distribution platform – they rather engage elsewhere. What do you make of that? Make it better – more appealing, or take it down all together. Are there values in that platform unbeknownst to the customer, but vital to the backbone of the business? Can it be transformed, changed develop in such a fashion that it sustains its value to the business, yet, at the same time is more in line with what the customer want? Is innovation needed to change the perspective of what the service is? The classic example being that according to Henry Ford, people would ask for faster horses rather than cars when asked about their preferences for transportation.

As you do your analysis, certain really tough questions arise: Should you act as if certain aspects of your business is bound by nature, or not open to question, or is it reasonable to challenge even the most fundamental truths that has been a factor for success in the past? Do you act forcefully, driving change, or do you continue to improve in increments? Do you integrate innovation and business development in your day-to-day operation, or do you externalize and make a separate space for innovation, to be integrated later?

How does this play out in real life?

The last few years have been massively disruptive for the financial sector, and the revolution only seems to be at the beginning. All around us new actors are innovating in different parts of the universal bank offering. In almost all of these cases, the service from the start seems to be unthreatening, which is similar to how disruption often happens. In fact that is one of the key pitfalls described by Clayton Christenssen in his disruption theory. For example, the iPhone was very much regarded a toy by the large phone makers at the time it launched. The larger players continued to focus on their own business, refining, enhancing and nurturing a current setup of products, but missing the shift that was really going on. So similarly, when financial services companies are being challenged on separate business areas, in a successive fashion, nothing seems to stick, until it’s to late.

The Swedish finance startup, Izettle is a good example how piece after piece of the incumbents banking offering will be taken over by a new breed of companies. From the start, iZettle pursued a very niche market – mobile card payments, invented by Square in the US. Most incumbent bank saw this as a single product threat, and quickly released a similar product – albeit less sophisticated and less slick. In the product and services mix of a large bank it was quickly forgotten and very little attention was paid to it.

What they didn’t realize is that that product was very, very far from iZettles end game.  The ecosystem around iZettles products now includes SME loans, e-commerce systems, payment solutions etc. Basically everything a small retail or services company might need. It’s about to be listed at a 10 billion SEK valuation during 2018. Correction; It has now been acquired by PayPal for $2,2 billion.

Izettle founder Jacob de Geer, Paypal CEO Dan Schulman and Paypals COO Bill Ready. Photo: Press

Now the entrepreneurial spirit has entered the mortgage business with a number of Swedish startups offering mortgages at substantially lower rates than the typical bank. The core reaction is to point at the current flaws of this phenomenon (which to be fair, there are a number of) rather than analyzing what makes 8200 customers sign up on the first day Enkla launched its digital, low cost mortgage.

Is it just the low interest, or is it also something that has to do with simplicity, transparency? A backlash reaction, something in the way the onboarding process works?

Banks has traditionally had a very high swelling, throwing out offhand comments like “VC funded startups is our outsourced R&D department”, or that “we have the innovation before they have the scale”.

It’s just that companies like iZettle, Trustly, Klarna and a couple of others are large players now. They have scale and valuations of > 5 billion SEK. At this point it’s not just something that you acquire. But just as important, they have quite sizeable customer bases (for iZettle even bigger now that is working with PayPal) that lend them huge platform opportunities. This does show that among all these small startups there are hidden threats of real business proportions and it also displays the importance of not trying to avoid a single product attack, but to understand and win the whole game.

To win the game you need the ability to set out on a mission. The inability to change in a quick enough pace that at the same time pleases markets, pundits and builds the external story of the business, continues to be the overshadowing problem for large incumbents.

No strategic endeavor is set it stone – rather it is the ability to change with the surroundings, without giving up on what sets the business apart from the others.

At least to me it is clear that whatever your business model, distribution strategy or path you choose – there must be a clarity on the direction and adapt and change as you go along.

Digital is at the core of future competition

If your background is in physical retail, finance or whatever, transforming the business to become first and foremost digital is about making sure you stay relevant enough to attract a large enough part of the market, not risking to be become a margin player.

What has change dramatically for any business is how you are discovered, evaluated and consumed. All these critical parts of operating a business are now in large part digitalized.

The implications of that is that in any given business solution there are a million small choices to be made, that all affect the customer experience, which in turn has an effect on how you view the brand and the company. To say that a digital solutions, in it’s nature (being digital) is easily copied, and therefore does not pose a threat as a competitive weapon is… well, just wrong.

Personal touch, humanity, experience, how it feels to be a customer, how services and products are consumed and interacted with, and any other tactile parameter is already to a large degree digital, and will be even more so in the future.

The brand can absolutely, and must most definitely be, defined by what the digital experience of being a customer is. No longer can we see digital abilities merely as a complementary service, an add-on aiding stores or physical outlets.

It must be integrated both in processes, products and experiences. Otherwise the business will be provincial and irrelevant.


*This is quite a complicated matter for listed companies. They have to balance investments with cost structure and still provide steady revenue growth. Venture funded companies have an extreme burn rate during a number of years, with no obligation to show profit. Plus finding IT-competence in this economy is almost impossible, even for tech companies and startups who presumably are attractive employers, the competition for developers is crazy.