runner tying shoe laces

Perspectives

Agility in financial services

If the shoe fits, mass-customize it

I recently attended a talk about the impact of all things digital on the financial services industry. I know what you’re thinking: Oh, another one of those? But there were some interesting perspectives shared during the presentation.

October 23, 2017

A blog post by Jim Eckenrode, executive director, Deloitte Services LP.

Among them was the concept of the age at which individuals become “commercially empowered,” which according to the presenter is age 17. In this case, “empowerment” is defined as the point when people start to make deliberate brand choices when spending their own money. I’m not quite convinced that’s true. I remember being very loyal to a certain brand of model airplane kits when I was much younger than that. But the data point works for this story, so I’m going to use it.

My daughter is 17, and a dedicated soccer player. She was in need of a new pair of cleats, and was going to use a gift certificate she received from the manufacturer when another pair of her cleats failed under warranty. To use the certificate, she had to go to the company’s website to place the order. After searching a while, she didn’t find what she was looking for. At that point, she speculated that perhaps she could customize her order, based mostly on the cleat pattern she wanted on the bottom of the shoe.

Being a classic Baby Boomer, I suggested that there was no way that the company was flexible enough to allow someone to place a custom order for something that was relatively inexpensive. A car? Sure…most auto manufacturers allow you to build your car online and then order it. But not soccer cleats, surely.

Of course, I was wrong. A few clicks later, she had a completely custom pair designed, ordered, and paid for. She was able to not only choose her cleat pattern, but also the pattern and color of the upper, and the color of the company logo on the side of the shoe, ankle cuff, and even the shoelaces. At the time of the order, we were informed that it would take six weeks to arrive. Okay, sure, (said the Baby Boomer), maybe you can customize your order, but see how long it takes them to do it? Two weeks later, the box arrived at our door.

The point? While my daughter perhaps remembers life before smartphones, that doesn’t apply to the online world and online commerce. She’s now at the age where she has some money to spend and is starting to make choices about who will earn her business. And for digital natives like her, it was quite a natural thing that a consumer products company should be able to give her exactly what she wanted.

kids playing soccer

What can financial institutions learn from shoe manufacturers?

I’m not at all a manufacturing expert, but I can speculate on the amount of flexibility that had to be built into the soccer cleat value chain. From suppliers, to the design of the shoe manufacturing facility, the technology that manages inventory, orders and sales, to the website used by the consumer, a high degree of emphasis had to be placed on creating a system that could respond to a market of one. A market that is expecting this to be the natural order of things.

And it doesn’t take a huge cognitive leap to apply those same demands to other product and service providers, including financial services. According to a recent report Deloitte developed in conjunction with the World Economic Forum, the rapid development of fintechs creates some challenges and many opportunities for incumbent financial institutions. On the positive side, large banks, investment management firms, and insurance carriers are increasingly looking to fintechs for partnership opportunities to improve customer experience, create new products, and access new markets.

But the challenge these larger financial institutions face involves creating a level of agility and responsiveness to be able to identify and partner with these smaller startups without smothering them. To be sure, the financial services industry has successfully demonstrated a level of strategic and technology agility. Recent examples include how wealth management firms have responded to the rise in robo-advisory fintechs, and how auto insurance carriers have taken advantage of telematics to improve underwriting and pricing of collision coverage.

But I’m not talking about those kinds of agility. What’s different with my daughter’s experience is that this shoe company was able to build in day-to-day operational agility to be able to deliver in two weeks a reasonably custom pair of shoes.

An analogy in the insurance industry is found in the potential demand for time-based or event-based products, which would need to be similarly customizable and delivered rapidly. True, financial services firms have been successful in designing products with features that align to different customer needs or profiles. Credit cards, mortgages, and investment accounts all take into account things like lifestyle, risk tolerance, and credit behavior. But these are all either prepackaged or driven by the financial institutions’ rules or profit models.

But if today’s emerging consumers who are beginning to determine their brand loyalty expect to be able to customize financial services products and experiences, will financial institutions be able to respond? Or is the need for such customization truly needed as it relates to financial products? What do you think?

If today’s emerging consumers who are beginning to determine their brand loyalty expect to be able to customize financial services products and experiences, will financial institutions be able to respond? Or is the need for such customization truly needed as it relates to financial products?

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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