投资金融之金融服务公司的战略伸缩性.docx

Deloitte ResearchStrategic Flexibility in theFINANCIAL SERVICES INDUSTRYCreating competitive advantage out of competitive turbulenceA financial services industry study byDeloitte Consulting and Deloitte & ToucheFormulating and implementing strategy has been about taking the long view. Buthow can one plan for a future that cannot be accurately forecast? In this report, weprovide a framework Strategic Flexibility that is designed to enableorganizations to prepare for what they cannot predict. Drawing on years of research,we present here a financial services industry perspective on how best to cope withand ultimately exploit uncertainty for competitive advantage.CONTENTSExecutive Summary . 2Uncertainty in the Financial Services Industry . 5Responding to Uncertainty. 8The Strategic Flexibility Framework . 13Implementing Strategic Flexibility. 27Conclusions . 31Endnotes . 32About Deloitte Research . 33About Deloitte Consulting and Deloitte & Touche. 34InsetsThe Genesis of the Strategic Flexibility Framework . 6M&A Strategies in the Financial Services Industry . 11Scenarios for the Financial Services Industry . 16Valuing Flexibility . 22Royal & Sun Alliance: Strategic Flexibility Case Study . 26Program Management and Strategic Flexibility . 28Executive SummaryThe complexity of the financial services industry can overwhelm anystrategist. Companies in the financial services industry (FSI) mustcope with multiple dimensions of change involving regulation,technology, globalization, new competitors and business models,capital market pressures, and constantly changing customerdemands.Worse, on all of these dimensions it is not merely theircomplexity that proves daunting, but the uncertainty surroundingthem. How will regulatory policy change, and what will theimplications of those changes be? What new technologies willemerge and how will they affect existing business models? Howwill the capital markets react to new strategic initiatives, and whatwill that reaction mean when it comes time to make the nextacquisition?Moreover, the uncertainty itself concerns two issues: what willhappen, and when it will happen.Existing tools for strategy formulation and implementation areof limited help because they are premised either on a relativelystable future or on the ability to make roughly accurate predictionsTrustworthy predictions would help, but few strategistshave demonstrated the ability to repeatedly and preciselyforetell what lies over the horizon. Whether it is Thomas J.Watson Jr.s well-known forecast of a world market for fivecomputers or the more recent and (apparently) equallyinaccurate bullishness of the capital markets regarding Internetstocks, there are far more examples of failed attempts atforecasting than successful ones. The French absurdistplaywright Eugene Ionesco was right when he said, “one canonly predict events after they have occurred.”Still, the uncertainty that plagues some of the mostimportant questions facing the financial services industry doesnot relieve executives of the need to think strategically or tomake decisions that will move their organizations forward. WhatFSI decision makers need is a new set of strategic planning andfinancial evaluation tools that are designed specifically to copewith uncertainty.We present just such a set of tools in this report. Specifically,by drawing on years of research across a range of industrysettings and competitive contexts, we have developed a2of what the future will hold. For example,traditional industry analysispresupposes that the structure of an industry will remain stable longenough for meaningful action to be taken. However, when it cantake only months for the industry to change significantly, pursuinga particular course of action for example, an acquisition that isgeared to the needs of todays industry structure seems foolhardy.powerful approach to strategy under uncertainty and organizedit into a four-phase framework. Strategic Flexibility provides arigorous yet adaptable methodology that will help you guideyour organization through uncertain and turbulent waters.The figure below illustrates the four phases of the StrategicFlexibility framework.FIGURE 1. STRATEGIC FLEXIBILITY FRAMEWORKANTICIPATEFORMULATEssssssIdentify drivers of changeDefine the range of possible futuresDevelop scenariosOPERATEExecute the core strategyMonitor the environmentExercise or abandon options as appropriatessssDevelop an optimal strategy for eachscenarioCompare optimal strategies to define“core” and“contingent” elementsACCUMULATEAcquire those capabilities needed toimplement the core strategiesTake options on capabilities neededfor contingent strategiesSOURCE: DELOITTE CONSULTING ANALYSISConsider each in turn:ANTICIPATEThe uncertainty that shrouds tomorrow does not mean we shouldabandon all efforts to anticipate what lies ahead. Scenario-basedplanning provides a proven process by which executives canunderstand the drivers of change affecting their industry, theirorganization,and even the successful launch of specific productsor services. By analyzing the dynamics of change and defininghow key drivers might evolve and interact, executives canconstruct a workable number of discrete scenarios for theirbusiness. This scenario space defines the future worlds in whichan organization is likely to find itself, and so provides a contextfor determining the nature and extent of the flexibility neededto compete effectively no matter how the future unfolds.FORMULATEOnce the range of possibilities for the future has been defined,the challenge is to create a strategy that is optimized for eachscenario. That is, the strategist asks, “If I knew the future weregoing to turn out like this, what would my best response be?”Answering this question is best done using the many toolsavailable for industry and competitive analysis. Porters fivei iico-opetitioniii , and Christensens disruptive technologiesiv areonly four of the many different approaches that have beendeveloped to assist in formulating strategies appropriate to agiven situation.Analyzing the strategies developed for each scenariotypically shows that, while certain initiatives are pertinent onlyto a single version of the future, others are appropriate for all ormost of the scenarios. For example,international expansion mightmake sense only if particular circumstances materialize. Otherkinds of investments for example, in customer relationshipmanagement software might be essential no matter whattranspires. Those elements that are common to all scenariosconstitute the core strategy for the organization the no-regretsbets that an organization can begin implementing today. Elementsthat are unique to a given strategy make up the contingentstrategies those actions that make sense only if a certain state ofaffairs comes to pass.ACCUMULATEWith a clear sense of what strategy the organization will pursue ineach possible future world, and the core and contingent elementsof those strategies identified, a firm can now begin to build oracquire the resources needed for each strategy. To implement thecore strategy, the prescription is conceptually straightforward:press ahead with the development and deployment of theappropriate capabilities. This is by no means simple in itsapplication, but similar to strategy formulation, there is at least anestablished body of management research and practice to callupon.More challenging still is the need to secure access to thoseresources and capabilities that are needed on a contingent basis.For example, assume that for a particular FSI company expansioninto China is a contingent strategy that depends on changes inthe regulatory regime there, and establishing a distributionchannel in China is an element of that contingent strategy. Whilethere is no need to delay or hedge in obtaining resources neededfor a core strategy, what a firm requires in the case of the Chineseexpansion strategy is more tentative the right, but not theobligation, to activate desirable distribution channels in thatgeographic market. The company would like to lock up the rightpartners without at this time committing the investment necessaryto actually expand operations into China.It is here that the emerging discipline of real options providesnot only insight but also guidance. Drawing on years of proprietaryresearch in this area, we have developed an approach to realoptions that provides new ways of thinking about the purpose ofdiversification and the valuation of investment opportunities. Inour Chinese expansion example, a firm might take a real option3Deloitte Research Strategic Flexibility in the Financial Services Industryforces ,Hamel and Prahalads core competency ,Brandenburgers4on distribution partners in China through partial equity stakes andexplicit long call options on the outstanding equity. Alternatively,outright acquisition might be necessary, but the incrementalinvestment required to employ the new channel would bewithheld. Either way, the cost of controlling the channel partnercan be viewed as the cost of an option on eventually using thatchannel to expand into China. In other words, diversification beit into new geographic markets or new product markets createsoption value on future integration opportunities.From a valuation perspective, such initiatives rarely appearattractive when viewed through the lens of traditional net presentvalue calculations. This is because a significant portion of the valueof real options on assets associated with contingent strategies liesin the flexibility they create. Conventional discounted cash flowapproaches at best underestimate this value, and typically ignoreit altogether. Identifying the value of diversification motivated bythe need for strategic flexibility therefore requires a fundamentalshift in the way in which investment opportunities areconceptualized and their value quantified. We provide suggestedapproaches for properly taking into account the value created bystrategic flexibility.OPERATEThe first three phases of the Strategic Flexibility frameworkconstitute a new approach to strategy formulation and portfoliostructure. Our research shows that these are necessary but notsufficient conditions for success; another crucial component is anew approach to the management of a multibusinessorganization. When an organization must face the future not witha clearly articulated and precise battle plan, but instead with aseries of contingent strategies and just-in-case resources, the keyto implementation success is knowing when and if to exercise thereal options that created the necessary flexibility. This requires aotherwise autonomous operating units, rather than simplydefining overall goals and delegating the task of implementation.It is not merely in the exercise of options that the corporateoffice must get its hands dirty. In an uncertain world, it is inevitablethat some options will have to be abandoned. Unfortunately, it isa fact of organizational life that walking away from projects is noteasily done. Operating managers become psychologicallyinvested in specific projects, convinced that given more time andresources their particular initiative can be made to work. Moreimportantly, good management has come to be defined asdelivering projects on time and on budget, and so terminating aproject because the option it represented never came into themoney can be seen as a failure on the part of the managersinvolved. Of course, it is not failure at all, but simply a recognitionof the fact that the circumstances under which a given strategy,and hence a given project, was optimal never materialized.Balancing the need for commitment in implementation byoperating managers with the inevitability of having to abandonsome undertakings without undermining the careers of thoseinvolved requires a new kind of involvement in decision makingfrom corporate executives.This report explains why this approach to strategyis needed in todays financial services industry, andprovides examples of how the four phases have beenapplied by some FSI leaders. It is our hope that thisreport will serve as a catalyst for using StrategicFlexibility to chart a course for your organizationthrough the industrys turbulent waters.very different role for the corporate office than the one typicallyiPorter, M. E. (1980). Competitive Strategy. New York, Free Press.prescribed, one in which senior executives take an active role iniiiiiPrahalad, C.K. and G.Hamel (1990).“The Core Competence of the Corporation.”HarvardBusiness Review (May-June): 79-91.Brandenburger, A. M. and B. J. Nalebuff (1996). Co-opetition. New York, Doubleday.determining the timing and mechanisms of integration amongivChristensen, C. M. (1997). The Innovators Dilemma: When New Technologies CauseGreat Firms to Fail . Boston, Harvard Business School Press.Uncertainty in the FinancialServices IndustryThe financial services industry is undergoing a metamorphosis:market boundaries and competitors, once clearly labeled, arebeing transformed by a wide array of forces for change.Incumbents are invading each others customer and productmarkets even as start-ups and established firms in seeminglyunrelated industries threaten similar incursions. Many aspectsof the industrys transformation remain unclear, andtremendous uncertainty surrounds even the most basicquestions of strategy:At the same time, flexibility is only necessary, and hencevaluable,when two conditions are met. First,significant uncertaintymust impinge on the major strategic issues facing an organizationor an industry. When strategists have confidence in their projectionsor predictions of the future,there is no need to be flexible. Second,there must be no clear best response to this uncertainty: even ifthe future is unpredictable, if there is one all-purpose riposteflexibility is of no use.If Strategic Flexibility is to be valuable to executives leadingfinancial services organizations,one must first assess the degree towhich the financial services industry is subject to both anunpredictable future and debate regarding how best to respond.sWhat products and services should I offer?sssssWho are my customers?Which new entrants are a flash in the pan, andwhich are truly dangerous?Who are my competitors?Which components of my business model areworth retaining?What business am I really in?The Horsemen of UncertaintyThere are many drivers of change that serve to make the future ofthe financial services industry unclear everything from customersand globalization to capital market pressures and general economicconditions. Indeed, the horsemen of uncertainty are so numerousthey might better characterized as a cavalry.To illustrate how thesedrivers create the kind of uncertainty that makes flexibility valuable,consider two in detail: regulation and technology. and,despite it all,industry executives are increasingly forcedto make bet-the-company decisions with no guarantees ofsuccess.In the face of this turbulence and unpredictability, thestrategic challenge facing financial services companies is nolonger one of predicting the future,or even attempting to createit, but rather one of coping with and exploiting inescapableuncertainty. Doing this, however, requires a fundamentally newapproach to strategy formulation and implementation, for thetraditional tools of strategic planning and financial analysis aresimply not up the task. In their stead is proposed a frameworkfor thinking about strategy amid uncertainty called StrategicREGULATION Most financial services executives view manyaspects of regulation as an impediment to the success of theindustry. Barriers between markets and restrictions on productofferings stifle innovation and growth. However, the consequencesof changes in regulation can be highly unpredictable. For example,in the 1980s the U.S.government deregulated deposit interest ratesand increased deposit insurance. This resulted in fierce competitionfor consumer accounts,resulting in a dramatic fall in the net interestspread on funds. Con