Singapore celebrated its 45th year as an independent nation and I celebrated the long weekend with gusto the usual bars and restaurants with a bunch of friends but in the midst of all the gallivanting about town, I spent a couple of hours at Resorts World Sentosa where I saw the new show in townVoyage de la Vie.
My thoughts immediately went back to a misty morning when I was indoctrinated into the Blue Ocean philosophy and the Cirque du Soleil discussed as one of the best case studies. While Cirque expanded the common known philosophy of a circus and created an almost new art formthus becoming one of the most successful shows ever and reinventing a rapidly dying circus thanks to constraints like Animal Welfare, safety norms etcI was thinking on the taxi ride back to the Hyatt on similar constraints in banking and what we are doing about it to constantly innovate, expand horizons and create value. In this post, I thought I would quickly identify the key principles of the Blue Ocean strategy and then look at the constraints driving change in banking thoughts and systems.
Blue Ocean strategy
Blue Ocean strategy is essentially a strategy, tool, philosophy and method to create uncontested market spaces. The logic is simple how does one create new markets, services, platforms, policies and so on. Existing market spaces due to the very nature of competition become highly price-sensitive (this market is termed as a red oceanessentially to reflect the blood-letting that needs to happen in highly congested, competitive markets) and the new markets (often extensions of existing red oceans) are termed as Blue Ocean (a reference to blue sky thinking). The strategy expounds this basic logic further and brings out tools, techniques and methods to study existing markets and attempt to identify inflexion points to create new markets.
To bring this to a financial services perspective, has over-innovation resulted in the global financial crisis (GFC) and led to increased complexity in instruments and thus higher probabilities of failurewhich has now resulted in increasing regulation and risk-management thus stifling innovation? By the same logic, circus as an art formas a result of the restrictions, already high and further increasing cost-base, lack of consumer interest et alshould have died out. Cirque used the very nature of the restrictions and constraints to develop its class act and thus creating a Blue Ocean case study.
However, there have been several articles and thoughts expressed on this and I am not going to delve into any detail but want to leave readers with just one thoughtstrategy is not always about innovating and delivering more complex solutions but often about de-mystifying and simplifying existing layers of complexity and driving innovation based purely on simplicityof thought and action. So is simplicity the great new strategy banks need to employ? Will life become simpler if consumers are advised to focus on core, non-core and value-added services from banks and thus choose the category of services they want? So would consumers be interested and can banks make money from essentially single-service channels? One of the interesting initiatives has been BofAs (Bank of America) only-Internet banking checking account. Will we see more of this?
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