Modern finance is several hundred years old and not often thought of as being particularly innovative. It’s why former Federal Reserve Chairman Alan Voeckler’s quip about the only thing useful banks invented over a 20-year span was the ATM still rings true nearly a decade after he said it.
But, in a surprise, the financial services industry is actually the world’s most digitally sustainable, with an ability to empower, organize and motivate employees to solve problems. It beat out four other large industry groups, including technology, in the first-ever Korn Ferry Digital Sustainability Index. Indeed, financial firms are in the best position to transform continuously as waves of disruption upend the business world. “Repeating yesterday’s successes is futile: what got you here, will not get you where you need to be. Companies must be built to change, forever iterating,” says Melissa Swift, Korn Ferry’s global leader for digital solutions.
The Index, created by the Korn Ferry Institute and Oxford Analytica, measures five key dimensions which enable organizations to respond to change. Those dimensions are agility, connectivity, discipline, empowerment, and transparency. Financial services firms came out on top, followed by technology, life sciences/healthcare, industrials and consumer firms.
Being digitally sustainable has business benefits as well. A 10-point rise in Digital Sustainability Index score is associated with an average 1.5 percentage point increase in operating performance. For a mid-sized company with annual revenue of $7 billion, that equates to a potential increase in earnings before interest, tax, depreciation and amortization (EBITDA) of $105 million.
The waves of disruption may have forced the financial industry to move faster toward digital sustainability than other groups, experts say. Since the turn of the century, and certainly since the global financial crisis of 2008, the industry has been under intense pressure to deliver services far cheaper and meet new regulations from governments worldwide. At the same time, traditional firms have built systems to deliver new ideas and customer-centric technology as a way to fend off startup fin-tech firms, says Michael Franzino, president of Korn Ferry’s Global Financial Services Market practice. The industry isn’t perfect, however, it still lacks an ability to move those ideas to the marketplace fast. “To continue on the path to true digital sustainability, financial players must now limber up to a more agile way of doing business,” Franzino says.
The Technology industry was second in the Index. While the industry itself may create innovative products, at the company level, its lackluster ability to get employees to collaborate makes it difficult for individual firms to create lasting success. “Technology firms are not consistently institutionalizing cross-functional collaboration and flat hierarchies in their own organizations. This is an opportunity missed and technology leaders can’t afford to be complacent,” says Werner Penk, president of Korn Ferry’s Global Technology Market practice.
Besides looking at industries, the Index evaluated 14 countries on their ability to nurture innovative firms and, as importantly, workforces. The United States topped the list, followed by the United Kingdom and the Netherlands. China was 11th and Turkey was 14th.
To find out more about the Korn Ferry Digital Sustainability Index, download the report.