Dbs Analysis

1. Analyze the competitive position of DBS prior to its digital transformation. What are the motivations behind the digital transformation of DBS? Answer this is the context of Porter's five forces and Treacy & Wiersma's value disciplines.

Trearcy & Wiersma

        DBS is pursuing excellence and becoming the number one bank for Asian consumers. This value discipline is not a complete revamp of DBS’s identity (Weinman, 2015). However, the new vision and strategies being implemented are ways to stay true to DBS’s identity of excellence and customer focus, while integrating innovation, becoming a digitalized firm, and a leader in the technological banking industry. The new vision and strategies align with its new operating model and original value discipline by focusing on using technology to improve customer touchpoints. The goal is to achieve operational excellence, product leadership, and customer intimacy through its core value discipline by implementing the new strategies related to innovation and technology to become the “Asian Bank of Choice’ (Kien, Soh, Weill, & Chong, 20115). This is important because the industry is changing to a digitalized environment and consumer profiles are demanding different products and services, and more from DBS and its competitors.

Porter’s Five Forces

The competition in the banking industry is significantly fierce due to the fact that the banking industry has evolved from more than just traditional banking activities, and any firm that competes against the core competencies of banking in the financial services industry are considered competition. Additionally, DBS has branched into areas that are outside of traditional banking, exposing itself to competition from other firms that may or may not be considered financial institutions. DBS’s three main areas of focus are institutional banking, consumer banking, and wealth management. These areas encompass a wide range of products and industries outside of banking ensuring a high threat of competition. According to the OECD it was estimated that the financial services industry represented 12-19.6% of the total global economy in 2014, and grows at a compound annual rate of 6% decade over decade according to a McKinsey report (Ross, 2015). As products in the financial services industry continues to become digitalized and the number of potential future scenarios grow, the power of firms decreases because equivalent services and products will continue to increase (Deloitte, 2016).

Given that a firm can enter the financial industry market with a single, or few, product/s and be competitive, as well as emerging technology solutions, the threat of new entrants is high. In traditional banking the threat was low due to regulation, high capitalization, branding, and high exit costs, but that has changed. PayPal is an example of a firm that possess fewer core competencies than DBS, but have begun making inroads into DBS’s space with non-traditional tactics (Kien, Soh, Weill, & Chong, 20115). Historically the banking industry has required significant capital, DBS is a perfect example of a firm that experienced great success because of strong capitalization, however technology can eliminate this barrier making entrance a low cost activity and increasing disintermediation. There are many substitutes to certain products in the banking industry, many of which eliminate intermediaries, including financing with inside funding arms, mobile payment firms, do-it-yourself wealth management firms like Acorn, pre-paid credit cards, payday lenders, and payroll withdrawal programs. These products can weaken DBS in its core competencies. By digitalizing and innovating DBS has significantly reduced this threat from high to medium. Additionally, there are certain products with no substitutes.

The reasons customers have increased power in the banking industry, despite the large customer base, is because many banks offer customers money to sign up with them, credit cards offer free interest and transfer fees, and people no longer require brick and mortar banks and financial institutions. In the past it could be a huge hassle to switch from one bank to another, granted it still is for mortgages and other larger investments, but for the average consumer it is quite simple to switch and/or use substitutes. In fact, it is estimated that at least 8% of Americans do not have a bank account and 21% of households said they don’t want or need one. Among disadvantaged groups, up to 28% do not have bank account. Additionally, at least 20% of Americans are underbanked (Ellis, 2012). These statistics prove that the power of customers is high and the power of suppliers is decreasing as the barriers to entrance and cost of doing business decrease, however it still remains medium.

1. Using Christensen's classification of change, is DBS pursuing sustaining or disruptive innovation?

DBS is pursuing a disruptive innovation through its aggressive tactics to overcome the “burning platform of competition” in the banking and financial services industry (Kien, Soh, Weill, & Chong, 20115). DBS is investing in ways to make products more simple, cheaper, and convenient, offering an entirely new value proposition from the traditional banking industry (Christensen, 1997). DBS is working to break free from its competitors using Big Data, technology innovation, differentiated customer touch points, reorganization, and experimentation to change the basis of competition, not improve current dimensions of performance (Christensen, 1997).

1. What are the key thrusts of DBS’ digital transformation strategy? What technology investments is DBS making? What radical organizational changes is DBS instituting?

A primary thrust of DBS’s digital transformation strategy is how DBS is transforming face-to-face touchpoints to highly personal customized interactions with Big Data and behind the scenes technology. DBS is using its innovative capabilities as a precursor to successful touchpoints that reign the customers in on all levels. DBS is analyzing consumer trends including the transition from middle class to high class and smart phone access to guide its strategy instead of following other firms lead. Additionally, DBS has combined its technology and operations divisions. All of these contribute to the recreation of the customer experience and is led by DBS’s rewiring of the organization to create more streamlined data feeds between levels within the organization. In order to implement change fast and effectively a flatter organization is required, in addition to standardization. DBS has been able to build scalable platforms as a result of flattening and creating a technology roadmap (Kien, Soh, Weill, & Chong, 20115). To achieve these radical organization changes DBS spends most of its capital on the back end, creates flexible solutions, emphasis enterprise collaboration, uses data to drive decisions, and sets up internal think tanks (Kien, Soh, Weill, & Chong, 20115).