Financial services, food retailing, and pharma are reinventing themselves in different ways.
As companies grapple with the different dimensions of digitization highlighted in McKinsey’s latest research (see “The case for digital reinvention,” forthcoming on McKinsey.com), here are snapshots of three industries in the eye of the storm: financial services, food retailing, and pharma.
The first highlights the impact of new digital entrants on products and services in banking; incumbents will either need to compete head on or use their financial muscle to move into adjacent markets. The second offers an example of how retailers can use digital means to increase efficiency in the supply chain, thereby buying time before taking more radical action to deal with disruptors. And in the third, new research in pharma highlights the importance of digital self-awareness and the scope to improve performance by better connecting digitally with patients and physicians.
Over the past decade, fintech companies—technology firms that focus on financial products and services—have forced incumbents to rethink their core business models and embrace digital innovations. Now fintechs themselves are maturing and entering a period of rapid change.
Where once these companies focused on payment applications, lending, and money transfers, for instance, the industry’s reach has extended into more than 30 areas (Exhibit 1). The shift brings fintechs away from a focus on frontline activities to a broad engagement throughout the value chain. The new offerings cut across a wide swath of financial services: retail, wealth management, small and midsize enterprises (SMEs), corporate and investment banking, and insurance.
Technologies vary from robo-advisory systems that provide automated recommendations with little human input to the more experimental blockchain systems that track and store an expanding series of transactions to help reduce infrastructure costs. Fintechs, meanwhile, are also moving beyond addressing a customer’s financial needs to offering a wider range of services, blurring the industry’s boundaries. Holvi Payment Services, a Finnish start-up acquired by Spanish financial group Banco Bilbao Vizcaya Argentaria in 2016, began by offering banking services to SMEs and expanded to provide complementary offerings, such as an online-sales platform, bookkeeping services, expense-claims systems, and a cash-flow tracker.
For the full article, see Miklos Dietz, Vinayak HV, and Gillian Lee, “Bracing for seven critical changes as fintech matures.”
Fresh food is becoming a challenging battleground in grocery retail as discounters, convenience-store chains, and online players recognize the power of fresh-food categories to drive store visits, basket size, and customer loyalty. Retailers constantly have to make difficult trade-offs in the supply chain: order too much, and the food goes to waste; order too little, and they lose sales and erode customer loyalty. With demand fluctuating daily, how can they know the right amount to order?
A number of leading players are now revolutionizing their planning through machine learning. Based on algorithms that allow computers to “learn” from data even without rules-based programming, machine learning allows retailers to automate formerly manual processes and dramatically improve the accuracy of forecasts and orders. Retailers that use machine-learning technology for replenishment have seen its impact in many ways—for instance, reductions of up to 80 percent in out-of-stock rates, declines of more than 10 percent in write-offs and days of inventory on hand, and gross-margin increases of up to 9 percent.