FutureBanker: Why analyze strategic alliances in financial services?
wiesel: We're seeing very much a trend, and our clients are talking about different forms of partnerships and collaborations with other organizations, recognizing that bank mergers that (were driven) primarily by cost reduction, customer acquisition and contiguous market expansion aren't going to be the things that really drive their organizations' earnings growth-primarily revenue growth-going forward.
So that, coupled with hearing our clients say that they realize now they really can't be all things to all people. By that they mean they can't continue to provide all of their own infrastructure support, operations and technology. They can't continue to develop every distribution channel opportunity that comes along. They can't reach enough customers to drive the kind of revenue growth they need. So they (recognize) that they need to do more and different things and have access to capabilities of other organizations that they would not have access to through a traditional merger or acquisition.
FB: What do institutions hope to gain from these strategic alliances?
wiesel: It's about defining the competitive organization in which (CEOs) choose to operate. They need to figure out ways to position themselves so that they can offer unique, compelling and differentiated value propositions to customers.
FB: Of all the financial services respondents surveyed, what was the most surprising discovery?
wiesel: There were a couple (things). Some organizations believe that strategic alliances do not work. Others believe they are critical to their future. So we saw a lot of diversity around the (concept); some of that is a function of the strategy of the organization and how visionary the leadership is. I thought there would be a higher degree of commonality.
The other point that I found surprising is that, even for organizations that recognize the importance of strategic alliances, they struggle with how to institutionalize their own capability to formulate and manage strategic alliances.
FB: Will alliances focus on capturing value, bundling products, achieving scale, or strengthening channels?
wiesel: It's going to depend on the organization. There will be less alliance activity in the product arena. Most organizations do not lack for product capability. We'll continue to see a lot of outsourcing activity in the scale arena. But I expect to see more alliances around channels.
FB: How do institutions focus their efforts among the alliance sectors?
wiesel: The positioning isn't intended that you pursue one at the expense of another. All of these have different objectives. If an organization in the gaining scale category has some sort of processing capability and they feel that they have an advantage in that, what would be the opportunity to add more scale to that to achieve greater cost economy? They may focus on that and, at the same time, they may (look) at strengthening the number of access points customers have to their organization (by) entering into an alliance to do that.
FB: Who will ally in the next year?
wiesel: You'll continue to see a growing number of alliances between banks and technology providers. (Banks) can use alliances as another way of getting access to a particular platform or distribution capability. A lot of it is (due to) the investment requirement.
FB: But aren't some alliances little more than mission statements?
wiesel: I'm not going to correct you. How do you really measure value that the alliance creates? All that ties back to is what's the (alliance) purpose, what distinctive capabilities does each partner bring, what difference will it make in the marketplace and what are the economics. I would estimate conservatively that 50 percent of alliances do not have well thought-out strategies in terms of the value proposition.
While we talk a lot about the number of alliances (institutions participate in), we believe the number of alliances is an irrelevant measure. What's more important are the value statements around your alliances, to make sure that they are positioned well and that they are managed well to produce value.