I was reading an old article written by 2 Accenture consultants (May 24, 2000, Jane Linder and Susan Cantrell) from the Institute of Strategic Change on "Changing Business Models: Surveying the Landscape".
The article was written to highlight the following key points:
1) How to define a business model
2) Business models will change over time
3) How to constantly evolve the business models in order to keep pace in time
Although the article was written back in year 2000, I find that it is still very relevant today. According to the article, a business model is the organization's core logic for creating value. Whereas a change model is the core logic for how a firm will change over time in order to remain profitable. This is a very important concept to understand in view that the competitive landscape changes rapidly.
Applying to the context of the wealth management industry that I am working in, I find that many financial institutions have been quick to jump into the wealth management space to get a share of the rising affluence without a proper change model framework and a roadmap.
Many of the financial institutions are actively recruiting relationship managers as method to build their assets under management. With booming stock markets in Asia coupled with a low unemployment rate, the barriers to entry seems low at the moment.
However, there must be a caution here. Financial institutions need to prepare for the eventuality that when markets turn bearish, and the clients' asset values fall below the minimum threshold, how will they able to operate in such an environment.
The importance of having the right business model to support the change in environment only solve half of the equation. The other half of the equation is to evolve the business model to maintain profitability. This is distinction between a serious player versus a marginal player in the wealth management industry.
My learnings from this article are the following :-
a) Know what your value proposition to the client, ie trusted advisor, depth and breath of your product offerings..etc
b) Define and understand your business processes. When business environment change, business processes are the fastest way to change and meet the new challenge
c) Align all stakeholders to the same business model. It helps on the execution.
