Financial services organisations can no longer afford the luxury of long-term strategic plans and must base their corporate strategy on the ability to change.
"Rapid market changes dictate highly flexible strategies," says Bart Hogendoorn, SAP Africa's general manager: financial services. "In the financial services environment, this is a major challenge. Firstly, the traditional banking and insurance product systems tend not to lend themselves to change, and secondly, a highly flexible strategy often incurs increased costs and loss of quality.
"However, if companies try and keep costs low by adhering to rigid long term strategies, they will not be able to serve a changing environment," he explains. "It may be too harsh to say they won't survive, but they certainly won't prosper."
Hogendoorn believes corporate strategy must be flexible in market segmentation. "The company must be able to service different sectors. It must also be adaptable in its product offerings - product sets must be re-examined and there should be capacity for switching to third party products.
"Finally, the company must cater for delivery compliance - companies must be able to employ a mix of delivery channels," he says.
"In the past, all these elements were pre-determined for long periods of time," says Hogendoorn. "This no longer works. Already short-term insurers suffer from price competition and face changes in the ways they supply product to market. Soon, the majority of their customers will buy directly via the Internet, looking for the cheapest product."
Hogendoorn warns increasing acceptance of the Internet will compound the problem dramatically.
"Right now we are still not feeling the full impact of the Internet," he says. "The perceived risk continues to stunt growth. Yet, as soon as trust and risk factors have receded, which they will, use of the Internet will skyrocket - and strategic flexibility will become absolutely crucial."
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